Financial situations change, and it’s ideal to get the best terms possible for your debt, but how easy is it to refinance student loans? Loan refinance may seem complicated, but making fewer payments and possibly saving money on your student loan repayment ought to seem appealing enough to put in a little work.
Should you decide to refinance your student loans, we’ve broken down what to expect in five basic steps.
1. Compile a list of your current student loans, their balances, and interest rates.
Take stock of whether you have federal student loans, private student loans, or a combination of both, and who your servicers/lenders are. Make note of the current balances, the rates, and whether you have a fixed or variable rate. It may be a good idea to create a secure spreadsheet with the information for easy access later.
2. Explore current refinance rates and estimated payments.
Most lenders now offer an option to enter your information on their website to view potential rates and offers. By inputting some basic details, the lenders will perform a “soft credit check” which will not affect your credit score. While every lender is different, most will ask for items such as:
- Name and contact information
- Your college or university
- Total of your student loan debt
- Your current income
Your results will include a list of available terms (how many years the loan is for); rates, which may be fixed or variable; and an estimate of your payments. Compare information from different lenders, and then select the offer that best suits your needs for terms and payments.
3. Gather the necessary information and apply.
If you decide to pursue refinancing, this next step is not unlike when you applied for your student loan the first time. If you are wondering “how soon before I can refinance my student loans?” The answer is that it may happen faster than you’d expect (more in this in the next step), but just as you did for your original student loans, you’ll need to provide documentation of your identity and income. In general you will need to provide:
- A government issued photo ID
- Social Security card or number
- Proof of income such as paystubs
- Statements and account information for your current loans
You will need the same information for a co-borrower if applying with one. Be sure to respond to any requests for additional information in a timely manner so the loan process isn’t delayed.
4. Continue making your loan payments until the refinance loan is finalized.
The new lender will notify you when the refinance process is complete, which may take several weeks. Until that time, you should continue to make any scheduled payments on your current loans.
5. Register for online account access for your new lender and make note of your payment date.
Setting up automatic payments is an easy way to be sure your payments are made on time, and many lenders even provide a rate discount for automatic payments.
If you need help preparing for student loan refinance, Credit Union Student Choice’s College Counselor can provide information via email or phone.
Should You Refinance Student Loans? — Additional Considerations
It’s important to remember that every student loan situation is unique. There are many factors to consider when refinancing student loans, including a possible loss of loan benefits and protections for any federal student loans you currently hold.
In addition, the CARES Act was passed in response to events related to the COVID-19 pandemic and includes broad relief measures for federal student loan borrowers. Further, the Biden Administration announced plans to implement up to $20,000 in federal student loan forgiveness per borrower in 2022, but the president’s plan has been blocked in court and is awaiting the Supreme Court of the United States to resolve the case. Either 60 days after the Department of Education is allowed to implement the debt forgiveness plan or 60 days after June 30, 2022, whichever comes first, is when federal loan payments are scheduled to resume.
If you are considering refinancing your federal student loans, please make sure to review these measures at www.studentaid.gov/coronavirus to understand your options.
This article was originally published by Credit Union Student Choice. You can find the original article here.
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This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.
