Thinking about refinancing? Here’s what you need to know

If you’re struggling to afford your student loan payments or are looking for one single payment to make your life easier, you may be considering refinancing. But what exactly is refinancing?  

A refinance loan is the combination of one or more private and/or federal student loans into one new, private student loan.   

Refinancing allows you to simplify your loan payments. Instead of keeping track of multiple loans, multiple payments, and multiple loan servicers, you only have to worry about one!   

You can also select a fixed or variable rate. Depending on what the rates are when you refinance, your new rate could potentially be lower, saving you money in the long run. You may also be able to get a different loan term, allowing for more affordable payments or putting you on a schedule to repay your loan sooner.  

There are a couple of important things to be aware of if you’re considering refinancing. Refinancing will generally require a credit check in order to be approved. Also, if you want to include your federal student loans, you’ll lose all federal loan benefits and protections, such as income driven repayment plans and various forgiveness options.  
 
If you need to retain access to federal loan benefits and protections, you may want to consider a consolidation instead. A consolidation is the combination of one or more federal student loans into one new, federal loan.  It may be beneficial in cased such as when:  

• You have multiple federal student loans. A consolidation can simplify your federal loans so you only have to work with and pay one federal loan servicer. However, your private student loan(s) will remain separate.  

• You want to switch from a variable to a fixed interest rate. The interest rate on a consolidation will lock in any variable rates you may have on individual loans and create a new fixed rate for the consolidation based on the weighted average of all your current interest rates. This can get a little complicated.  Studentaid.gov does a great job explaining it on their website.   

• You want a more affordable monthly payment. Because the consolidation extends your loan term, your monthly payment may be lower. Just remember that extending your loan term typically means increasing the total cost of the debt. 

• You want to gain access to federal student loan benefits that your current federal student loans are not eligible for.   

One more thing to keep in mind: Although consolidation allows you to maintain (or gain) access to federal student loan benefits like forgiveness, it may impact progress you have already made toward that forgiveness. It’s best to speak to your federal loan servicer before you apply.  

Everyone’s financial picture is different. Some people won’t benefit from either refinancing or consolidation. If you think refinancing might be a good choice for you, we can help. Our EdvestinU Refinance Loan offers multiple repayment options and terms, competitive rates, and support from local student loan experts.  

Check out our refinancing page for more information.