How to refinance student loans

With President Joe Biden’s student loan forgiveness plan hanging in limbo pending a Supreme Court decision, borrowers face the possibility of having to resume payments. If debt relief cannot proceed, the current moratorium is expected to expire by August 30th at the latest.

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Loan forgiveness would clearly be a huge boon to the country’s student debtors, but it’s not something everyone should resort to. There are steps you can take now to help. The main thing is refinancing.

Is it really possible to refinance student loans?

In a nutshell, yes. A student loan is just like any other type of loan issued by a bank, financial institution, or federal government. Refinancing a loan means taking out a new loan to pay off an existing loan. You’ll have to do the math to see if refinancing makes financial sense, but yes, you can refinance student loans just like you can with personal or mortgage loans.

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What steps do I need to take to refinance my student loans?

There are three main steps to refinancing a student loan. Scour rate quotes, select a lender, finalize loan terms, and submit paperwork to complete your application. Here’s an overview of each of these steps:

BUY A RATE QUOTE

Lending is a competitive market. A simple online search will reveal numerous refinancing options. Most lenders can run a soft credit check to determine your interest rate without affecting your credit score. This makes it easy to compare student loan refinances. Remember, the interest rate isn’t the only cost of refinancing. You should also factor in any fees and other administrative costs that may come with your new loan.

Choose a lender and loan terms

Monthly payments aren’t everything when it comes to refinancing student loans. The term of the loan is equally important. For simplicity, let’s say you have a loan that currently requires $100 monthly payments for 10 years. This equates to $12,000 over a 10-year period. Refinancing to a loan that only requires $70 monthly payments may seem like a bargain. However, if that loan had a maturity of 20 years, he would end up paying $16,800, which is 40% more. Just like you should consider all the costs of a loan when getting an interest rate, you should also consider the total cost of your payments before signing up for a new loan.

Submit the required documents and sign the application form

Once you’ve done all the math and found a lender that provides good customer service, finalize the loan. You will likely need to provide your prospective lender with various personal and financial documents so they can secure your credit. Sign up for new low cost student loans.

Should I refinance my student loans?

Whether refinancing student loans makes sense depends on your personal financial situation. In a general sense, if you can move to a loan with a lower total cost, it also makes economic sense, especially if you have a private he loan that is not subject to forgiveness. However, to make that decision, you need to consider all aspects of the loan, from interest rates and monthly payments to the total amount you pay over the life of the loan. You should also consider the service capabilities of the loan provider. Student loans are likely to be one of the biggest expenses in his life, so it’s a good idea to talk to your financial advisor.

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Daria Uhlig contributed reporting for this article.

This article originally appeared on GOBankingRates.com: How to Refinance Student Loans