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Do you have to pay off student loans?
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The average student loan refinancing rate for 10-year fixed rate loans remained relatively stable at 5.67%, down from 5.71% the week before. July 25th. The average interest rate on five-year variable rate loans rose to 3.96% from 3.73% last week. Of course, the actual interest rate you pay will depend on the lender you choose, the type of loan (fixed or floating rate), your credit score, and other factors. You can see the lowest interest rates for eligible student loan refinances here.
Refinancing student loans means taking out new loans to pay off old ones. That way, you can consolidate your private or federal student loan debt to take advantage of potentially lower interest rates and more competitive terms. But refinancing student loans isn’t always a good idea. That’s why student loan experts recommend weighing the pros and cons of the process before pulling the trigger.
Pros and cons of refinancing student loans
Refinancing may mean lower interest rates, but if you have a federal student loan, you should convert your loan to a private loan. In doing so, you lose federal protections such as income-based repayment tools, certain loan forgiveness options, and the current payment and interest accrual suspension introduced due to the pandemic.
So while lower interest rates can significantly increase your monthly savings, refinancing may not be the answer if you think you might take advantage of the protection offered by federal student loans. I have. This is because once a federal loan is changed to a private loan, it cannot be changed back to a federal loan.
However, if you take out private student loans, you don’t risk losing federal protection. As such, refinancing may be in your favor if your credit score goes up or if your financial situation changes which could lower interest rates or raise terms. you. Another thing to consider is keeping the loan term short. This can result in a higher monthly payment, but a shorter repayment period, which ultimately saves you money over the life of the loan and pays less interest over a shorter period of time. .
Marketwatch Picks has put together a guide with five questions to ask yourself during the refinancing process. Also, this guide will help you save thousands of dollars when refinancing your student loans.
*Prices correct at time of publication.
Any advice, recommendations or rankings contained in this article are those of MarketWatch Picks and have not been reviewed or endorsed by our commercial partners.
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