When you are planning to go away to college, one of the most daunting things can be facing student debt. For a lot of young people, student loans are necessary to pay for tuition and to allow them to cover their living expenses while they are students. While this does mean that getting a higher education and a better set of career prospects is possible for people who couldn’t otherwise afford it, it does also mean that it is important to understand the financial commitment involved as soon as you are old enough to be thinking about university.
What is Student Loan Refinancing?
In the US, student loan repayments normally begin as soon as you finish your education, and for many people, this can be very difficult at first, particularly when on an entry level salary or when trying to set yourself up for working life. One option that can make things easier is student loan refinancing, which is where you take out a new loan that pays off your student debt and gives you a new repayment plan that may end up being cheaper long term or may be more suitable to your immediate financial situation. You can find out more about how refinancing student loans works in practice here.
Of course, just knowing that this may be an option for you in the future if you incur student debt at college isn’t enough—as with any other financial product student debt refinancing loans are not available to everybody, and you’ll have to meet certain criteria to take advantage of them.
Income and Credit History
In many cases, you will need to prove you have a stable income that allows you to be able to afford the repayments on the new loan you would be using to refinance your student debt. This will mean you’ll need verifiable employment. What is asked for will vary—in some cases you will need to prove you have had an income for a while, in others even a job offer letter you are accepting will suffice.
You will also need to show that you are responsible with credit. A good credit score will certainly help, but you may be able to show regular repayments on things like credit cards or car loans as a means to verify this if you are fairly new to credit and haven’t built up a solid rating yet.
If you want to consider student loan refinancing but are unemployed or underemployed, or have no credit history or a poor one, you will need someone with a better credit record to cosign with you, such as a parent. Be aware before considering this option of whether or not you have anybody who fits the bill and would be willing to do this for you.
As you can see, student loan refinancing can make life easier once you start having to repay the loans you take out for college, but there are factors that you’ll need to consider that will affect how easy it will be for you to take this option.