After securing college loans, the conversation between students and their families often shifts from how they are going to pay the tuition bill to how they're going to meet their education loan payments leading into graduation and after students have their diplomas in hand.
To get a ballpark idea of their upcoming monthly payments, a lot of families use a repayment estimator.
From there, you're in more command of the realities of your student loans to start looking into repayment plans that work for you and your family.
Understanding Your Student Loans
If you are a student and have finished college, there are essentially two types of federal student loans that you may have: Perkins loans and, the more popular, Direct student loans (also called Stafford Loans) that are broken down into subsidized and unsubsidized loans.
Perkins loans are fixed interest loans that are designed to help families really struggling with paying for college. These loans are intended for students in dire financial need and would have been awarded by your college through your financial aid package.
Stafford loans, on the other hand, are given out by the federal government via the Federal Direct Student Loan Program (FDSLP). When you receive a Stafford loan it is either subsidized (interest covered by the government while the student is in school) or unsubsidized (the student pays all interest).
In addition to these federal student loans, you may have private student loans, which have varying terms based on the lender and program. Private loans may have fixed rates or variable rates. When a student has a variable rate loan, the monthly payment can change if market rates rise. Fixed rate loans have level monthly payments until the loan is paid in full.
If you are a parent of a student or recent grad, you may be a cosigner on your child's private student loans or have some in your own name. You may also have Federal Parent PLUS Loans, which can carry an interest rate as high as 8.5%.
Refinancing Your Education Loans
Unfortunately, some former students and their parents find that their education loan payments are getting to be too much for them to manage and that it would be easier to refinance their loans than fight a losing battle against accumulating interest.
But grads should be careful with refinancing - and know when it is the best option for them - as they will permanently lose federal student loan benefits on any loans they refinance in the private market.
Loan refinancing, though, can significantly lower the interest rate on your student loans, potentially reduce your monthly payment, and it can even lower the total amount that you repay over time by thousands.
It can also potentially enable you to turn variable interest rate student loans into fixed rate ones saving you from future rate hikes.
Saving More Every Month with Refinancing
Post-graduates as a whole are a cash-strapped bunch. This means that any money put back in their pockets at month's end is a good thing. Parents, on the other hand, may simply be looking to pay less in the long run.
Student loan refinancing could help students and parents do just that by lowering their monthly payments, fixing variable-rate interest, and saving on interest that otherwise would have been unmanageable.
But it is important to do your research before refinancing to make sure you are getting the best deal for you.
For more detailed information on student loan refinancing, including FAQs, savings examples, and tips on how to determine if refinancing is right for you, download RISLA's Guide to College Refinancing.