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Student loan refinancing companies are private lenders that offer solutions for students looking to lower their interest rates and make student loan payments more manageable. You can refinance multiple student loans into one loan with one payment and potentially lower interest rate. The biggest caution of refinancing federal student loans is that you will forfeit and lose all your federal repayment options including loan forgiveness and income-based repayment plans. We encourage you to carefully calculate all the benefits and disadvantages of refinancing your student loans.
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Best Reasons to Refinance Student Loans
Consolidate many student loans into one
If you have several student loans, keeping up with multiple payments every month can be burdensome. With refinancing, you can consolidate several student loans into one and have only one payment to make each month.
Get a lower interest rate
Refinancing options for your federal student loans can lower the interest rate on your loans. That means you will pay less total interest and could have lower your monthly payments. If you refinance for a longer period of time and/or for a lower interest rate your monthly payments can decrease.
Get better customer service from a different lender
Many students say they are unhappy with their student loan lender. We recommend refinancing with a non-profit lender with a reputation for excellent customer service.
Disadvantages of Refinancing Student Loans
Longer payment terms
If you refinance from a 10-year to a 20-year repayment plan your monthly payments will decrease but you will pay more total interest because you will be repaying for a longer period of time.
Paying more for your loans
We recommend you carefully research your loan refinancing options to make sure you are getting the best deal for your financial situation now and in the future. Variable interest rate loans might have low initial interest rates, but over time they will increase, meaning you will end up paying more for your loan.
Lose access to federal repayment plans
Some private lenders offer a variety of repayment options but they are likely to be less flexible than the many repayment plans offered on federal student loans. We encourage you to compare all of your options for repayment plans before you consider refinancing.
Is refinancing right for me?
Refinancing student loans might be a good option for you if:
- You have multiple student loans with high interest rates
- You want to lower your monthly payments
- You have a steady career and good income
- You want to pay off your loans faster