6 Must Ask Questions Before Refinancing Your Student Loans

Questions About Refinancing Student Loans

BIG Ideas:

  • Refinancing allows you to pay off higher-interest federal and private student loans with a new private loan.
  • Some lenders may charge application, origination, and even pre-payment fees for refinance loans, so make sure the savings outweigh the costs involved.
  • The decision to refinance depends on a few factors, including your interest rate, whether you want to take advantage of federal loan benefits, and your financial goals.

College has given you memories and experiences that will last a lifetime. What you don’t want to last a lifetime, though, is your student loan debt, especially if it’s high-interest debt.

There’s a good solution to help with that – student loan refinancing.

When you refinance, you could consolidate higher-interest federal and private loans into a single private loan, which could lower your monthly payments and save you a lot of cash over the life of the loan.

However, refinancing a student loan is a big decision that comes with pros and cons. So, before you decide if now is the right time to refinance, there are some important questions you need to ask:

  1. What’s the situation with your current loans? Take a good look at all your existing loans to determine how much you owe, interest rates, and the terms of your loan (how long you have to pay them off). Also, determine if your loans are federal loans (from the government) or private loans (from a bank, credit union, or other private institution).

  2. Can you get a lower interest rate? Interest rates are a major factor in determining whether to finance. Even a slight drop in rates could lead to big savings over the life of your loan. Use our student loan refinance calculator to see how much Brazos could help you save.

  3. What will refinancing cost you? Refinancing isn’t always free. Some lenders may charge application and origination fees and even pre-payment fees if you pay off your loans early. Make sure any potential savings are worth these extra costs. FYI, at Brazos, we won’t charge you any fees to refinance.

  4. Will refinancing cause you to lose federal loan benefits? If you refinance federal loans with a private lender, you will lose at least the following federal benefits:
    • Income-driven repayment plans
    • Loan forgiveness
    • Deferment or forbearance options

    So, if you plan to take advantage of these benefits in the future, student loan refinancing is not right for you. Make sure you do your homework to determine what federal benefits may be lost by refinancing or consolidating your federal loans into private loans.

  5. What will happen to my loan term if I refinance? When you refinance, you can change the length of your loan, which will impact your monthly payments and the amount of interest you will pay over the life of the loan. For example, you can:
    • Extend your loan term. This will lower your monthly payments, but it could mean you’ll pay more interest at the end of your loan term.
    • Shorten your loan term. This works the opposite way. You may pay more each month, but you’ll pay less interest overall.
  6. Does refinancing help me meet my financial goals? Your student loans are just one aspect of your financial life. So, before you make any decisions, think about what’s next for you. For example, if you plan to buy a home, pay off other debts, or grow your savings, consider how refinancing will impact your goals. Will it make your goals easier or add financial stress? And what effect will refinancing have on your budget? For example, would lowering your monthly student loan payments free up money in your budget that you can use to pay down debt or save?

You’re in Charge of Your Financial Life

Refinancing your student loans can be a great way to save money, pay off your student loan debt sooner, and create budget space, but it is a big decision. Make sure you ask the right questions before you leap. For more helpful information about refinancing, check out our student loan refinance guide.

Brazos is Here to Help You Save

For more than 40 years, Brazos Higher Education has been helping make education more affordable for students. As a Texas non-profit, we can offer you great rates on refinance loans to help you save money and reach your financial goals. Contact us today!