Why financial experts are urging student loan borrowers to refinance

Low interest rates help borrowers save money. (one)

Refinancing your student loans can help you save thousands of dollars in interest and pay them off faster, allowing you to save money for emergencies or other uses. Interest rates are extremely low right now as the Federal Reserve has kept short-term interest rates near zero to try to stimulate the economy amid the coronavirus pandemic.

Credible can show what refinance rates you qualify for. You can compare student loan refinance rates from up to 10 lenders without affecting your credit score.

Should You Refinance Student Loans Now?

People with larger amounts of student loans could benefit by refinancing them at lower interest rates, which can help pay off debt sooner. But is now the right time to act – or should you wait? Financial experts are encouraging borrowers to refinance personal student loans now that interest rates have been incredibly low and are unlikely to rise in 2021.

“For borrowers with excellent credit and stable incomes, they could potentially save thousands by refinancing their loans,” said Leslie Tayne, a debt relief attorney in Melville, NY.


When you refinance, you replace your current loan with a new one. This step has a few benefits, including:

  1. Get a lower interest rate
  2. Decrease in monthly payments
  3. Consolidation of multiple loans
  4. Shortening the term of your loan

1. Get a lower interest rate

If you refinance now, when interest rates are low, you stand a better chance of replacing your old loan with a new one at a lower interest rate. This gives you the opportunity to save more money over time. Right now is a great time for those with personal student loans to refinance before interest rates rise. (Just note: if you refinance federal student loans, you could lose some of the perks and benefits that come with them, so make sure you do your research before making any final decisions).

You can compare student loan refinance rates from multiple lenders at once using an online tool like ​Credible without hurting your credit score.


2. Decrease in monthly payments

For borrowers who are financially stable, have a steady income from their current job, and do not anticipate the need for affordable repayment plans or public student loan forgiveness, refinancing government-guaranteed loans may be a consideration. Again, keep in mind that you could lose federal loan protection and perks.

However, if you have personal student loans, now is a good time to refinance.

“Refinancing your student loans can open up opportunities to save money with lower monthly payments and reduced interest rates,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling, a Washington, DC-based nonprofit.

If you have private loans, check to see if the current student loan refinance rate is lower than yours. If so, use Credible to get actual personalized rates based on your credit history.


3. Consolidation of multiple loans

People who have private student loans should consider refinancing because of low interest rates and the ability to consolidate multiple loans into a single monthly payment, McClary said.

Use an online tool like ​Credible to view rates from multiple lenders at once.


4. Shortening the term of your loan

Another advantage is the potentially faster repayment of the loan.

“It ultimately costs you less with a lower interest rate and a faster repayment program,” Tayne said.



With the Coronavirus Aid, Relief, and Economic Security Act (CARES) expanding the benefit of automatic forbearance on federally guaranteed student loans, it’s probably not the best time for people who need that protection to refinance their loans. Here is the list of some disadvantages:

  1. You could lose federal benefits
  2. Refinancing fees apply
  3. You may not qualify for low rates

1. You could lose federal benefits

If you refinance your federal loans, you would no longer have access to affordable repayment programs administered by the Department of Education. Borrowers will lose all of the benefits they currently have from refinancing, including the loss of fixed interest rates, public service loan forgiveness (PSLF), access to various repayment plans such as income-based repayment plans, deferral and forbearance programs.

“You don’t want to lose benefits from an ongoing program, so be aware of changes due to refinancing, especially if you’re moving from a federal loan to a private loan,” Tayne said.

2. Refinancing fees apply

Before you start refinancing your student loans, get an idea of ​​what your new monthly payments will be by using an online student loan refinance calculator to get an idea of ​​what might be.

Determine what the refinancing fees are. People whose credit ratings have declined or those with less than excellent credit will often find that refinancing can actually raise their interest rates because low interest rates are reserved for borrowers with excellent credit, Tayne said.

3. You may not qualify for low fares

“Loan companies often lure applicants by mentioning their lowest rates, which are reserved for a small pool of borrowers, only to find they don’t qualify or that they have to pay points or fees upfront,” she said.

Credible can show what refinance rates you qualify for. You can compare student loan refinance rates from up to 10 lenders without affecting your credit score. Plus, it’s 100% free!


How to get the lowest interest rate on student loans

People who want to get the best refinancing deal should first consider ways to improve their credit score.

A qualifying credit history is always important when looking for the most competitive refinancing terms. So make sure you fix any overdue accounts or inaccuracies that could hurt your rating, McClary said.

“Get a free copy of your credit report before contacting the lender so there aren’t any nasty surprises when they respond to your loan application,” he said. “If you have debt problems that are preventing you from paying off affordable credit card and home loan payments, contact a nonprofit credit counseling center and get help before you refinance.”

Tayne also said that excellent credit can lower your interest rate and refinance payments.

“There are many ways for those with good credit to increase their cash flow on refinance by lowering interest rates and monthly payments,” she added.

Consumers should ensure they are not overspending and approaching their credit card credit limits as this will lower their credit score.

“The closer you get to your credit limit, the higher your credit utilization,” she said. “High credit utilization could signal lenders that a person might be struggling to pay off their balances or that they are relying on credit to make ends meet.”

See if you can secure a lower interest rate by refinancing your student loans today. Just enter some of your information (like your current student loan balance and credit score, etc.) to find your interest rate in minutes.


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