Would Student Loan Refinancing Pay Off for You?
BY SEAN PYLES
Glossy mailers promising low rates and cleverly crafted ads on your favorite podcast might leave you wondering: Should you refinance your student loans? With over $1.6 trillion in student loan debt in America as of March 2019, student loan refinance companies have an incentive to entice you. And a lower payment sounds alluring. But is refinancing the right move for you? DIG INTO YOUR FINANCES Before you make a big change to your money management, such as refinancing your student loans, fully understand your overall financial picture, says Barbara Thomas, executive vice president at SouthEast Bank. This will ensure you’re coming from an informed place so you can make the best decision for your situation. The more solid your footing — you’re paying all bills on time, putting away savings and still have cash left at the end of the month — the more likely it is you could qualify for a refinance and handle any financial changes it brings, Thomas says. “Make sure you’ve done all the reconnaissance work in terms of what your obligations are, what your credit scores are, and make sure you understand your financial outlook,” she says. Start with a simple monthly budget, like the 50/30/20 approach that allocates 50% of income to needs like housing, 30% to wants, and 20% to debt payments and savings. Then list your student loans, noting balance, annual percentage rate and loan term. Check your credit and correct any errors on your credit reports.
LOOK AT YOUR LOAN TYPE
Next, turn your attention to your loans themselves: Are they federal or private? Federal loans carry options and protections — such as income-driven repayment plans and loan deferment — that you lose if you refinance them into private loans.
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