If you can refinance a home loan or a car loan, what would stop you from refinancing a student loan? According to a publication by newyorkfed.org, the fourth quarter of 2018 showed student debt was at nearly 1.5 TRILLION dollars, up by 15 Billion. Thatâ€™s right. Student debt is in the TRILLIONS and is continuing to climb by the BILLIONS. Among other issues in the student loan landscape, lingers the massive elephant in the room- interest rates on student loans are high, making it harder and costlier for individuals and families to pay back these loans. The very loans that were supposed to help families to better their lives are the very thing that bottleneck them. Instead of being a catalyst for growth, student loans have become an albatross for people looking to get stable and get ahead. In fact, according to federalreserve.gov, 2 in 10 borrowers are behind on student loan payments. That is a staggering 20%. So if you have student loans and are looking to gain some traction by refinancing and resolving your debt fast, what are your options? Letâ€™s explore a few:
First, identify whether your loans are held by the government or private student loans. Your options will vary depending on who owns your loan.
Think hard before refinancing a federal loan privately. When refinancing, you may be able to lower your rate, however, be aware that you will be refinancing with a private lender. When you refinance with a private lender, you will lose access to government programs such as income-driven repayment or debt forgiveness programs. For those with interest rates in the double digits, refinancing could be a very appealing option. Just be sure to check all the details of the private loan and make sure you are comfortable with the terms set forth and the options you are forgoing by keeping your loan with the fed. Check the interest rate, length of repayment, and whether you are signing on to a fixed or variable rate loan. Just like a mortgage, you will want to protect yourself in the case of a rate hike and be aware of the future possibilities.
If you have privately held loans and lack the benefits of federal loans, this could make refinancing a little simpler as far as making the decision. Again, you will want to pay attention to not only the rates but the rest of the repayment terms. Lenders will sometimes pull you in with the promise of a certain rate, but the rate may only apply to specific repayment terms that you may not qualify for or be interested in. Also, be aware that just because you refinance one student loan doesnâ€™t mean you have to refinance them all. If you have favorable terms on some but not on others, you can refinance individually to keep the loans with the best terms intact while searching for better options for the others.
If you are feeling overwhelmed by the prospect of refinancing, but know that you need some support in figuring out what to do, there are agencies out there who are willing to help you weigh out your options. However, you can be prepared to pay a fee for this service, and know that there are plenty of companies out there looking to take a buck without offering much value in return. If you opt to get some help, do your homework when choosing a company to assist you. You may even consider finding a credible and trusted financial advisor to help you navigate not only your student loans but your complete financial future. Whatever you choose, get active and involved in your financial life. By addressing your student loans, you can give yourself the boost you need toward financial freedom!