Paying down your student loans can feel like a never ending burden, but there are ways to minimize the burden.
Refinancing your student loans could help you pay off your debt quicker. Money has picked out their favorite companies for Student Loan Refinance Companies , offering an analysis of the industry, and ranking the top refinancing companies based on the factors borrowers consider when looking to take better control of their student loan debt.
Money’s Top Picks to Refinance Student Loans
PenFed: Best Credit Union
Laurel Road: Best Loan Consolidation for for Medical Students
Splash Financial: Most Affordable Repayment Options for Medical Students
Earnest: Best Student Loan for Customizing Repayment
Credible: Best Student Loan Marketplace
Methodology
Student loan debt has been categorized as one of the most widespread financial burdens of our time, second only to mortgage loans, according to experts at Experian. Nationwide, 54% of college-bound students took on student loans in 2018 (that includes students in associate, bachelor and graduate degree programs). That year, 2 out of 10 people with student debt were behind on their student loans, and that number is on the rise.
Student Loan Refinance
Student loan debt in the U.S. reached an all-time high of $1.4 trillion in the first quarter of 2019, according to Experian data. That’s an increase of 116% in 10 years and represents one of the country’s most significant and widespread financial burdens to date.
With interest rates near historic lows, refinancing your student loans — whether federal or private — can save you money by replacing existing education debt with a new loan under a private lender. The new loan generally has a lower interest rate, and can offer a shorter or longer repayment term depending on whether you’re trying to pay off your debt quicker or lower your monthly payments.
Loan terms for refinanced loans typically range from 5 to 20 years and can feature either fixed or variable rates. Getting a low interest rate can get you on the path to pay down your student loan faster, but there are also drawbacks to refinancing.
Refinancing your student debt could cost you, especially if you have federal student loans. (More on that below).
Here’s what you need to know.
Your Student Loan Refinance Questions Answered
Is student loan refinance the same as consolidation?
People often confuse student loan refinance with consolidation, but they are not the same. Student loan refinance involves replacing an existing loan with a new loan featuring different terms. This involves combining multiple loans, including both private and federal, into a single loan.
Consolidation, on the other hand, refers to combining all of your federal student loans into one Direct Consolidation Loan with a single interest rate. Consolidation is different from a student loan refinance, mainly because this option is only available for federal student loans and borrowers will retain benefits associated with federal loans.
If you choose to refinance and have federal student loans, you’ll be giving up your federal student loan protections including student loan forgiveness, deferment, forbearance, and income-driven repayment plans.
Before choosing to refinance your student loan, experts recommend you take a careful look at the types of loans you have.
Who is eligible for student loan refinance?
To qualify for student loan refinance, private lenders require you to have good to excellent credit, a steady source of income, and a low debt-to-income ratio. You can refinance your student debt if you have private student loans, federal student loans, or both, but keep in mind that once you refinance federal loans they become private. That means you’ll give up certain protections, such as student loan forgiveness and income-driven repayment.
Refinancing may not be the right option for many, and qualifying borrowers should compare lenders and evaluate if this option meets their needs and long-term financial goals. Once you refinance your student loans, the process cannot be reversed.
View the whole guide at Money.com
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