However, I generally recommend
not refinancing federal loans unless there is a significant need or other circumstances that you don't need to keep your benefits (like the example above).
You can refinance both private student loans and federal student loans, though the site recommends that you be careful
in refinancing federal loans.
You should only consider
refinancing federal loans with a private student loan if there will be significant savings in both the interest rate and the monthly payment.
If you are currently facing financial instability or see that as a likely part of your future,
then refinancing federal loans may not be the best decision.
If you work as a federal employee such as a teacher, or for a nonprofit, you may not want to
refinance your federal loans since these occupations are more likely to be eligible for loan forgiveness after making regular payments for a set number of years.
For instance, borrowers
who refinance federal loans into private loans will lose access to income - based repayment plans and loan forgiveness.
Before this process takes place, however, it is especially important to understand exactly what changes will take place if you choose to include any or all of your federal loans into the refinancing package,
as refinancing a federal loan may nullify federal student loan protections, such as public service forgiveness and income based repayment plans.
That's
because refinancing federal loans means forfeiting government protections such as income - driven repayment plans, deferment / forbearance, and some debt forgiveness programs.
While you can
refinance your federal loan debt as well as private student loans, you might want to look at other options within the federal system first — especially if your application for a refinance was denied.
However, before you make the final decision, it's very important to consider whether you'll lose any important benefits by refinancing your student loans, particularly if you're thinking
about refinancing federal loans with a private loan.
«The only two situations where
refinancing federal loans makes sense is if you're on the standard 10 - year repayment plan, can easily make all your payments, plan to [continue] into the future, and you won't be applying for any type of forgiveness program,» says Robert Farrington, founder of The College Investor.
But some experts
discourage refinancing a federal loan, since its transition to a private loan eliminates those built - in benefits designed to make federal student loans easier on you, the borrower.
While there are things to consider
before refinancing federal loans with a private lender, it can be an attractive, cost - saving option for many borrowers with high - interest rate, unsubsidized and PLUS loans.
If you work as a federal employee such as a teacher, or for a nonprofit, you may not want to
refinance your federal loans since these occupations are more likely to be eligible for loan forgiveness after making regular payments for a set number of years.
As there are no options to
refinance federal loans using another federal loan, you would have to refinance using a private loan, giving up all of the benefits federal loans offer.
She also called on lawmakers to pass legislation that would allow students to
refinance their federal loans to take advantage of today's low interest rates, similar to what is already offered to homeowners.
After graduating,
they refinanced their federal loans to lower their monthly payments.
The decision to
refinance federal loans should be based on these benefits weighted against the potential setbacks.
It's important that you consider the following issues when deciding between federal and private student loans, or when considering whether to
refinance your federal loans:
After borrowers have graduated and established a good work and credit history, they may find that private lenders are more interested in helping them to
refinance their federal loans to a lower interest rate.
Remember though,
refinancing your federal loans could mean giving up your certain borrower benefits like deferment and forbearance, loan forgiveness, and income - driven repayment plans.
Remember, since you're
refinancing a federal loan with a private lender, you will lose any federal borrower benefits that came with your loan, such as access to income - driven repayment, deferment, or forbearance, which are not always available from private lenders.
If
you refinance federal loans, you will no longer be able to take advantage of federal repayment programs or loan forgiveness.
If you are confident in your ability to repay your loans over your given repayment term and are seeking to maximize savings, and you also have a good credit score and healthy income,
refinancing your federal loans could be a wise option.