Most people are doubtful and confused when they think of refinancing student loans. Experienced financial experts tend to signal a thunderous maybe, when they are asked about refinancing. However, things have changed drastically over the past few years. Traditional federal student loans are much better than modern private loans. The ultimate benefits of refinancing will depend on what you give up to accomplish it successfully. When you are about to refinance your student loan, you will come across several terms like loan forgiveness, Income Based Repayment, term extension and Federal Direct Consolidation. And, in this article, you will learn if you should refinance your student loans or not!
Enjoy Your Freedom!
Refinancing is a special form of the Federal loan repayment program. It will extend the duration of your loan and give you more time. Meanwhile, loan extension will increase the rate of interest. To know more about the bond between refinancing and loan extension, you should browse through studentaid.ed.gov. This is an official site with everything you should understand and learn about student loans. Unfortunately, term extension will ruin your credit score in the long run. To enjoy ultimate freedom, you should pay your debts as soon as possible. Timely payments may reduce your monthly interest and save more cash.
Two enticing reimbursement schemes
Refinancing will help you make use of unique reimbursement schemes like Pay As You Earn (PAYE) and Income Based Repayment. These are advantageous programs that are linked with your income. As you step out of college, you will feel like a young achiever. However, debts worth several tens of thousands of dollars may loosen your spirit. This is when PAYE and IBR will become enticing. As mentioned previously, the special repayment plans will estimate how much you should pay every month after refinancing the student loan.
The Doubtful Forgiveness program
When you refinance student loans, you will have the wit to enjoy loan forgiveness programs. This is another important feature for federal loan borrowers. Unfortunately, loan forgiveness programs are meant for those in the public sector and for teachers. If you are a part of these courses, you don’t need to approach a private lender for refinancing. This is because you can refinance your federal student loan without any second thoughts.
The Big Confusion
A lot of people tend to confuse private refinancing with direct student loan consolidation. Some borrowers state that they are unable to refinance private loans because they have consolidated them! Nevertheless, reality is completely different! Irrespective of whether you have consolidated federal direct programs or not, you can refinance with the help of private lenders.
Factors to be considered while refinancing
Refinancing from federal loans to private ones will take off many features. If you are prepared to give up the downside protection of federal student loans, you should shift from federal to private student loans. And, if your annual income is bigger than your yearly loan amount, you should opt for private student loan refinancing. Few other factors like your monthly expenses and credit background must also be taken into consideration.
Refinancing Student Loans – A Mysterious World!