Can You Refinance Federal Student Loans?
If you currently have a federal student loan, you’ve probably thought about refinancing for an easier repayment experience. However, there could be some disadvantages that you may not know about. Before jumping into anything that you can’t undo, let your friendly advisors at College Funding of Tampa Bay fill you in on all the details so you can make a more informed decision.
What Happens When You Refinance a Federal Student Loan
Refinancing a federal student loan is definitely possible, but like with most things, the process has its ups and downs. Depending on your current situation, refinancing could benefit you, or it could put you in a less favorable position. The best thing you can do is evaluate the possible outcomes and think hard about what would actually be best for you.
The Benefits
First, let’s consider why someone would want to refinance their loan in the first place. If your credit score has increased since the time you originally took out the loan, it’s very possible to come out of it with a much lower interest rate. You could also choose a more flexible repayment deadline. For instance, you can opt for a sooner date for fewer total interest charges, or you can decide on a date much farther out for lower monthly payments.
The Drawbacks
The most notable downside to refinancing your federal student loan is the fact that you must do so through a private lender. Why is that a bad thing? When you refinance, your federal student loan becomes a private loan since your private lender is technically paying off your original loan in full. This means you’ll no longer qualify for federal benefits such as the loan forgiveness program.
The Best Times to Refinance Your Federal Student Loan
Considering the pros and cons of refinancing your federal student loan, when is the best time to go through with it? Most people find the need to change up their repayment plan after finding a stable and higher-income job which is a responsible choice. Many individuals deal with a higher-than-average interest rate since they received the loan with little to no credit, and so refinancing would put them in a much more desirable position with a significantly lower rate. And if you don’t qualify for federal loan forgiveness anyway, you have less to lose.
If this all seems like a lot to take in, you’re not the first one to think so. Paying for college isn’t always an easy task and many students and graduates tend to struggle in finding the best solutions to their problems. In situations like these, it helps to seek out a knowledgeable financial advisor who specializes in college funding.
Need Some Expert Financial Advice?
Consult the financial experts at College Funding of Tampa Bay to help you decide if refinancing your federal student loan is the right choice for you. Our advisors can carefully evaluate your current financial situation and find the best path for you to take in being debt-free. Call (813) 755-6834 today for a free consultation.
