Can I Refinance Federal Student Loans?

Can I Refinance Federal Student Loans?

8 min read


In this video, Matt talks about how he was able to lower his interest rate on his federal loan to 2%. He shows how in just a few minutes he’s able to submit a request online getting approval from two different lenders.

If this sounds familiar, apply for an FHA loan at a reasonable rate and get approved for a mortgage today. Then find a good realtor and start looking at houses. In this video I’ll talk about how to refinance your federal student loan and save money while doing it.

If you plan to purchase a house over 10 years old then the government gives you the opportunity to refinance your existing student loan. So if you currently owe $20,000 and have 20 years left you can refinance to something much cheaper.

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Important Details:

Your current loan may not qualify. At least 30 days prior to applying take note of your monthly payment and principal balance.

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Can I Refinance Federal Student Loans?

Student Loan Debt Is at Record High: Here’s What You Need to Know

It’s no secret that student debt is reaching record highs across the nation. But, what many don’t know is that federal student loans have become a major obstacle for millions of Americans to overcome. According to recent reports, student loan debt now stands at $1.53 trillion, making it one of the largest forms of consumer debt in America today. And, if you’re wondering whether you can refinance your student loans, then we’ve got some good news for you! In fact, according to NerdWallet, you can actually get approved for refinancing even if your credit score isn’t great.

But, before you sign onto any new agreement, just remember that getting approved for a refi won’t necessarily make your student loan payments lower. There are a lot of things that go into determining how much money you will pay towards your federal student loans, including (but not limited to) your income, interest rates, total amount owed, etc. So, while getting refinanced may seem like a good idea right now, keep these four things in mind before signing anything official.

First, let’s talk about your income. If you’re currently maxing out your financial aid, then obviously refinancing isn’t going to help you save any money. However, if you’ve already earned enough to cover your education costs, then it’s time to start shopping around for a cheaper rate on your federal student loans. Because the federal government controls educational lending, they set the minimum payment amounts that each lender must adhere to. So, instead of trying to find lenders who offer the lowest rate, you should focus on finding lenders who offer the best rate for your current income level.

Next, let’s take a look at your interest rate. While refinancing doesn’t always result in a lower interest rate, you do want to make sure that you’re comparing apples-to-apples between different lenders. After all, if you were paying 5% interest on your loan, you wouldn’t think twice about taking out a 0% interest personal loan, would you? So, if a particular lender offers a lower rate than another lender, make sure you understand exactly what that means before committing to their product. Finally, consider your monthly payment amount. As mentioned earlier, getting approved for a refinance won’t reduce your monthly payments. Instead, it simply shifts them from paying off your original loan to paying off your new loan. And, depending on your situation, that could mean a higher amount per month or a lower amount per month.

Now, let’s say you decide to continue refinancing after learning more about your options. That’s fine too! Just make sure you check your credit report regularly to ensure you haven’t missed any negative items on your credit history. Also, as a general rule of thumb, you shouldn’t spend less than 10% of your gross annual income on monthly student loan payments. And, if you fall short of that standard, you should work on increasing your salary until you reach that mark.

Finally, if you’d like to learn more about refinancing your federal student loans, feel free to give us a call! At American Education Finance, our team of experts specializes in helping students, parents, and graduates navigate the complicated world of education financing. We can answer your questions about private versus public schools and explain the various types of student loans available. Plus, we can also walk you through the steps necessary to apply for refinancing and help you get your loan reworked as soon as possible.

Can I Refinance Federal Student Loans?

Borrowers Need To Know!

In today’s world, everyone is looking for ways to save money. One way many people are looking is refinancing their student loans. But before you do that, you need to know what you are getting yourself into. There are different types of loans out there, and not all of them are created equal. Below we look at some of the things you should consider before refinancing your federal loans.

What type of loan are you talking about?

Before you start thinking about refinancing your federal student loans, you first have to understand the different types of student loans. Most students take out two types of loans during college: subsidized and unsubsidized. A subsidized student loan means the government pays the interest while you are paying back your loan (the interest rates depend on your income). An unsubsidized loan means you pay the interest by yourself and you may end up having to use the loan funds for repayment over a longer period of time.

How much would you be saving if you refinance?

Refinancing your student loans may seem like a great idea, especially since you are repaying the loan at a lower rate. However, depending on how much you owe and where you get your loan, you may or may not actually be saving money. If you are currently making payments on your federal loan with an 8-percent APR, refinancing to a 4-percent APR could only save you $50 dollars over the course of 10 years. As long as you are comparing apples to apples, you shouldn’t expect huge savings, even though lenders advertise otherwise.

Is refinancing right for you?

Another thing you want to think about is whether refinancing makes sense for you. You should weigh a number of factors before deciding whether refinancing your federal student loan is something you want to pursue. These include:

Your current financial situation. Are you paying off any other debts besides your student loans? Do you have extra cash lying around that you could potentially put toward your student loans?

