With student loan debt at an all-time high and jobs still not as prolific as they were twenty years ago, student loan refinancing is now being considered far more than it ever has been. It’s not surprising. If you don’t graduate with the stable career you thought you would (or are doing way better than you thought you would–that’s also possible), it might behoove you rejigger some things to change your monthly payments or interest rates.
Whatever the reason, if you have a student loan, federal or private, you should have a basic understanding of refinancing since there’s a strong possibility you’ll have to do it in the future. Here are four factors to consider if refinancing looks especially likely for you.
Before you beginning this process, you should consider what exactly you’d like to get out of it. Are you interested in lower monthly payments or a lower interest rate? Or are you looking to repay the loan faster than you originally planned? Taking all of these separate needs into account is important before you make any moves that could set you up with a new lender or change the current terms of your loan.
If you think you have a stable income for the next few years, but it’s lower or higher than what you originally projected when you signed your original loan agreement, a refinance might be in order. However, if your income is only momentarily different, consider holding off. Refinancing isn’t something you can do an unlimited amount of times, so if you really need lower payments at the moment, it might be better to just cut back on other spending instead of refinancing. Same goes for if you have a high income, but it’s something seasonal or in an unstable field. In this case, it might just be better to make higher payments on your own while you can without locking yourself into something permanent.
The two types of loans you can get are federal and private loans. They each come with their own set of plusses and minuses, so it’s important to identify them before you think about refinancing. For example, federal loans come with some handy features like income-based repayment that will no longer be available if you refinance. If you find yourself unable to make your payments, it might be better to look into taking advantage of that rather than refinancing.
Student loan refinancing can allow you to take advantage of a good credit score, should you have one. If you were locked into a higher interest rate initially, you might be able to score a lower one. In the long run, you’ll be paying less for the money that allowed you to graduate from Boston University. Plus, if the jobs in health informatics you set your heart on aren’t materializing, it can be a good idea to take advantage of your credit score while you can.