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Should I refinance my student loans now?
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According to the latest interest rates in personal finance, the average student loan refinancing rate for 10-year fixed-rate loans reached 5.01%, up slightly from a week ago, and the average interest rate for 5-year variable-rate loans rose slightly to 4.01. % became. Trustworthy of those who prequalified in the student loan market in the week ending May 15.
When you refinance your student loans, you’re basically taking out a new loan to pay off your existing loan. But why go through the trouble of getting a whole new loan? For one thing, you might be able to take advantage of better rates and terms. Still, low interest rates aren’t a good enough reason to refinance student loans, especially if the borrower has federal loans.
In fact, federal student loan borrowers should think twice about refinancing. Because when you refinance a federal student loan, the borrower converts the federal loan into a private loan. Also, changing a federal loan to a private loan is irreversible. This means borrowers lose all federal protections that once came with loans, such as income-based repayment tools and certain loan forgiveness options. Pandemic-related payment and interest suspensions now apply to federal loans, but borrowers may not want to refinance their federal loans.
Private student loan borrowers are not involved in such protections, so they do not lose these protections when refinancing. In fact, refinancing can significantly shorten your payments and loan term. If interest rates are going down, your credit score is improving, or you’re making more money than you were when you last refinanced your loan, refinancing is a great way to save money each month. Another thing to consider is adjusting the terms of the loan if you have the funds available. This is because shortening the repayment period will save you money in the long run, even if your monthly payment is higher as a result.
You can see the lowest interest rates for eligible student loan refinances here.
Marketwatch Picks has put together a guide with five questions to ask yourself during the refinancing process if you’re still not sure if this is the right move for you. Check out this Marketwatch Picks guide to see how much you can save by 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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