If rates for student loan refinancing are dropping, now may be a good time to compare loan options. (iStock)
In an effort to alleviate some of the economic stress caused by the coronavirus pandemic, the Federal Reserve decided to lower interest rates to historic lows beginning in 2020. The decision to lower the Fed Funds Rate could have a direct impact on your bottom line. line if you owe private student loans.
Figures for studying student loan refinancing have dropped dramatically, according to Credible, with rates on 10-year fixed-rate loans down 31% from their April 17 highs. Rates on variable rate loans are 63% down from their high in February 2018. If you have private student loans, then refinancing can help you save money and potentially reduce your monthly payments.
Are refinancing rates for student loans falling?
Fixed interest rates and variable interest rates for private student loans are all over the level, thanks in large part to the actions of the Federal Reserve earlier this year. If you want to take advantage of the low refinancing rates for student loans to save money, then use Credible to compare rates from multiple lenders to see which offers make the most financial sense for you.
HOW TO CHOOSE THE BEST STUDENT LOAN FINANCING OFFER
In times of economic stress, lowering the Fed Funds Rate can help boost consumer spending and lending. For example, you are more likely to take out a car loan or a personal loan than lower interest rates because a lower rate can save you money.
If the Fed Funds Rate drops, rates for refinancing student loans may only follow. This is because student loans for student loans set fixed interest rates and variable interest rates for loans based on a benchmark rate. If the reference rate drops, the rates on student loans will adjust accordingly. Again, use Credible to see what kind of rates you qualify for today.
Is It A Good Time To Refinance Private Student Loans?
Refinancing private student loans can make sense for several reasons. For example, you can refinance private student loans if:
- You are interested in switching from a fixed interest rate to a variable interest rate or vice versa
- You are hoping to lower the interest rate on your loans to save money
- Do you think student loan refinancing can help reduce your monthly payments so that your loans are manageable?
- Your original loans were borrowed with a cosigner and your current loan does not offer a cosigner release to remove them from the loan
Refinancing student loans can be a good option in any of these scenarios, although it is important to consider how much you can actually save.
Why you should repay student loans now, according to an expert
How much can I save by financing my student loans?
With student loan refinancing rates so low, it is potential to save there. But how much you can save by refinancing depends on several factors, including:
- The new interest rate you are eligible for, based on credit value
- How much you have borrowed and how much you have already paid off your existing loans
- Whether you repay with or without a cosigner
- Any fees that a lender can repay
According to Credible, their average borrower saves $ 17,344 by refinancing over the life of their loans. That’s a nice amount of money, but before you apply for student loan refinancing, it’s helpful to look at the figures.
Doing the math with an online calculator for refinancing student loans, for example, can give you an idea of what your new monthly payment might be if you decide to go ahead with refinancing. Keep in mind that your credit score and credit history typically play a large role in determining the rates and loan terms to which you are eligible. If you have a bad credit file or bad credit, you may need a landlord to get a loan back.
If you are confident in your credit score and history, use Credible’s free online tool to see what rates are available to you. Credible makes it easy to check rates from various lenders without affecting your credit score. Take a look at your score and credit history to get an idea of what interest rates you are likely to be eligible for.
HOW TO CHOOSE THE BEST STUDENT LOAN FINANCING OFFER
Do I need to refinance my federal student loans?
Federal student loans receive special treatment as part of the federal government’s effort to minimize the financial impact associated with COVID-19. Lenders, for example, can benefit from a temporary satisfaction period until the end of 2020.
Federal student loans have fixed interest rates that are already low, but it is possible that you could now find an even lower rate by refinancing with a private lender. That could save you money, but keep in mind that by refinancing federal student loans into private student loans, you will lose certain protections, such as benefits for ratio and deferral.
In addition, student financial loans may not refinance if you are on an income-driven repayment plan or if you are seeking student loan forgiveness. No one is an option with private student loans, so you may be better off keeping your federal student loans where they are if you are trying to qualify for forgiveness or if you want to keep your payments low based on your income.
