Refinancing Federal Student Loans

There are many ways to consolidate student loans and get rid of interest rates. In this video I’m going to teach you how to do it at no cost! If you’re currently enrolled in school and have student debt, then the time to refinance your education loan(s) is now. There’s never been a better time due to the recent tax law changes where borrowers are given a $5750 tax credit if they refinanced certain types of debts. From personal experience we know how hard it can be to juggle different financial institutions while trying to pay off student loans while working full-time. We began self-payments back in March 2016 and were able to remove about $4600 off of our balance and save thousands in interest payments.

This video is a complete step-by-step guide to consolidation and refinancing federal student loans and can serve as a reference guide to help you understand what options are out there. Your situation may vary, but the truth remains the same. You WILL save money and enjoy lower monthly payments by refinancing your student loans.

Refinancing Federal Student Loans

How Refinancing Can Help You Pay Off Your Loan Faster

A refinance loan is simply a loan where you get a lower interest rate than what you currently have on your federal student loans. When you refinanced last year’s $30,000 loan at 6.9%, you saved about $1,500 over the course of the whole loan term! That’s a total savings of $600 per month. Now, imagine if you could save even more money by refinancing again after your first loan payment was due? If you were able to refinance your 2016-2017 loan at 4.3% instead of 5.8%, you would save almost $800 each month!

What Are the Benefits of Refinancing?

If you’re already paying off your student loans faster than their terms allow, you should consider refinancing to take advantage of the many financial benefits associated with doing so. Here are just some of them:

Lower Interest Rates – You may find that your current interest rates are much higher than those on the new loan, meaning that you will save thousands of dollars over the lifetime of the loan.

Easier Payments – By taking out a shorter amount of time, with a smaller monthly repayment, the payments should be much easier for you to manage.

Flexibility – While your original loan term may not change, you may be able to choose a different term length and interest rate for your new loan.

No Penalties – There are no penalties for prepaying your loan early, and you can always pay back more than the minimum amount you owe.

Tax Benefit – Many people who do not make enough money to itemize deductions may benefit from the tax deduction associated with making extra payments.

More Time to Save Money – Another benefit of refinancing is that you don’t need to wait until the end of the full loan term to apply for a consolidation loan; you may be able to apply now and start saving right away.

Less Risk – A refi loan is less risky than a personal loan, since it comes with certain protections for you and the lender in case things go wrong.

Other Savings Opportunities – Since refinancing doesn’t eliminate the original debt entirely, you still have other opportunities to reduce the balance on your loans, including lowering the interest rate, extending the maturity date, or consolidating your private student loans into one larger loan.

Now that you know how refinancing works, let’s discuss how to determine whether this option makes sense for you.

Where to Find Out About Funding Options

Refinancing Federal Student Loans

For many Americans today, student loan debt is the largest portion of their total debt burden. According to a recent report, over 60 million Americans now have some kind of student loan debt, totaling $1 trillion. That’s roughly 1 out of every 2 American adults! Many people struggle to pay off those loans each month because they’re simply unable to find jobs that offer enough income to make a dent in the amount owed. In fact, 40% of borrowers who started repaying their loans in 2014 still haven’t paid it back 6 months later! But what if we told you there was a way for borrowers to refinance their federal student loans without paying any additional fees?

There’s no need to wait to start saving money on your student loans, thanks to the recently announced refinancing program offered by the U.S. Department of Education – Free Refinancing for Borrowers Who Have Defaulted (or Will Be) on Their Federal Student Loans. Under this plan, current borrowers who fall behind on their payments may qualify for a lower interest rate on their loans. What’s more, these borrowers will not have to pay any prepayment penalties – meaning the only thing borrowers will owe is the original principal balance on their loans. And, even if borrowers choose to repay their loans early, they won’t have to pay any penalty.

