There are many reasons why you should refinance your student loans. You may have a high-interest rate and want to lower it. You may need more time to pay off your debt. Whatever the reason, when considering whether or not to refinance your student loans, you should know that many factors will affect how it works out for you in the end:
Creditworthy Cosigners
You can only refinance student loans without a cosigner if you have excellent credit and the income to back it up. It’s also important to note that a co-signer doesn’t just mean someone who signs your loan documents—it means they are 100 percent responsible for paying back any money borrowed.
You will be responsible for making payments on time, but if anything happens and you miss an installment, your co-signer will be expected to cover all past-due amounts immediately.
Refinance Federal Loans into More Federal Loans
Federal student loans are not eligible for refinancing. You may be able to refinance a private student loan into a federal loan, but not vice versa. If you have multiple types of federal and private student loans, the best approach is to pay off your debt as aggressively as possible before considering refinancing options.
Once all of your debt has been paid off, then you can look into different refinancing options based on what works best for you at that time (if anything).
The Interest Rates are Low Now
Now is a great time to refinance your student loans. Interest rates are low, so you can lower your monthly payment, get a better rate and duration of loan repayment, or change the repayment plan.
Monthly Payment: Refinancing will decrease monthly payments if you have a higher interest rate than what’s available today. Because there is no prepayment penalty with federal student loans (the only downside), refinancing can extend your loan’s life and make it more affordable down the road. This makes sense if you’re confident that your income will increase over time—it’ll give you more flexibility on when to start making those investments in yourself!
Other Ways to Reduce Student Debt Burden
You can also try to lower your payments by consolidating your loans or switching to an income-driven repayment plan.
There are plenty of ways to pay off student debt, but before you decide on one, make sure you know what the pros and cons are for each option.
“All loan terms, including rates of interest, Annual Percentage Rate, and other monthly payments shown on Lantern by SoFi website, are from lenders and are regular estimates based on the limited info you provided and are for knowledge purposes only. APR includes total applicable fees as needed under the Truth in Lending Act.”
If you are considering refinancing your student loans, it’s important to understand the process and your options. If you have questions, contact a financial advisor or tax professional who can help you through the process.
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