Over the past several years, many homeowners have refinanced their high-interest mortgages, allowing themselves a lower monthly payment, as well as a great deal of savings over the long term. While refinancing a mortgage is common today, there are many who are not aware that a similar type of savings may be obtained by refinancing student loans.
For many college students, borrowing the high cost of tuition is the only way to afford an education. Yet, once your school days have been completed, there is oftentimes a large amount of debt waiting at the other end.
It is estimated that well over half of all college and university students leave school with at least some type of student loan debt obligation. These payments can be hard to swing â€“ especially in light of the tough job market. But there are some solutions that can help to ease the burden.
Who is a Good Candidate for Refinancing Private Student Loans?
While the U.S. government offers a number of student loan programs, oftentimes students must supplement these loans with additional funds from other lenders in order to pay the full cost of their college education.
For those who have borrowed from a number of different sources, it can sometimes feel like a juggling act just to keep the payments straight and to ensure the timeliness of all of the different obligations.
By consolidating all of these loans, however, you can instead make one convenient â€“ and oftentimes lower â€“ monthly payment, saving you a great deal of undue stress and frustration, and making it easier to budget for other expenses.
Typically, those with private undergraduate student loans may consolidate and refinance a total of between $7,500 and $125,000. Those who possess private debt for post-graduate education may consolidate and refinance up to $175,000 in most cases.
There are certain income and credit related stipulations for those who are refinancing their private student loans. Typically, a borrower must have a minimum credit score, as well as an annual income of at least the amount of debt that is being refinanced.
In some cases, a cosigner may be required. If so, this individual must also possess a set minimum credit score, as well as a monthly income of at least $2,000. Although many people do not like the idea of having a cosigner on their debt obligations, by doing so, you will likely increase your chances of being approved for borrowed funds, as well as for obtaining a lower loan interest rate. Once you have made 12 consecutive and on-time monthly payments, the cosigner may be removed from the debt obligation.
Is Consolidating and Refinancing Your Private Student Loans the Right Choice for You?
It is important to carefully consider whether or not consolidating your private student loans is the best option for you. Prior to committing to a loan consolidation, you should determine several factors.
First, add up the monthly payment amount of all of the private student loans that you owe on. This will allow you to directly compare the savings that you may incur against the amount of your potential new loan consolidation payment.
Next, compare the amount of time that is left on each of the loan terms. Remember, while one option may significantly lower your monthly payments, if you double or triple the amount of time that you must pay, it may or may not be the best long-term alternative.
In any case, it is essential that you continue to make the monthly payments that are due on your current student loans until your loan consolidation has been completed. This way, you will ensure that none of your current loans go into default, as this could have a negative effect on your credit report and score â€“ and could even count against you in qualifying for your new loan.