How Do I Refinance a Student Loan?

Here's how to refinance student loans.

Flickr user Spencer Bawden

Emanuel Lasker, a chess world champion, thought of as one of the greatest of the game’s players, was once asked what basic advice he would give to beginning chess players. “When you see a good move,” Lasker replied, “look for a better one”. Even if you don’t play chess, Lasker’s advice applies to a variety of situations that require an important decision. For those of us under the age of 25, our important decisions usually regard our college years. One of these is how you’ll pay for college. The chess match you’ll play against your tuition prices is one of the more difficult you can play, but as long as you make the right moves, it’s possible to pull off a hard-fought checkmate. So, how do you refinance your student loans?

Student Loan Refinancing

Students often take out loans to pay for school, but often feel dismayed when they graduate to a mountain of debt. There are many ways to ease this burden, but one of the most popular is to refinance the loan. When most of us hear a phrase like “refinance a loan,” we immediately think of real estate or cars, where the tactic is most often used. However, college loans can also be refinanced in a similar manner through a few simple steps: define your problem, look at the various solutions, and commit to the plan that fits best.

How to Refinance Your Student Loans

Refinancing a loan may sound complex, but once you understand it, it’s actually a pretty simple concept. Basically, what you’re doing is removing your current plan and substituting it with another. The stipulations of your agreement are probably going to be different, removing or accounting for the factors that caused you to change the plan in the first place. There are a ton of reasons why students might refinance loans. Sometimes, you may not have a problem with your current plan, but find another one that works better. Other times, it might be more serious, like changing your payment process because of financial trouble. Whatever the reason, once you decide to refinance your student loans, you’re ready to proceed to finding assistance.

First of all, you cannot, under any circumstances, refinance your federal loans. There’s a bunch of reasons for this, but the most simple explanation is that there are far too many students with federal loans, as well as too many legal implications, to allow students to change their plans. However, if you go through a private provider you’re in luck. The first thing you need to do is contact your current loan provider and inform them that you’re considering refinancing your loan. The best thing to do is speak directly to a human being instead of a robot because technology hasn’t advanced far enough yet for robots to have human capabilities. The customer support worker will probably then give you your next steps, which most likely involve a decision on your end.

Should You Refinance?

You’ll have to decide which way to proceed, and which organization to go forward with. Some banks will waive or reduce certain fees if you refinance with them that, if you left to go to a different company, would have to be paid in full. Your decision should rest on your experience with that loaning company to that point.

If you generally feel that they are doing everything they can to help you and that you can move to a new plan without a hitch, stick to the same place. If not, and if you feel that your best option is another private lender, explore other options. Think of yourself as a free agent. Refinancing can be tricky, but if you go about it the right way, you will end up far better off financially than you were previously. Eventually, if you play your pieces right, you can crisscross the board and defeat the shadowy prospect of student debt.

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