With interest rates remaining close to historically low levels, might just be a good enough time to refinance those annoying student loans. All you have to do is shop around and find the best rate that suits your needs. If you’re lucky, you might just be able to cut your student loan interest rate by as much as 50%.
Refinancing your student loan is a good thing. It can save you a lot of money and stress. This doesn’t mean, however, that you shouldn’t be careful and take into account the risks that also come with it. Here are some of them:
1. You will lose government protection
Probably one of the biggest downsides of refinancing a student loan is the fact that you lose government protection. In recent years, the federal government has expanded its income-driven repayment programs to help people who are having a hard time repaying their student loans.
Those who have student loans are eligible for these programs, which act just like insurance policies. And just like insurance policies, they can protect you if something goes wrong, like losing your job.
Before refinancing and giving these advantages up, you need to take a step back and look at your loan. Ask yourself how long will it take you to pay it back? The longer the period, the higher the chance of something going wrong. Are you willing to take this risk?
2. There’s a chance that you won’t be approved
The lenders that refinance student loans are picky. They want their customers to have excellent credit, a good cash flow and to be college graduates. If you’re not one such customer, chances are they’ll refuse to refinance your loan.
3. You can miss out on other opportunities
The US presidential election just around the corner. This means that there will soon be a new administration, and it will bring with it new opportunities. Your monthly student loan debt payments could be lowered, or your loans could be forgiven. Refinancing would mean that there’s no student loan and, as a result, nothing left to forgive.
Refinancing your student loan comes with both pros and cons. To be safe, you need to be responsible, careful and well informed.