Student loan refinancing rates dipped. What to consider before you refinance

 Student loan refinancing rates dipped.  What to consider before you refinance


Should you refinance your student loans?

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Student loan refinancing rates have dipped slightly: For 10-year fixed rate loans, the average student loan refinancing rate is 3.99%, down from 4% a week prior, according to the latest rates from Credible for the week ending March 21, 2022. Meanwhile, rates on 5-year variable-rate loans average 3.47%, down from 3.62% a week prior. That said, the rate you’ll qualify for will depend on things like your credit score (the higher the better) and your debt-to-income ratio (to figure this out divide your total monthly debt payments and financial obligations by your gross income ), which lenders like to see under 50%. See the lowest student loan refi rates you might qualify for here.

What does it mean to refinance a student loan?

By refinancing a student loan, a borrower takes out a new loan to pay off their existing loan, likely with the intent of taking advantage of a lower interest rate or a more advantageous repayment timeline to save money.

Note that some people save thousands when refinancing student loans, but before taking the plunge, you may want to ask yourself these 5 questions to ensure refinancing is right for you.

Should I refinance my federal student loans?

Though refinancing a federal student loan may mean cashing in on a lower interest rate – which can sound appealing – experts advise proceeding with caution when federal student loan borrowers refinance their loans into private loans. This is because once a federal loan becomes private (which happens when you refinance), most all of the protections — including potential loan forgiveness, loan discharge and income-based repayment plans — are no longer valid, nor are those loans able to become federal loans ever again.

Nevertheless, should you have a high-interest loan and you qualify for a lower interest rate, refinancing can save you money. And in the long run, lowering your interest rate and shortening your repayment term can save serious money, though it may up your monthly payment. So if you anticipate having steady finances and being able to keep up with monthly payments, refinancing can make sense. If however, you like knowing that you have income-based repayment options available, the opportunity for public service loan forgiveness (PSLF) or you’re enjoying those COVID-related forbearance protections – refinancing might not be the answer.

Should I refinance private student loans?

The question here is simpler to answer because your loans are already private. If you can find a lender with more favorable rates and terms, a refi might make sense, and potentially save you thousands of dollars over the life of the loan.

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