Refinancing student loans is a great opportunity to reduce your student debt. However, it’s not for everyone.
Refinancing can be a great option for you if you either have a private student loan or if you are in the workforce, have graduated with an associate degree or higher in an eligible field, and have high-interest rates on current outstanding student loans. You may save thousands and potentially shave years off your loan term, helping you get out of student loan debt faster.
Although there are many benefits to refinancing your loans, it may not be for everyone. There are specific benefits of a federal student loan that a private refinance/consolidation loan may not offer:
Loan forgiveness: If you qualify for student loan forgiveness and you refinance to a private student loan, your refinanced loan will no longer be eligible. Federal student loan forgiveness programs, such as Public Student Loan Forgiveness (PSLF), are only applicable on federal loans.
Deferment: Refinancing can restrict the options you have to postpone your payments in the event that you lose your job or fall into considered financial hardship. Private lenders’ deferment policies vary.
Income-Driven Repayment Plans (IDR): Federal loan holders can apply for an IDR plan that reduces their minimum monthly payment and makes it a percentage of their discretionary income. When you refinance, you will be ineligible for any IDR plan.
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