How Can I Refinance My Student Loans?
Student loan debt is problematic for thousands of people. One of the primary challenges that many face is the interest rates on student loans is fixed by Congress and regardless of how low interest rates may go or how strong a person’s credit is. In some cases, to avoid multiple monthly payments, individuals may elect to refinance their student loans.
When Refinancing Makes Sense
Student loans that were granted between 2010 and 2015 had rates varying from the low end of 3.5 percent to the higher end of 8.5 percent. This was largely dependent upon when the proceeds of the loan were disbursed. While those students who have rates in the 3.5 percent rate may not get a lower rate, those with higher rates may qualify for a persona loan at a significantly lower rate.
Most student are eligible to deduct $2,500 in student loan interest on their tax returns. Keep in mind, if you refinance your loans with a persona loan, you may lose this important benefit. If you elect to refinance your student loans through the federal loan program, you may retain this benefit but may not lower your overall interest rate. Be sure to weigh the pros and cons of refinancing before making the decision to move forward. If you are concerned about tax ramifications, speak with a tax professional before moving forward.
Options for Refinancing
Those who have federal student loans have limited options for refinancing. Back in 2014, there was legislation put forward to allow students with federal loans to refinance however, that legislation was never passed. This means if you wish to keep federal loans and their associated benefits, your only option is to consolidate multiple loans into one loan. Be cautious doing this if your intent is to lower your interest rate however; the new loan rate will be an average of your existing loan’s rates rounded up to the nearest eighth of a percent. It is important to be aware this will not impact any private loans you may have.
Those who have private student loans may benefit from discussion their options with their lender. It may be possible to refinance all your private and federal loans into a new education loan with the lender. Be sure before you do this make sure you understand that if you are extending the term of the loan or borrowing more than what is currently outstanding you may wind up paying more over time.
Finally, those who have outstanding student loans have the option of taking out a personal loan. This may be the least beneficial option because while you may lower your interest rate, you could lose tax benefits and other benefits associated with federal student loan programs.
If you are considering refinancing your student loans to take advantage of lower interest rates or to have a single payment instead of multiple payments monthly, contact Rue & Associates, Inc. before moving forward to ensure you are not going to miss out on some of the benefits associated with student loans including tax benefits.