When considering refinancing your student loans, there are several important things to keep in mind. Here are four key considerations to keep in mind:
- No financing from the federal government: Federal student loan interest rates are set by Congress and are not based on your credit score. Therefore, it is not possible to refinance a federal loan with another federal loan.
- Know the difference between refinancing and consolidation: Some borrowers confuse refinancing with consolidation, but they are not the same thing. Consolidation allows you to combine multiple loans into one, but it does not reduce your interest rate.
- Refinancing and your loan terms: Refinancing will change the terms of your loan, including your interest rate. This may lead to a lower interest rate, but it could also result in a higher rate.
- Other methods: There are other ways to reduce your interest rate, such as registering for automatic payments or making additional payments. Federal student loans also have no penalty for prepayment, so paying off your loan faster can lower your overall interest.
When considering refinancing your student loans, make sure you understand the difference between refinancing and consolidation, and be aware that refinancing will change the terms of your loan. Additionally, consider other options for reducing your interest rate before making a decision.