6/14/2022 | By Team United Test
Paying for higher education usually means taking out student loans to help cover the costs. But it might not always be clear if you have federal student loans or private student loans.
According to StudentAid.gov, federal student loans are made by the government, with terms and conditions that are set by law, and include many benefits (such as fixed interest rates and income-driven repayment plans) not typically offered with private loans.
In contrast, private loans are made by private organizations such banks, credit unions, and state-based or state-affiliated organizations, and have terms and conditions that are set by the lender. Private student loans are generally more expensive than federal student loans.
Beyond student loans are Direct Parent PLUS loans. Direct PLUS Loans are federal loans that parents of dependent undergraduate students can use to help pay for college or career school. These PLUS loans can help pay for education expenses not covered by other financial aid.
With that in mind, you might be wondering if you should refinance those typically more expensive private student loans or Parent PLUS loans. Here’s a quick look at when you should consider refinancing as an option and what you’ll need to get started.
The first thing you should consider when refinancing a private student loan or a Parent PLUS loan is your current interest rate. Because these rates are set by the lender (e.g. bank or credit union), you can shop around for the lowest rate and get a better deal by refinancing your debt. The benefits of refinancing include:
A lower interest rate means more of your payments go to the principal balance and will help you pay off the loan faster. You could save hundreds or even thousands in interest over the life of the loan.
Refinancing your private loan gives you the opportunity to revisit your monthly payment amount, shorten the length of your loan, or consolidate multiple loans into one payment. Any of these options allow you to pick a payback plan that fits your monthly financial needs.
Your satisfaction with your current lender could be a major reason to refinance. If you are dissatisfied with the service you’ve received, you can switch to a new lender who is a better fit. There is a cost to refinancing, so you’ll want to make sure you can pair this consideration with one of the other two benefits listed above to really see an improvement in your overall loan situation.
The first steps to refinancing your private student loan are easy.
United Federal Credit Union partners with Student Choice to offer you great rates and options for private student loans. You can find resources, frequently asked questions, and financial wellness tools to help you make the right decision on your private student loans.
How you pay for your higher education is a big decision. While there are many options available, you must decide which one fits best for your current and future financial situation. Refinancing may be the best option if you can get a lower interest rate, lower your monthly payment, or restructure your payment to shorten the life of your loan. Refinancing might also be the right step if you are looking to consolidate multiple private student loans into one simple payment.