With repayments set to begin again in September, you may be receiving a lot of information or seeing advertisements about refinancing student loans. Be aware! For most people, it is a bad idea to refinance your federal student loans into private student loans.
While you may get a lower interest rate by refinancing your federal student loans into private student loans, you will lose all of the protections and benefits that come with federal student loans, including income-driven repayment plans (IDR), deferment and forbearance options, as well as loan forgiveness and cancellation programs. Additionally, private student loans may still end up costing you more if other fees are added onto the loan even if the interest rate seems lower at first glance.
If you want to lower your monthly student loan payments, consider an income-driven repayment (IDR) plan instead of refinancing. Not only will your payments be based on your income and family size, but you will also earn credit toward loan forgiveness. For more information, see our page on IDR.
If you want to simplify repayment, think about consolidating your federal student loans into a federal Direct Consolidation Loan. This would allow you to combine your federal student loans so you have one loan payment and one loan servicer. See our page on consolidating loans for more information about the pros and cons of consolidation.
For more help with repayment after payment pause ends in September, visit our page on returning to repayment.
Finally, if you’re interested in refinancing your private student loans with another private student lender, see our page on private student loan refinancing. But again, be very careful. Make sure your loan isn’t a federal loan before you refinance. This can be tricky to figure out sometimes, but we have more information on this on our finding student loan information page. And make sure you read the terms and conditions of the new agreement very carefully before you sign it.