When to refinance student loans
Experts provided recommendations for student loan borrowers looking to refinance their loans.
Although refinancing with a lower rate can help federal and private student loan borrowers pay off existing loans, the experts noted that borrowers should consider several factors prior to making a decision, according to a news article from U.S. News & World Report. They explained that recent changes to the federal student loan system will end some repayment plans, increase monthly payment expectations and raise the number of repayments necessary to qualify for debt forgiveness.
The experts suggested that federal student loan borrowers should generally refrain from refinancing because they may lose protections available under the federal student loan system — including income-driven repayment plans and Public Service Loan Forgiveness. However, borrowers may benefit from refinancing if they can secure a significantly lower interest rate, more affordable repayments, a faster loan payoff or lower lifetime costs.
For instance, those on a Grad PLUS or Parent PLUS plan with a high interest rate, those with an existing Parent PLUS loan who plan to borrow more, those who have Parent PLUS loans who didn’t consolidate them and borrowers with private student loans could take advantage of lower interest rates by refinancing in 2026. Those who have a good credit score, are not interested in pursuing student loan forgiveness or want to streamline their repayments may also consider refinancing options. The experts emphasized that even though refinancing to lower monthly payments can save money in the short term, it can raise the lifetime costs associated with paying off the loan if the repayment period is extended. The interest rates for private student loans will be dependent on the borrower’s credit score, debt-to-income ratio and current interest rate standards.
The experts stressed that borrowers who don’t have job or financial stability, are looking to qualify for debt forgiveness and are nearing the end of their repayments should avoid refinancing or explore alternatives such as signing up for auto pay, switching to an income-driven repayment plan or consolidating their student loans.
Read more: U.S. News & World Report
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