Refinancing Your Student Loan? Points You Need to Consider

Karen is one of the most diligent students on the campus of the University of Massachusetts Boston. She completes her assignments on time and is an active participant in the extra curricular activities organized by the university. However, of late, Karen has been a bit negligent towards her studies. Her professors deciphered that something is bothering Karen. Karen later revealed that she was finding it difficult to manage the repayment of the various student loans she had borrowed in order to finance her education.

In today’s age, student loans have become indispensable. The soaring costs of education have meant that few students are able to finance their education from their own pockets. They are made to rely on scholarships, grants and student loans. In fact, many students are forced to apply for more than one loan.

Whenever, students go in for more than one loan, it automatically translates into additional paperwork burden for the students. Borrowing student loans from more than one lender also means that the student is answerable to more than one creditor.

Many experts state that refinancing one’s student loans can prove to be a good option. In simple terms, refinancing means borrowing a new loan and utilizing it to repay the current outstanding loan amount so as to streamline one’s debts.  

According to Timothy, a finance executive associated with Citibank’s Boston branch, there are lots of advantages associated with refinancing one’s student loan. He cites the example of Laura, one of his bank’s regular customers. Laura is a student of the Urban College of Boston. Prior to her admission, she had borrowed from three different lenders, including Citibank. Later, Laura realized that the other two lenders were charging interest at a higher rate. When she shared her concern with a friend, who happened to be pursuing a finance course from a Boston based institute, he advised her to refinance her student loan. Thus, in case of Laura, refinancing a student loan helped her to decrease the number of lenders and lent an organized look to her debt situation.

In the opinion of Justin, refinancing one’s student loan can help to save the outflow of thousands of dollars in the form of interest. When the Boston Architectural Center confirmed his admission, he decided to borrow loans from private lenders. He soon realized that the interest rate varied from lender to lender. He decided to refinance his student loans by borrowing from a lender who was quoting the lowest rate. This resulted in a saving of $1,000 in form of interests, thereby decreasing Justin’s liability.

Refinancing your student loan can also help you to increase the repayment period of your loan and thereby decreasing your monthly repayment installments. Consider the case of David, a student at the Boston Arts Academy. A native of Alaska, he had borrowed student loans from two different lenders who were based in his hometown. When David reached Boston, he got acquainted with a local bank which was not only offering a lower rate of interest but was also willing to increase the repayment period from 10 to 15 years, thereby lowering David’s repayment amount by 10%.  Refinancing his student loan enabled David to get a favorable deal.

Experts state that when refinancing student loans, one should try to find out the nature of the loans. Many students have federal as well as private loans. According to Jessica, a professor of economics at the Boston University, if one is thinking about refinancing one’s student loans, then you should go in for a separate refinancing procedure for your federal student loan and private student loan.

When Danny, a Boston based psychology student decided to refinance his student loans, he got his federal student loan and private student loan refinanced from a private bank. David failed to realize that there are several benefits attached with a federal student loan. According to exofrsys.com, ‘ federal student loans are funded by the Federal government and sometimes with the help of the school. Interest rates for federal student loans are lower and with flexible repayment schedule. Payments for federal student loans can be delayed if the student chooses to continue his studies. Interests on federal student loan are tax deductible. Private student loans do not offer the same benefits.’ So, if you combine your federal student loan with the student loan borrowed from a private lender, you might lose all the benefits and might end up worsening your debt situation.

Refinancing your student loans can be good option for those who want to get some concession in the repayment period as well as those who are looking for a longer repayment period. Refinancing one’s student loans can also streamline one’s financial situation. However, you should carefully weigh the pros and cons before taking any decision.

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