Student of President Bidenannounced in August could bring relief to millions of federal student loan borrowers. But if you have a private loan – that is, a loan you took out directly from a bank, credit union or finance company and not from the government – you are not not eligible.
Don’t despair though. You have options, including refinancing. This can help reduce your monthly private student loan payment and put money back in your pocket. You can easily apply for a refinance loan now.
To learn more about this unique financial opportunity, read on.
What is student loan refinancing?
When you refinance a private student loan, you take out a new loan from a bank or other financial institution, use it to pay off the old one, and start making payments on the new student loan. The idea is to replace your old student loan with a loan whose terms are more favorable for your current situation – and which allows you to.
For students and graduates with private loans, refinancing can offer some relief in several ways, including lower monthly payments or interest rates, depending on the borrower’s circumstances.and need.
You box refinance a public student loan with a private loan, but not the other way around. Some student borrowers combine public and private loans into one private loan.
Take note, however. You will not be eligible to apply for federal programs such as forbearance, deferral, or forgiveness if you take your public loan private. This exclusion includes programs for public servants, including the armed forces. So research the move thoroughly before going ahead and make sure that no government programs are open to you.
Private student loans cannot be consolidated or refinanced in public (government) loans.
You can explore your private student loan refinance options today to determine if this makes sense to you.
How does private student loan refinancing work?
To refinance your private student loans, you will need to apply through a bank or financial institution.
Your lender will assess your financial health, as they would for any other type of loan. It’s a good idea to shop around for better interest rates and terms than your existing student loan and take stock of the terms you need to meet. Shop around and compare lenders to find the best one for you.
If you have a(usually 670 or more), a steady job, money in an emergency savings account, and likely not eligible for federal assistance programs, private loan refinancing may be a good option. Many lenders are looking for a less than 50% to refinance a student loan.
Here are some pros and cons of student loan refinancing to consider:
- You can reduce your total debt by lowering the interest rate.
- This will help you lower your monthly payments.
- You may be able to lengthen or shorten the loan.
- You may be able to remove the co-signer from the original loan.
- You can combine multiple loans into one monthly payment.
- You will not be eligible for federal programs like pardon, deferment, and forbearance.
- You will not qualify for special loan terms related to the military or other public services.
- You cannot consolidate into a federal loan.
- You may have to give up subsidized loans.
- There is no repayment grace period like waiting after graduation. Payments are due immediately.
What you will need to apply for refinancing:
It’s a good idea to thoroughly research the pros and cons of your particular situation before applying for student loan refinancing. Closely compare the total repayment amount of your potential new loan to your current loan, including interest. Longer loan periods can end up costing a lot more than your original loan due to the higher number of interest payments – even if the monthly payments are lower.
If you decide to refinance, shop around. Before applying, experts recommend consulting a credit counselor or Financial Advisor.
Once you have chosen a lender, you will need:
- A government-issued ID, such as a driver’s license or passport
- Payslips or proof of employment
- Your most recent Form W-2 and tax return
- Repayment statement from your current lender for your new application.
It’s also a good idea to request a loan checklist from the lender in advance.
If refinancing sounds like something you could benefit from, it’s easy to start.