Here are our Top 6 Reasons for Refinancing your Student Loans:
1. Get a Lower Interest Rate (… and pay less interest!)
Considering you have a steady monthly income and good credit score, your risk as a student loan borrower to the bank has dropped since you initially borrowed the student loan. Some banks are willing to lower your student loan interest rate through refinancing due to decreased credit risk. By lowering your interest rate you will accrue less interest to save money and have a better chance at eliminating your student loan debt faster!
2. Lower Your Monthly Payments
Refinancing your student loans can mean a lower interest rate, but can also modify your repayment terms. Most federal and private loans by default have a 10 year repayment term. Student loan refinancing options vary by bank, but typical options include 5, 10, 15, 20 year terms. This means if your current loan has a 10 year repayment term and you refinance to a 20 year term, your monthly payments will drop significantly.
Smart Money Tip: Although your monthly payments will drop, be careful as you might accrue more interest and end up paying more over the long haul!
3. Get a Flexible Repayment Plan
Not many, but a few banks offer alternative student loan repayment plans. While your federal loan options include great benefits such as Pay As You Earn, Income Based Repayment, and Income Contingent Repayment, private student loans typically have limited repayment programs such as Interest only payments, Economic Hardship Deferment, and a Grace Period.
These federal repayment options are tools to help you lower monthly payments and manage your debt during the first few years out of school. Keep in mind, most federal repayment plans will also accrue more interest over the long term.
4. Release a Cosigner from Your Student Loan
If your parents are co-signers on your student loans, you already know the stress this adds to your relationships. By refinancing with a private lender you might be eligible to release your co-signer. The co-signer can then improve their credit score and gain access to new lines of financial capital to help buy big ticket items like a home, car, and even start a business.
Refinancing student loans with any lender will release the cosigner from the old loan. If you refinance your student loans using a cosigner, here are two banks that offer co-signer release:
LendKey
Citizens Bank
5. Switch to a New Bank that Actually Cares about You…
Most Student Loan Hero users that we talk to aren’t happy with the level of student loan servicing they are provided. Refinancing your student loans gives you the opportunity to switch to a new bank that has a great customer service record and better track record working with student loan borrowers.
6. Consolidate Multiple Student Loans… and make them easier to manage
Did you know the average Student Loan Hero user has 7 loans with 2-3 different student loan servicers? This can get confusing to manage, especially if your student loans are being sold to other banks every few years. Refinancing your student loans can allow you to consolidate multiple student loans into one debt, making your student loan debt easier to organize, track, and repay.
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