Should You Refinance Graduate Loans?
BIG Ideas:
- You can refinance federal and private undergraduate and graduate loans into one single loan.
- Refinancing could help you lower your monthly payments, reduce your interest rate, and consolidate your payments.
- A big drawback to refinancing federal student loans with a private loan is the potential loss of federal benefits like income-driven repayment plans and loan forgiveness.
College is expensive, but it can be one of the best investments you make in your future.
If you’ve attended graduate school or plan to, your college costs will likely be even higher. According to Education Data Initiative, the average graduate degree holder owes up to $102,790 in cumulative federal student loan debt.
So, the obvious question is: How can you manage your undergraduate and graduate school loans?
Because let’s face it, carrying high debt can strain your budget and impact your ability to reach other financial goals after grad school – like buying a car or purchasing a home.
There’s one option that can help: graduate school loan refinance.
But what does refinancing your graduate school loans mean? And can you include your undergraduate school loans, too?
You can actually refinance both with a single loan, typically from a private lender.
There are many benefits of refinancing, including:
- Lower interest rates and payments. When you refinance, you could get a better interest rate that could lower your monthly payments and the total amount of interest you’ll pay over the life of your loan. You could also extend the term of your loan to help reduce your monthly payment.
- One single payment. Instead of paying multiple loans (graduate school loans and undergraduate school loans, federal and private), you’ll have just one monthly payment, making it easier to manage your debt.
- Fixed rates and monthly payments. If you have existing private undergraduate and graduate student loans with variable rates, you could refinance to a fixed-rate loan to make budgeting easier.
- Removal of a co-signer. If you have a co-signer on your existing graduate school loans, refinancing could allow you to get the new loan without the co-signer, provided you have the income and credit score to qualify for the refinance.
There are some drawbacks to refinancing, too, including:
- Increased interest. If you extend the term of your graduate loans when you refinance, you could end up paying more in interest over the life of the loan.
- Loss of federal benefits. One of the biggest drawbacks is that refinancing federal student loans, whether graduate or undergraduate, results in the loss of certain benefits like access to income-driven repayment plans and student loan forgiveness.
Determining if refinancing graduate loans is right for you
Though refinancing could save you money, it doesn’t always make sense. However, there are some indicators that it may be right for you:
- Current interest rates are lower than the interest rates on your existing loan(s).
- You have multiple federal and/or private undergraduate/graduate school loans that are difficult to manage.
- You have federal loans, but don’t qualify for federal loan benefits, like income-driven repayment and loan forgiveness.
- You have variable-rate loans that make budgeting a challenge.
Before you sign on the dotted line
If you do plan to move forward with refinancing, be sure to take these steps:
- Take stock of your current loans, including interest rates, interest type (fixed or variable), and loan terms.
- Determine your goals for refinancing. Do you want to lower your rate? Extend the term of your loan, etc.?
- Shop private lenders. Rates, terms, and fees can vary significantly by lender, so do your research.
- Check your credit reports and manage your credit score so you can qualify for the best interest rate.
Brazos Can Help You Refinance and Save
Thinking about refinancing your student loan debt? As a Texas non-profit, we offer competitive rates that could help you lower your monthly payments and reduce interest fees. Contact us to learn more.