We get tons of questions on a regular basis regarding student loan refinancing. If you have questions, we have answers! If you don't see your question below, feel free to write to us at firstname.lastname@example.org.
When can I refinance?
If you are a student, you may have to wait until you finish school in order to refinance your education loans or risk surrendering your in-school deferment. If you are still enrolled, make sure to ask the right questions about when repayment starts before refinancing. If you are a parent, some programs will allow you to refinance PLUS loans and private loans in your name while the benefiting student is still in school. Ask your lender.
Do I qualify to refinance?
Every lender evaluates their borrowers based on their own set of criteria, so it is a good idea to check out rates from a few different lenders. Lenders look for good credit and a steady income when evaluating refinancing candidates. If lenders offer a pre-qualification program, that might be a good way to determine what your rates will be without having to endure a hard credit pull.
What are the benefits of refinancing?
Student loan refinancing has several main benefits. First, you simplify your life and after you refinance, you’ll only have one lender and one monthly payment for your student loans. Refinancing allows you to choose a new repayment term. If you have the money and want to pay off your loans faster, you can choose a shorter repayment term. Or, if you want to pay a smaller amount over a longer period of time, you can choose a longer repayment term (you will likely pay more interest over your repayment). If you choose to refinance your student loans, you may be able to get a lower interest rate than what you're paying. If you lower your interest rate, you can save hundreds or even thousands of dollars on interest charges.
Which loans can I combine when I refinance?
To be eligible to refinance your loans under a student loan refinancing program, your loans must have been used for qualifying education expenses. If you paid for you education expenses on a credit card, you will not be able to refinance those charges under an education refinance loan program.
Federal loans may be combined with private loans under most programs, but you lose any benefits on your federal loans once they are refinanced. PLUS loans have far fewer benefits than federal student loans, so it may be worth it for big savings, and if you don't think you will use your benefits, you may think refinancing is worth the risk.
Under some programs, a student can refinance his or her parent's PLUS loans if he or she is the named beneficiary of the PLUS loan. Other programs (like RISLA's) will not allow a student to refinance a parent PLUS loan in his or her own name unless the parent is cosigning the new refinance loan.
Graduates usually can combine Graduate PLUS loans with their other loans without trouble.
Refinancing can be a smart way of removing a cosigner from a loan, as long as the student meets the refinancing lender's underwriting criteria without that cosigner.
What would my monthly payments be?
Your monthly payment will vary based on the lender you choose and the interest rate you receive from them. To get an idea of what your monthly payments might be use this calculator.
What's the difference between refinancing and consolidation?
The terms “student loan refinancing” and “student loan consolidation” are often used interchangeably. But there is a big difference between refinancing and federal student loan consolidation. When you refinance, you take out a brand new loan with a private lender. You can refinance both private and federal loans. The new refinanced loan will be private, meaning you will no longer have federal loans. In an ideal world, your new loan will have a lower interest rate than what you're currently paying.
With consolidation, you take out a Direct Consolidation Loan with the federal government. Only federal loans can be consolidated; private loans cannot. Your new interest rate will be the weighted average of all your loans, rounded up to the nearest 1/8 of 1% meaning your interest rate won’t go down. Consolidation simplifies your monthly payments, allows you to keep most federal student loan benefits, and allows you to choose a longer repayment term, but you'll still need a plan for any non-federal loans you have in your name.
Can I consolidate after I refinance?
No. While you can refinance your federal loans (including consolidation loans) into private refinance loan, you cannot refinance private loans under the federal consolidation loan program.
Can I save more by consolidating?
If you currently have a variable rate federal loan, you can potentially save yourself from future rate hikes by consolidating. However, the rate you receive on your consolidation loan is the weighted average of all your existing loans, plus 1/8 of a percent. You do not reduce your interest rate by consolidating. Furthermore, by extending your repayment term, you often pay more in finance charges in the long run, potentially making the federal consolidation loan program a more expensive option than paying off the original loans within the standard term.
The interest rate you receive on a refinancing loan is determined by the program you are applying to, your credit worthiness, and sometimes other factors. This rate may be lower or higher than the rate on your existing loans so be sure you understand what your savings will be (either in total dollars or in the monthly payment amount) before applying.
How much does it cost to refinance education loans?
There is typically no cost associate with refinancing your education loans. Just be sure to ask the lender about any fees before applying.
Hopefully, we've answered many of the questions you have about refinancing and sonsolidation. If you have any other questions speak to a RISLA Refinancing Loan Specialist at 866-268-9419. If you think refinancing is right for you, apply here.