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Top 10 Facts About Student Loan Refinance

Student Loan Refinance

Student loan refinance generally involves consolidating all your student loans into one, although you can also refinance just a few loans to change their terms. Read on for the top 10 facts about student loan refinance.

  1. Multiple different lenders may offer refinance options: Not every lender has the same terms for figuring out your interest rate, nor the same payment plans or same incentives and options. Shop around to find a lender that offers you the best deal in your situation.
  2. You don't have to refinance all your loans: if you have multiple loans, you can consolidate or refinance them all into one. However, you don't necessarily have to include all your loans- for example, you may want to refinance all of your higher interest rate loans but leave your low interest loans alone. On the other hand, you may want to group all your low interest loans together but leave out one that is at a higher rate so you can concentrate on paying off the higher interest rate loan quickly.
  3. Generally, only certain loans are eligible for refinance: You cannot necessarily refinance every single student loan. Private loans, for example, may not be eligible for refinance by government-backed companies such as the Department of Education and Sallie Mae.
  4. You may only be able to refinance once: If you do opt to refinance with a government lender, or even with certain private lenders, you may be limited by lender policy to refinancing only one time.
  5. It is a good idea to refinance when interest rates are down: Some student loans are variable interest rate loans, which means they drop when national interest rates drop. If you have variable rate loans, you can refinance them when rates are low to lock in the low rate for the life of the loan.
  6. Refinancing can lower your monthly payments: When you refinance, the new lender may offer different repayment plan options. Opening up these new options can allow you to lower the amount you pay each month, providing you with more wiggle room in your budget.
  7. Refinancing can simplify your life: Many students have multiple loans, sometimes from multiple lenders. If you refinance, you can take out one big loan and pay all those little ones off. That means one monthly payment to one lender instead of several payments to different companies.
  8. Lenders may provide incentives to refinance: Some lenders offer you a rebate or a percentage back on the balance of your loan if you refinance with them. Compare terms before refinancing to see who is offering you the best deal.
  9. Refinancing can result in more advantageous payment incentives and options: Different lenders also have different policies for payback and different policies for rewarding buyers. For example, the Department of Education has a program called Income Contingent repayments in which your payment is based on a percentage of your income. If you opt for that plan, any amount unpaid after 25 years is forgiven. By looking for programs like this, you may be able to find a better option for you. Likewise, some lenders will lower your interest rate for paying on time or for setting up automatic withdrawals from your checking, and these options can result in your loan costing you less if you refinance to a lender that offers them.
  10. Refinancing can change the terms by which your loans are forgiven: Certain lenders will forgive part of your loan each year if you engage in a public service job- if you refinance to such a lender, you may end up saving money on your loans.

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