Refinancing Student Loans Lower Interest Rate

8 min read

Description: “With higher education costs and student loan debt at record levels, many students have had their dreams deferred. But refinancing your student loans could lower your interest rates and save money while paying off those pesky payments.”

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Debt consolidation loans

Debt consolidation loans are designed to help students pay off their higher-interest student loan debt while they repay their lower interest federal loans. These types of loans allow borrowers to consolidate their federal and private student loans into a single loan at lower interest rates. Consolidation doesn’t eliminate the need for repayment, however, if a borrower makes payments on both loans, the combined total amount of payments may qualify them for lower monthly payments.

Federal Direct Loan Programs

The U.S. Department of Education offers four different direct loan programs for undergraduate students. Two of these, the Perkins Loan Program and Teacher Grant program, offer low fixed-rate loans that can last for 10 years or longer, depending on how long the student remains enrolled full time or completes a graduate degree program. The Stafford Loan Program provides subsidized and unsubsidized loans, with varying payment options and maximum terms. The William D. Ford Direct Loan Program was created in 2007 under President George W. Bush’s administration, and is intended to provide college access to economically disadvantaged families. The remaining two, PLUS (Parent Loan) and FFEL (Federal Family Educational Loan), are aimed at parents borrowing money to finance education costs for their children who have completed high school but not yet attended college.

Private student loan programs

Private schools often offer students alternative financing options to student loans, including grant aid, scholarships, work study, and loans. However, private student loans can carry high interest rates and fees. Borrowers should compare interest rate, term length, and other features before accepting any private loan offer.

Financial aid offices

Contact financial aid offices to learn about various government and private student loan programs and what is actually included in the cost of attending college. Most colleges and universities have websites where prospective students can search for information about financial aid offered by the institution.

Refinancing Student Loans Lower Interest Rate

What is student loan debt?

Student loans are basically debts that students take out while going to college. These debts range anywhere from $50,000 dollars to millions of dollars depending on the amount of money they borrow and how long they have to pay them back. There are two types of student loan debt, private student loans and federal government student loans. Private student loans are taken out by individuals; federal student loans are taken out directly by the school that you go to. Federal student loans are paid off once a person graduates and gets a job making much more than the minimum wage or after 10 years of payments if the student chooses not to work immediately.

Why do I need to refinance my student loans?

If you are having trouble paying off your student loans, then you should consider refinancing your current student loans. Refinancing refers to taking out a new loan at a lower interest rate than the original loan. If you currently have an 8% interest rate on your student loans, refinancing could potentially save you hundreds of dollars over time. You may also find that the company offering to refinance your student loans offers you additional incentives, such as a cash rebate, tax refund, or gift card.

How do I get started with refinancing student loans?

First, you will need to contact the company that currently holds your student loans. Once they are aware of your predicament, they will offer you a list of companies who offer student loan refinances. Next, you will want to compare the different rates being offered by each company. Lastly, you will want to make sure the company you choose accepts any kind of loan products you hold, whether its a federal Stafford, PLUS, etc.

How does the interest rate comparison work?

Once you have chosen a company to refinance your student loan, you will fill out the application. On the application you will be asked about some basic information, including your name, address, phone number, and email address. From here the company will calculate how much you will qualify to receive in savings based on the type of loan product you are applying for. After this step, the company will give you a quote for the interest rate they would charge. The interest rate comparison works similarly to credit cards. You will first determine your monthly payment using the calculator provided by the company. Next, you will add up all of your monthly expenses and subtract the total from the monthly payment provided by the company. The difference between these two numbers will show what percentage of your monthly income goes towards your student loan. Now, you can use this number to compare interest rates and decide which company offers the lowest interest rate.

Is it safe to refinance my student loan?

Yes! Most companies will require you to provide proof of employment before they will provide you with a loan. However, many people have been able to successfully obtain their student loan refinanced after leaving full time jobs.

