3 Things To Consider Before Refinancing Student Loan Debt

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Having your college days behind you can be a great feeling, but managing your student loan debt can be harder than expected. Post college life can include expenses you didn’t realize would be there, so not paying anymore than absolutely necessary by refinancing student loan debt can really help.

Refinancing your loans should be a slam-dunk, but there can be things that could make you not so attractive to a potential lender. There are a few things you should consider before talking to lenders to be sure you’re ready.

Things to consider

1. Do You Earn Enough – Lenders may have specific requirements around how much you bring in each year to be eligible for a student loan refinance.

2. Is Your Credit Score Too Low – Having a low credit score never helps when trying to finance anything, and the same is true with student loans. You may need to get your credit back on track before exploring a student loan refinance or consolidation.

3. Is Your Debt-To-Income Ratio Too High – Companies that lend money almost always look at your debt-to-income ratio as a sign of potential financial problems. If you have taken on more debt than you maybe should have, lenders may not want to give you money. Basically, if your monthly expenses are too high compared to your income, then that makes lenders less likely to lend to you.

If you don’t feel like you may be the best candidate, you could still have an option. Getting a co-signer or co-applicant (usually a parent or close relative) that is a better financial situation can do the trick. This person will be accepting responsibility for your loans if for some reason you don’t pay, so it’s not something to take lightly.

After considering these three factors and you feel like you are in a good place, then explore refinancing student loan debt or student debt consolidation could be a great way to save some money each month.

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Pros and Cons of Consolidating Student Loans

 

If you are considering Consolidating Student Loans, then this information is for you.

Lots of people with student loan debt had to take out multiple loans to cover all of the expenses that come along while attending college. It isn’t exactly cheap these days, and you never want to borrow any more than necessary.

The Pros to Consolidating Student Loans

Having multiple individual loans isn’t a big deal, but you may have an opportunity to save yourself a fair amount of money each month by consolidating all of the student loans into a single one. There are benefits to doing this, such as reducing interest rates or just the convenience of only having to manage a single loan instead of multiple ones. You may also have loans with different companies, which can add some complexity to managing your student debt.

The Cons to Consolidating Student Loans

Beyond the benefits of saving money and convenience, there could also be a downside to consolidating or refinancing your student loans. The first is that you will likely be extending the payment period out, if you have been paying down your loans for a few years. That may not be a concern to you, but consolidating student loans can also cause you to lose certain borrower benefits–such as principal rebates, interest rate discounts, or loan cancellation benefits—that may be associated with your current loans. You could also lose any income-driven repayment plan forgiveness or Public Service Loan Forgiveness if you participating in one of these programs.

When it comes to refinancing or consolidating your student loan debt, be sure that you do your homework and are aware of any benefits that you may be walking away from before moving forward. The benefits of consolidating your student loans could save you money each month, if the rate is lower and the payment work better for you too.

For more information regarding consolidating your loans, visit www.studentaid.ed.gov

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