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Home Ask Student Aid FAQ Should I Refinance my Student Loan - What are the Pros and Cons

Should I Refinance my Student Loan - What are the Pros and Cons

Student loan refinancing is credit-based. To qualify you will need to have a steady income and strong credit history, or apply with a creditworthy cosigner. If you’re not deemed eligible by private student loan refinance lenders, you will not be able to use this option as a repayment strategy.

The Pros of Refinancing Student Loans

  • Simplify repayment by combining several loans into one (reduces the number of loan payments you need to keep track of each month)
  • Reduce the amount of monthly payments by increasing the term of the loan*
  • Qualify for a lower interest rate
  • Change from a variable to a fixed interest rate or vice-versa
  • Remove a cosigner from the original loan Better service.
  • Borrowers who don't like their current lenders can switch to a different lender

*NOTE: Increasing the term of your loan may increase the total interest paid over the life of your loan, but can help decrease the amount of your monthly payment.

 

The Cons of Refinancing Student Loans

  • If you extend your repayment term, you will also extend the amount of time you are paying interest on your loan. This may make the loan more expensive overall. However, with no prepayment penalties, you can increase your payments as you are able and pay your loan off early.
  • If you pick a variable interest rate, your interest rate may go up. Most lenders will give you the option to choose between a fixed or a variable rate.
  • Your federal student loans (like Direct Loans) will lose their federal loan benefits like, loan forgiveness or income-driven repayment.