These student loan refinance rates have dropped. What to know before refinancing

0

Refinancing your student loan doesn’t always make sense, even if you can get a lower rate.

Getty Images/iStockphoto

For 10-year fixed rate loans, the average student loan refinance rate stabilized at 5.79%, compared to 5.80% the previous week, according to Credible’s latest rates for the week ending 7 /5. However, average 5-year variable rate loan rates rose to 3.37% from 3.29% the previous week.

More than 40 million Americans are responsible for student loan debt totaling more than $1.7 trillion – so it’s no surprise that many people are looking to refinance their student loans. And, yes, the prices are attractive. (Check here for the lowest fares you could qualify for.)

But there are a few things to know before refinancing a student loan. When refinancing a federal student loan, the borrower effectively takes out a new private loan to pay off their existing public loan. In doing so, they lose all the federal protections that came with their federal loans. This means the borrower forfeits any government-issued loan forgiveness, as well as income-based repayment options. Additionally, all federal student loan repayments are suspended until August 31, 2022, and you would lose this benefit if you refinance. Even if a borrower is not currently using the programs and protections offered, they should consider whether the need for repayment or loan forgiveness plans will arise in the future.

That said, refinancing can make sense, especially if you’re in a solid financial position and can get lower rates. If you are considering refinancing a private student loan because your credit score has improved or your finances have changed and/or you are able to get a better interest rate or shorten the term of your loan, you will likely benefit from a refinance.

Share.

Comments are closed.