To be eligible for this free refi, borrowers don’t need to be in default, but rather just delinquent on their monthly payment. So if you’ve fallen behind on your payments at some point since borrowing your first student loan, you could be eligible for repayment assistance under this new initiative. As long as borrowers meet eligibility requirements, they’ll receive a letter explaining how much money they’ll save, based on the type of loan they have and their expected monthly payment. If they decide to take advantage of this opportunity, borrowers will then enter into a new agreement where they’ll pay the same monthly payment as before, but instead of paying the higher interest rate associated with their old loans, they’ll be charged a fixed rate of 0%. This means borrowers won’t have to worry about getting hit with any unpleasant surprises when it comes time to pay off their loans.

What makes this program unique, however, is that it applies to all types of federal student loans, including both subsidized and unsubsidized loans. So, whether you took out a guaranteed private student loan for college, or borrowed from the federal government, this program could benefit you financially. Plus, even if students do elect to repay their loans early under this new initiative, they won’t have any obligation to pay extra fees, either.

If you’d like to learn more about this initiative, visit the Department of Education’s website. You can also contact your lender directly to get information on how to apply. Make sure you know exactly which type of student loan you have before contacting your lender, though, to ensure you qualify.

Refinancing Federal Student Loans

What is Refinancing?

As of right now, the average student loan debt is $35,500. That’s a lot of money! But if you have good credit and keep making regular payments, then refinancing should be possible. Here’s how it works: You put down only 5% of the total amount owed and the remaining 95% will be paid back over 12 months. Your monthly payment will be lower than what you currently pay and your interest rate may even be lower. And remember, this program is free.

How to find out whether it’s worth it for you.

There are three factors that determine if refinancing federal student loans makes sense for you:

How much do you owe? If you’ve got less than $10,000, refinancing might cost about $900 – $1,200. If you’re carrying more than $40,000, though, refinancing could save you anywhere from $1,800 to $2,400 each year. The difference between these two amounts is based on the size of your loan balance — the higher the balance, the greater the potential savings.

Do you qualify for other financial aid? If you know that you don’t qualify for anything else, refinancing won’t make any difference. However, if you think you are eligible for grants or scholarships, or if you plan to apply for private loans, refinancing could potentially save you thousands over the years.

Does not having this type of debt affect your credit score? If credit scores aren’t something that concern you, refinancing might actually improve them slightly. On the other hand, having high-interest debts can definitely harm your credit rating. So, it really depends on the situation.

If refinancing isn’t a possibility for you at this time, you shouldn’t let that stop you from saving more throughout the year. Even small changes add up.

Refinancing Federal Student Loans

What Is Refinancing?

A refinancing is paying off a loan with a different rate and/or a different term. When you refinance student loans, you generally pay less interest over time than if you had borrowed directly from the government at the original rate. You should calculate how much money you will save on interest payments using the following formula:

Interest Rate How Much Money You Will Save With A Refi

For example, if you have $10,000 left on a loan with an interest rate of 4%, then your monthly payment would be $100. Now imagine that you decide to refinance your loan with a new loan with a lower interest rate of 2%. Your principal balance will remain the same but you’ll now only need to make 20 installments per year instead of 30. If the new loan has an interest rate of 0.16% (which is 1% lower), you’d only need to make 10 payments per year and save yourself $80 per month in interest.

Are There Any Downsides To Refinancing Federal Loans?

There are no downsides to refinancing federal student loans. However, some people choose not to do so because they don’t want to take out new loans even though they could save them money. In addition, some students find refinancing difficult because they’re working jobs with low-paying wages and/or making minimum wage, and their income isn’t high enough to cover both the initial and new loans. Lastly, some people just aren’t sure whether they should refinance or not. I recommend talking to your financial advisor about what’s best for you.

Where Can You Find Out How Much You Could Save By Refinancing?

You can find out how much you could save by refinancing by contacting your lender directly or by visiting studentloans.gov. Once you know what you owe, you can compare rates at several online lenders.

Is Refinancing Really Worth It?

If you have good credit, you may be able to get approved for lower rates or terms by refinancing your loans. And since your debt burden will stay the same, you’ll still have access to the same amount of money to spend on things you really want. Plus, you’ll still have the chance to earn higher earnings later in life because of your education.

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