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Best Student Loan Refinance – Consolidating student loans can save you time and money. Learn how to standardize and the pros and cons of each method.
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Best Student Loan Refinance
They’ve collectively borrowed $1.5 billion to get their degree, and paying it back wasn’t easy. One in 10 have defaulted on their student loans, and while the average repayment time varies depending on the amount of debt, it will likely take at least 10 years and can be as long as 30 years.
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Members of the Class of 2019 who took out student loans owe an average of $31,172 and their payments are less than $400 a month. This is a big, unwanted graduation gift, so it’s important to know how to minimize the damage.
If the borrowed money is a federal loan, you may find easier repayment options by applying for a direct consolidation loan.
If some or all of your student loans are from private lenders, you’ll need to use a refinancing program to get similar results.
Consolidation is one way to make paying off your student loans more manageable and potentially less expensive. Consolidate all your student loans, get one big consolidation loan, and use it to pay off all your other loans. You have one payment left to make to the lender each month.
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The typical student receives money from loan programs in school each semester. It often comes from different lenders, so it’s not uncommon to owe money to 8-10 different lenders when you graduate. If you’re still applying for graduate school loans, add 4-6 more lenders to the mix.
Each of these student loans has its own due date, interest rate and repayment amount. These types of schedules are hard to keep track of and are the reason why so many fail. That’s why student loan consolidation is an attractive solution.
Federal loans can be included in the Direct Consolidation Loan Program. Consolidate all of your federal student loans into one fixed-rate loan. This rate is obtained by taking the average interest rates for all federal loans and rounding to the nearest rate.
While this method won’t reduce the interest you pay on federal loans, it will keep all repayment and forgiveness options open. Some lenders allow you to reduce the interest rate by making straight payments or have the right to a reduction by making one-time payments over a long period of time.
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Student loan refinancing is similar to a consolidation loan program in that you consolidate all of your student loans into one loan and make one monthly payment, but there are important differences to consider before making any decisions.
Refinancing, sometimes called private student loan consolidation, is primarily for private loans and can only be done through private banks, credit unions, or online lenders. If you have taken out a loan from both federal and private programs and want to include the whole group, it can only be done through a private loan.
The main difference between refinancing and direct loan consolidation is that with refinancing, you can negotiate a fixed or variable interest rate, which must be lower than what you pay for each loan. Lenders take into account your credit score and whether you have a co-signer to determine your interest rate.
However, if federal loans are part of your refinance, you’ll miss out on repayment options and the forgiveness programs they offer, including deferment and forbearance. These last two elements can be crucial if you face financial complications when paying off your loans.
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The average college graduate owes nearly $8,000 on a credit card. Now that your student loans have been waived, let us help you with your credit card, too.
There are many good reasons to consolidate through a direct loan consolidation program, not the least of which is that it keeps you alive in one of the income-based plans such as REPAYE (Pay As You Earn), PAYE (Pay As You Earn), IBR. . (consumption based on income) and ICR (consumption with income).
There are two sides to every story and here is the other side to consider before entering into a straight loan consolidation program:
If you miss payments because you’re struggling to keep up with multiple loan services and multiple repayment dates, consolidating or refinancing is a viable option. Making one payment each month instead of many makes life easier.
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You can go through a direct loan consolidation program, which allows you to keep the door open to income-driven repayment options that result in lower monthly payments.
However, it’s important to know that if your payments qualify for any forgiveness program, the clock will restart when you consolidate your accounts. For example, if you make three years of public service loan forgiveness payments and then increase your loans, you will miss three payments and the clock will start over.
The problem with most loans is can they afford the monthly payment? That’s why consolidation and refinancing are remedies: make a monthly payment that doesn’t break your budget.
However, if you can earn enough money right away and are very dedicated to paying off your loan, the fastest and most efficient way is to stick to the standard repayment schedule and do it in 10 years…or less!
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Max Fey has been writing about personal finance for the past five years. His expertise is in Student Loans, Credit Cards and Mortgages. Max inherited a genetic tendency to be tight with his money and without financial advice. He was published in every major newspaper in Florida while working at Florida State University. He can be contacted at [email protected].
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Our goal is to provide you with the tools and confidence you need to improve your financial situation. Although we receive compensation from our donor partners, which we will always determine, all opinions are our own. By refinancing your mortgage, your total financing fee can be higher over the life of the loan.
There are many potential end goals when it comes to refinancing your student loans. For example, you may want to get a lower interest rate, lower monthly payments, or pay off your loan earlier.
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If your monthly student loan payments are too high and you can’t afford them comfortably, you may want to consider refinancing your student loans to extend your repayment period. This can lower your payments and reduce pressure on your budget.
Plus, consolidating your student loans by refinancing will leave you with just one loan and one payment, making it easier to manage your payments.
But keep in mind that choosing a longer repayment period means you’ll pay more interest over time.
Tip: It’s a good idea to choose the shortest repayment period you can afford to save as much interest as possible. Choosing a shorter term can result in a better interest rate.
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If you’re wondering how competitive your loan is, the loan score tool below can help. Enter your annual interest rate (APR), credit score, monthly payment, and remaining balance (estimates are good) to see how your loan stacks up.
Your student loan interest rate is one of the biggest factors in determining how much you actually pay off your loan. If you have a particularly high interest rate, you’ll end up paying thousands of dollars in interest.
However, depending on your credit, you may be able to lower your student loan interest rate by refinancing. This can save you a huge amount of money in interest charges and also help you pay off your loan faster.
For example: If you have a $25,000 loan with an interest rate of 7% and a 10-year term, you will pay $9,833 over the life of the loan.
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But if you refinance with a 5% loan for 10 years, you’ll save $3,013 in interest charges.
Use our student loan refinancing calculator below to see how much you could save by refinancing your student loans.
By refinancing your student loan with a 10% interest rate, you can save and pay an extra dollar a month and pay off your loan early. The total cost of the new loan will be $.
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