Can you refinance your student loans? Yes, but be careful, it can cost you a great deal of money.
So you graduated college! Congratulations! Now all you have to do is pay back the estimated 20 thousand dollars that you had to borrow to get through college. The clock starts now!
Usually you have between six and nine months grace period until the first loan payment is due. And you will receive information about repayment from your loan provider. They will let you know the date that the repayment begins. This, by the way, is a real obligation and you have to pay the money back or suffer the consequences. Suddenly you are an adult.
So now what?
First of all, go to your lender and find out about your loan and what you options are for repayment. If you can afford to pay a standard repayment plan, do it. Some other options are; Income Based Repayment (IBR), Graduated, Extended, and a couple more if you have Direct loans or FFEL loans. Find out how they work and how they can affect you. This will be a part of life for the next 25 years and you want to make some of the best choices that you can. Make sure you pay your loans when they are due and in the amount needed. Don’t risk your credit rating!
Ok, it’s two years later and you are paying so much of your income for student loans that life is hard to navigate. You probably have found yourself with all kinds of new responsibilities; maybe a car payment and insurance, rent or a mortgage payment, maybe even (shudder) kids. Whatever it is, pocket money becomes harder to come by, and you are looking for options to lower your expenses.
Refinancing your student loans is one, although not the right one for everyone. You can consolidate the student loans that you currently have and have a lower monthly payment. However, it will cost you in the end. You will pay more interest and for a longer time. Learn what the impact is for you before you make any decisions. A good place to start gathering information is http://studentaid.ed.gov/PORTALSWebApp/students/english/repaying.jsp. Look at all the options and make sure that there isn’t something that you are missing.
Once you have consolidated your loans, you will not be able to refinance them through the current debt holder. They consider that you have to consolidate to get a consolidation loan and at that point you are refinanced. Your options will become limited at that point.
If you can, refinance using home equity. That way, you have a low interest rate and can pay back the loan as fast as you like with no concern for prepayment penalties. But there are other ways to refinance student loans. Tread carefully!
There are many places where they will be happy to negotiate a loan to make your student loans easier to pay off. They are private lenders and when you go to this option, you are at their mercy. Make sure you know what is in the details of this kind of loan, especially if your credit rating is a little shaky. This is where a lot of people get taken advantage of.
Here are three things to keep in mind as you begin the process of dealing with this problem;
1. Honestly asses your ability to pay, and try to stay within the guidelines and plans of the original lender. This is the absolutely cheapest option that you have to pay back your loans.
2. Make sure you have explored all the options to have your loans forgiven! For example; if you are a teacher or work in public service, you may be able to get the loans forgiven entirely.
3. Don’t take out any loan that has a prepayment penalty. This way they assure that you will pay exorbitant amounts of interest even if you pay back sooner.
It’s tricky and it isn’t fun, but you can get your loans taken care of with just a little planning. Don’t be afraid to talk to lenders, they can be very helpful if things get rough.
Hey, you can figure this out, after all, you graduated college. Just apply the same research and take the same kind of notes, it will serve you well years from now.