If you have federal student loans, you’ve experienced some relief due to the ongoing coronavirus pandemic. Currently, federal student loan payments are suspended until September 30, 2021. However, private borrowers of student loans have not received the same benefits.
If you’re currently struggling to pay off your personal student loan debt, you have options. Forbearance and forbearance can help, but they won’t lower your student loan. One of the best loan repayment options to reduce the cost of your loan payments is student loan refinance.
When you refinance your student loan, you are essentially taking out a new loan at a lower interest rate, replacing your existing loan. Refinancing can help lower your monthly payments and save you thousands of dollars over the life of the loan.
And you can use an online tool like Credible to compare student loan refinance rates from multiple lenders. And since Credible is easy on your credit score, you can get the information you need without fear of it damaging your credit score.
Student loan borrowers don’t have to struggle financially. If you’re struggling to afford your monthly student loan payments, here are four steps you can take.
1. Call your lender
Borrowers of private student loans do not get the same protection that they would get with federal student loans. But many lenders have options to help borrowers through the fallout from the coronavirus pandemic.
For example, some lenders offer loan forbearance, which means you can temporarily pause your monthly loan payments. Their interest will continue to grow, so it’s not an ideal scenario in the long term, but it might offer a temporary respite.
First, contact your lender to find out what type of relief options they have available. Most lenders are willing to work with borrowers who are in financial difficulties.
2. Consider other repayment options
Federal borrowers are not required to make any payments for at least the next six months. But the freeze on federal student loan payments will eventually end, and you’ll need to resume your payments.
At this point, it may be a good idea to consider other repayment options. For example, income-based repayment (IDR) plans like REPAYE and IBR are good options for many federal borrowers.
These plans limit your monthly payments to 10% of a borrower’s discretionary income. And after 20 years of repayment, borrowers are granted full forgiveness.
3. Consider refinancing your student loans
For private student borrowers, refinancing is a good option. With a remortgage, you replace your current student loan with a new loan at a lower interest rate. This can help you save money over the life of the loan and makes your monthly payments more affordable. This allows you to pay off your debts sooner.
However, refinancing isn’t always a good option for federal loan borrowers. Federal student loans offer benefits like loan forgiveness options and other federal protections that you lose by refinancing.
But it is a good option for private student loan borrowers who are looking for ways to reduce the amount they have to pay. You can use this online student loan refinance calculator to get an idea of what your new monthly payments could be.
4. Consider credit consolidation
Finally, personal student loan borrowers should consider loan consolidation. Again, this may not be the right move for federal borrowers since they lose valuable federal protections on their loans.
Many students take out multiple student loans to finance their studies. This means you may be paying off multiple loans with different interest rates. Consolidating these loans and refinancing them at a new low interest rate simplifies your monthly payments and helps you save money.
If you’re interested in learning how refinancing your student loans can save you money, take a look at Credible and explore your personal loan options. After filling out a short form, you will receive offers from up to 10 different lenders. This is the best way to compare your options and find the lender that’s right for you.
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