Refinancing Student Loans Lower Interest Rate

Refinancing student loans lower interest rate

There may be times in your life where you need to refinance your student loan debt, but not know what refinancing is. That’s okay though because we are here to tell you about it! When you are trying to refinance your student loans, you should take some time to look at your options before making any decisions. If you aren’t sure how much money you can borrow, start out by estimating your total amount of outstanding student loans. You can do this by looking at your current monthly payment (CMP) and adding that number together. Next, add approximately 20% to 25% of that amount to your estimated maximum outstanding balance. Don’t go higher than that, because otherwise you would actually have less than $10,000 left over to pay back over the course of 10 years. Once you have an estimate of what you could potentially borrow, use our calculator to find out if refinancing makes sense for you, based on your current CMP. Remember, the more you put down, the lower the amount you will owe after paying off your remaining balances. As long as you can afford the upfront costs, refinancing can save you thousands of dollars in interest payments over the term of your loan. Plus, even small improvements in your credit score can mean lower borrowing rates in the future.

How to get a low interest rate on student loans

If you do decide to refinance your student debt, you want to make sure that you choose the best option for you. Depending on your situation, there are several different ways to refinance your student debts, including: 1) Direct Consolidation – Where you consolidate your existing federal student loans directly with your new lender. 2) Fixed-Rate Loan – These types of loans offer fixed interest rates so they won’t fluctuate during the repayment period. 3) Income Based Repayment – Income Based Repayment helps you pay back your student loans with lower minimum payments while still having the opportunity to earn extra money towards your goal of paying off your entire student loan obligation. 4) Pay As You Earn Plan – This plan lets you set aside a certain percentage of your income each month to repay your student loan debt. 5) Public Service Loan Forgiveness Program -This program provides forgiveness for your public service loans if you work in certain fields and meet specific eligibility requirements. 6) Private Consolidation Programs – These programs allow you to consolidate private student loans into one single loan. We recommend using these programs only when your private student loans are eligible for consolidation under federal law. So, if you want to learn more about these various options, check out our blog post on student loan refinancing.

Why to refinance student loans?

While many people think that refinancing their student loans means that they are getting rid of their debt, that isn’t necessarily the case. There are several reasons why you might want to consider refinancing your student loans, including: 1) Lowering Monthly Payments – By refinancing your student loans you can lower your monthly payments. 2) Lowering Your Total Outstanding Balance – If you refinance you can reduce the total outstanding balance of your loans, saving yourself a ton of money on interest in the long run. 3) Getting a New Credit Card – One way to improve your overall credit rating is to apply for a new credit card. While it may seem counterintuitive, applying for this type of account can help you build your credit history and increase your chances of getting approved for a mortgage or auto loan in the future. 4) Saving Money on Interest – In addition to lowering your monthly payments, refinancing your student loans can help you save hundreds of dollars per year in interest fees. 5) Lowering Down Payment Costs – By refinancing your loans you can put away more cash for a down payment on a house or car. 6) Avoiding Tax Penalties – If you don’t refinance your student loans right now, you may face tax penalties in the near future. For example, if you don’t pay off your student loans until after April 15th, you could end up paying an early withdrawal penalty equal to 50% of your unpaid principal. 7) Improving Your Credit Score – Lastly, refinancing your student loan can help improve your credit score. To learn more, read our blog post on how to help raise your credit score.

What to Do Before Refinancing Your Student Loans

Before you head to your bank to refinance your student loa…

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Refinancing Student Loans Lower Interest Rate

Refinancing student loans lower interest rate

Student loan refinance is one great way to get rid of unneeded debt. You can pay less interest by refinancing your student loans at a lower rate than what they were originally given out at. In order to do this you need to contact your credit union and ask if they offer any type of refinancing services. If they don’t then you may want to try a different lender that does offer these types of services.

Apply for Federal Direct Loan

The federal direct loan program is designed specifically for students who have federally guaranteed student loans. Once you sign up with the government, you’ll receive a monthly stipend and you won’t have to worry about making payments anymore. Your old loans will be transferred over to this new loan and you’ll start receiving your stipends immediately.

Consolidate your student loans

One thing you might not know about student loans is that they’re not always mandatory. Most private companies will provide education loans to their customers without charging them any interest. However, if you decide to go with one of those lenders, they will charge you fees that add up quickly. Instead of paying lots of money in interest fees, you should consider consolidating your debt using one of the many consolidation programs offered. All you need to do is apply for the program, submit all necessary paperwork and wait for approval. When it’s approved you’ll end up saving thousands of dollars in interest charges.

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