Where you will be applying for the loan. Will you be moving to another state? Does your school have a high loan volume?

How long you plan on staying in school. If you finish school in four years, refinancing might make sense. If you stay in school longer than that, it might be better to just leave your loans alone, especially if you plan on going back to school.

What your loan options are. If you don’t have any private scholarships or grants, then refinancing those loans might make sense.

If after doing your homework, you still feel like refinancing is right for you, here’s what you need to know. First, before you apply, you’ll want to contact the Department of Education and find out if there are any changes that affect your situation. For example, if you’re considering lowering the amount of your monthly payment, you might run into problems if your school has a cap on the maximum amount you can change your payment each year. Also, if you are married, divorced, or in a relationship where you share a household with someone else, you might not qualify for certain programs.

You should also remember to stay organized throughout the entire application process. Make sure you create a folder with all your loan documents. Include copies of everything you submit and keep track of who sees what. Finally, know exactly what you want to say to the lender or financial company when you call. Don’t let them talk you into anything you aren’t comfortable with. If they try to sell you services you don’t need, tell them no thanks.

Can I Refinance Federal Student Loans?

What Is a Federal Direct Loan?

A federal direct loan is a type of student loan serviced by the U.S. Department of Education’s (ED) Office of Servicers. These loans are offered by private banks or other financial institutions. You may hear about them referred to as government-backed student loans, federally guaranteed student loans, or education loans. There are two types of federal direct loans: subsidized Stafford and unsubsidized Stafford.

How Do Subsidized Stafford Loans Work?

Subsidized Stafford loans are federally backed loans that are eligible for interest rate reductions based on income level. If you choose to take out a subsidized Stafford loan, your monthly payment amount will stay low while you’re enrolled at school. When you graduate and begin repaying your loan, payments increase according to a standard repayment plan. You’ll pay lower rates while enrolled in school than if you had chosen not to borrow any money at all. After 20 years of paying back your loan, the remaining balance becomes fully dischargeable.

How Does Unsubsidized Stafford Loans Work?:

Unsubsidized Stafford loans do not have any income-based eligibility requirements, however, they don’t offer any upfront loan forgiveness options either. As long as you make timely payments throughout your college career, you’ll be able to repay your loan without having to worry about its size increasing over time. Repayment plans are just as traditional as they were before the introduction of subsidized loans. However, unlike the subsidized version, you won’t be benefiting from any reduced interest rates during your college years. That means higher monthly payments after graduation.

There Are Three Different Types of Repayment Plans Provided By Fannie Mae.

You Can Choose Between Fixed, Graduated, or Income-Contingent Payments.

What Are My Eligibility Requirements for a Subsidized Stafford Loan?

For a subsidized loan, you need to meet certain criteria to qualify. Your principal and interest payments shouldn’t exceed 10% of your discretionary income. A discretionary income is defined as gross income minus a reasonable number of basic necessities, including housing costs, food, transportation. In some cases, you might be allowed to borrow more than 10% if you’ve been accepted into a work study program.

If I’m Not Eligible for a Subsidized Loan, Should I Consider Other Options?

If you aren’t eligible for a subsidized loan, there are still several ways you can finance your college education. Private lenders often give out unsubsidized loans, which are similar to unsubsidized Stafford loans, except the borrower doesn’t receive any upfront loan forgiveness. Another way to finance your education is to apply for a private loan from a bank or credit union. Banks and credit unions are generally less expensive than private student loan providers, but they tend to charge high fees and require good credit scores to approve you for the loan.

These loans only become due once you complete your undergraduate studies. So, any debt incurred won’t negatively affect your future borrowing power. Plus, if you decide to leave school early, you’ll still be responsible for making your regular payments.

What Are My Eligible Borrower Costs with a Subsidized Loan?

Can I Refinance Federal Student Loans?

Can I Refinance My Student Loan?

If you’re considering refinancing student loans, here’s what you need to know about federal student loan refinancing programs.

How Much Could You Save By Refinancing Your Student Loans?

How much money could you potentially save by refinancing your student loans? If you have federal student loans, how does the interest rate work? Here’s a look at some different scenarios regarding the amount of money you could save if you refinance your student loans.

What Is the Cost of Refinancing Student Loans?

Is refinancing your student loans worth the cost? Learn about potential costs including closing fees, application fees and appraisal fees. You might also consider whether to choose a fixed-rate or variable-rate option. Read on to find out how to calculate your savings.

Do I Qualify for a Refinancing Program?

Do you qualify for federal refinancing? Find out if you meet the requirements after reading the table below and then take our quiz.

How Does Refinancing Work?

Learn about how refinancing works with our video tutorial above. Find out if refinancing your student loans makes sense for you.

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