Debt Student Loan Refinancing: Where Do I Begin? Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint.com Published Aug 22, 2019 - [Updated Apr 26, 2021] 5 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. Have you been thinking about whether refinancing your student loans is the best move to make for your financial health? The thought of having a lower payment or shortened loan term sounds pretty amazing, huh? Under certain circumstances, student loan refinancing can be a great financial move. However, it does not apply to everyone. Here’s how to see if student loan refinancing is right for you! What is Student Loan Refinancing? First, let’s review the types of student loans. Private and federal are the two types of student loans. Think of it this way, federal is connected to the government and private is connected through a private lender. In order to even think about student loan refinancing, you need to have the proper loan, to begin with. Private loans allow you to easily refinance while federal loans are not eligible for refinancing given the fact the government decides the interest rates. That said, you can potentially turn your federal loan into a private loan. This is why it’s important for college students to shop around for their student loans and not just accept the first one they come across. When you move your loans from federal to private, you cannot switch back to a federal loan. Make sure you understand your terms and conditions when moving to a private lender. For instance, two terms that are easily misinterpreted are refinancing and consolidation. Student loan consolidation is when you have multiple loans that turn into one total loan. Refinancing, on the other hand, occurs when you replace an old loan and terms within it with a new loan. How to Know if You Can Refinance? Do you have a good history of on-time payments? Do you have a good credit score? Are you making a good income? If you answered yes to all three of these questions, then student loan refinancing might be a good option for you. When you go to refinance your student loans, your private lender will look at those three factors. If you have a good history with on-time payments, a solid credit score, and a reliable income, you have a good chance of being able to refinance. When Should You Consider Refinancing? You should consider refinancing your student loans with your private lender when it will work in your favor. Many people will refinance their student loan to get a lower interest rate than the current rate they have. This will save them money in the long run by paying less interest over time. Another positive about student loan refinancing is it can give you a lower monthly payment, giving you additional money in your monthly budget. Under your new loan terms and conditions, the life of the loan could be extended longer giving you more time to pay it off. The longer you have to pay it off, the smaller your monthly payment will be. If you currently hold a loan with an interest rate that changes and you are looking into a loan that will give you a fixed rate then refinancing might be a good option. If the interest rates are low, you might want to refinance to a fixed interest rate to keep your rate low if interest rates are expected to rise. Bottom line: Make sure you read all your refinancing terms and conditions before making a change. Although you might be getting a lower interest rate you might not have the option of making extra payments to try and pay off your student loans faster. When Should You NOT Refinance? You shouldn’t refinance your student loans to a private lender if you work for a nonprofit or a government job. By keeping your loans federal, you could qualify for loan forgiveness and get your loan forgiven based on the government’s forgiveness criteria. If you are having trouble paying off your student loans, sticking with federal loans is important. The government has created protections to help support you if you are having difficulties with payments. They also have options to reduce your monthly payment or put your loans on pause if you are really struggling to make ends meet. In addition, if your payment is tied to income, refinancing might not be the best option for you because it might actually increase your monthly payment rather than keeping it manageable. Refinancing your student loans can be expensive. There can be fees in order to refinance so make sure you always run the numbers and check if it’s a good decision for you personally. While you are giving yourself more time to pay off your loans you should be aware that extending your payback period will cost you extra money. The more years you add on to your loan payback, the longer you will be paying interest. How to Get Started Refinancing? Once you have weighed the pros and cons of student loan refinancing and decided what makes sense for you, you’re ready to refinance those loans! Here’s how to get started: You make the decision to improve your current loan. You search and find better loan terms and apply. Your new loan pays off your old loan. You make payments to your new loan servicer. When you’re at step two, make sure you are carefully reading over your terms and conditions. It is a big financial move to refinance your student loans and you want to ensure it’s worth it. Research and shop around to find the best lender that works for you and your current situation. We highly recommend using SoFi as they have helped over 250,000 people refinance their student loans. At the end of the day, your student loans are not going anywhere. They are your responsibility to pay off and knowing your options when it comes to refinancing can help you make a smart decision. 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