Student loan refinancing rates are currently low. Refinancing with a private lender costs access to government programs. This includes the student loan relief already offered due to the coronavirus pandemic, as well as any future programs that may be introduced. Can you refinance government student loans?
Some refinancing lenders are currently instructing borrowers to think carefully about refinancing federal loans. You should probably take into account that the giant, blinking “cautionary sign” will refrain from refinancing these loans for now.
If you have private student loans, refinancing remains a good option if you can lower the interest rate.
For federal loans, we recommend that you use the time when student support programs buy you to get a financial home in the best possible form. Build a rescue fund. Pay off debts with a higher interest rate. Improve your credit standing.
When to refinance student loans
Not everyone can be eligible for refinancing student loans. Usually you need a university degree, good credit and income that will allow you to conveniently afford expenses and pay off debts. If you meet these requirements, consider refinancing in the following circumstances:
- Savings will matter. You don’t have to wait until you get the perfect refinancing loan as long as you can get a better rate than today. Check to see if the lender is offering a student loan refinancing premium to further increase your savings.
- You have private student loans. By refinancing private student loans, you have almost nothing to lose because they are not covered by federal loan programs such as income-based repayment and Public Loan Forgiveness.
- You have student loans with high variable rates. Forecasting payments with a floating rate loan can be difficult, and even loans with a low interest rate can be more expensive to pay back. Before increasing, consider refinancing to get a fixed interest rate.
- The rate environment is strong. Both fixed and variable refinancing rates for private loans may change depending on economic factors, such as interest rate increases or lowering interest rates in the Federal Reserve. When rates are reduced, you can take advantage of this situation by refinancing.
- Your finances have improved. If refinancing makes no sense after graduation, think about it when you’re on a more solid financial foundation. And if you have refinanced before but simply repaid your credit card debt or received a raise, you can now get a better rate – you can refinance as often as you like.
The consequences of refinancing federal student loans
Federal student loans are administered by the United States Department of Education. Federal borrowers have certain rights through the Department of Education.
For example, federal student loan borrowers have access to various repayment plans – including an income-based plan that bases monthly payments on discretionary income. Federal student borrowers using an income-based plan that makes constant payments for 20 to 25 years may be eligible for student loan redemption. Federal borrowers also have access to deferment and forbearance options. These options can suspend your student loan repayment if you can’t make monthly payments.