Decreasing Students Loan Payments by Refinancing

The sole objective of refinancing is usually to decrease your monthly student loan payments. There’s plenty of ways to do this, and most banks have student loan consolidation features.

Furthermore, refinancing your student loans need you to think about several things. First, you have both federal student loans and private loans; they are refinanced in separate ways. Because of the way federal loans are structured, you can get a much lower rate of interest on them than you get on private loans. Private student loans are fundamentally personal loans made with the assumption that your income will increase with more schooling. In case you mix it together when you refinance, you will eventually be paying a higher rate of interest on the combined principal than you would in case you financed the loans separately.

Secondly, student loan rates vary by lender and by your credit history. So, before your refinance make sure that your credit history is in nice shape. Review a credit document, and take action to fix issues. Then, compare rates from different lenders. Rates on for refinancing federal student loans alter once a year (usually around first week in July). Currently the rates are low, but it is difficult to know how they will alter as the economy changes.

How to Reduce Student Loan by evaluating your debt

Your first step in reducing debt is understanding it. Ask yourself the following questions before proceeding.

1. Are your loans federal loans or private loans? (i.e., were they issued to you from the government or a private bank or lender?) To learn more about specific types of loans, go to FinAid’s student loan explanations.

2. Note that your federal loans are usually fixed at a comparatively low rate, while private loans calculate interest using a variable rate that depends on your credit and current rates.

3. What kind of loans do you have, e.g., Stafford, PLUS, Perkins? Are your loans subsidized or unsubsidized? (A subsidized loan, which is need-based, does not need you to make interest payments while you are in school. On an unsubsidized loan, interest accrues while you are in school whether you are repaying the loan yet or not)

4. How much debt do you have?

5. Are you currently in a grace period before repayment begins?

6. What is your repayment period (i.e., are you scheduled to pay off your loans in 10 years? 15?)

7. What rates of interest are you currently paying on your loans?

Also,  another great resource for understanding your student loans is Simple Tuition, which not only provides detailed information about various loans and their options but lets you comparison shop for consolidation offers or new loans. Research your private loans on your lender’s web-site (all lenders will let you manage your account online with a user name and password), and bookmark the site for future reference.  Three times you have collected all the relevant information, read over FinAid’s student loan checklist to keep your various loan details organized and in one document.

Providing honest answers to the above questions will be a good indicator when applying for students loan refinancing.

Joseph Okonkwo is an online author who likes writing on hot and relevant issues around the net and enjoys patronage from online users. Today he  shares some insights on students loan refinance at: www.studentsloanrefinance.co.cc

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