Refinancing student loans can lower your interest rate, possibly saving you thousands in total interest, which will allow you to pay off your loans faster. It can also give you confidence by allowing you to reduce your monthly payment, lock in a fixed interest rate, or remove a cosigner of a private loan. Whatever your goal, you should weigh your options carefully.

Important Points

• I never recommend consolidating Federal Loans into a Private Loan.

• You lose the benefits that Federal Student Loans offer, and in the long run, I don’t feel a possible lower interest rate is worth a switch.

• Having a co-signer can help you get a lower rate, but it’s a risk for the co-signer as it makes them liable for the loans if you do not pay them back.

• Remember, you can refinance your private student loans as many times as you want as long as you find a lower interest rate.

See below for an understanding of the refinance process:

CHOOSING A REPAYMENT TERM

• The shorter the term you select, the better the rate you will get

• The preferred approach is usually one that balances paying off the loans with building your savings.

• Remember, you can always pay more than is required to pay off the loan faster.

CHOOSING VARIABLE VS FIXED RATES

• I typically recommend a fixed rate.

• Variable tends to only make sense if you plan to pay off the loan in five years or less.

• Variable rates will always be lower than the fixed but come with an added risk; if interest rates go up, your monthly payment will increase.

Refinancing Companies for Your Private Loans

Remember: A better interest rate saves you more in the long term than any cash bonus (those are just a nice perk)