Should I Refinance ALL Of My Loans?

You may not want to refinance all of your loans

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Many college students end up taking out loans to pay for college. In turn, they graduate with some amount of student loan debt. Student loan refinancing is the preferred solution for borrowers looking for a way to lower their monthly payments, get a lower interest rate, or otherwise renegotiate the terms of their loans. This can be a truly attractive option, especially for those who have managed to build their credit history. Or, for those who want to change some part of their loan. However, despite the many benefits of refinancing, it’s not always advisable to jump in and refinance all of your student loans.

Which Loans Should I Refinance?

When deciding which loans to refinance, the most important thing you should consider is the interest rates on your current loans vs that of the new refinanced loans. The rate the lender sets for your refinanced loan will depend on several factors, the main one being your credit score. A good credit score will qualify you for a lower rate of interest.

What’s the best way to decide which loans you should refinance? First, get a quote by private lenders for your refinanced loan, then only refinance loans with a higher interest rate than the one being offered by the lender. You don’t want to refinance a loan with already low interest rates into one that has a higher interest rate.

Parent PLUS and Grad PLUS loans typically have the highest interest rates, so you are likely to benefit most from refinancing these loans first. Many private student loans also have higher interest rates compared to federal student loans. You may want to consider refinancing your private loans if you know you’ll get a lower interest rate.

Refinancing Can Lose Federal Loan Benefits

One drawback to refinancing is the fact that you’ll lose any federal benefits with your government-issued loans. Since federal loans can only be refinanced through private lenders, you’ll lose access to loan forgiveness programs or certain repayment plans. Federal student loans are typically more forgiving and have more flexible repayment plans. Keep in mind any benefits you’ll lose if you choose to refinance your federal student loans.

The loans that should ideally be refinanced last are those that are eligible for forgiveness under certain circumstances. Only refinance the loans if you have absolutely no other option.

Explore Your Options

Before settling on anything, do your homework. Shop around with different lenders to discover what interest rates you might earn. Don’t feel like you have to commit to the first lender you find either. It’s better to shop around, rather than be stuck with a refinanced loan that doesn’t help you. Be sure to weigh the pros and cons of refinancing your federal loans with a private lender. Take your time to do some research about lenders. Compare offers before settling on the one right for your financial situation. Refinancing can be a big help, but you should be fully informed of your options before committing.

College Raptor Staff

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