This day and age, a large majority of college students have incurred some form of student debt; in fact, most sources put the figure at 70 percent of college students, totaling an overall $1.4 trillion in student debt. That’s a huge number! So basically, there are tons of college kids taking out student loans for higher education.
The student debt picture is a bit of a hot topic today, mainly due to the fact that a decent number of people are not paying back, or struggling to pay back, their student loans. Well, debt isn’t a new concept, and there are plenty of measures and financial services in place to help people manage their debt.
The financial service of the day right now happens to be refinancing, and in this particular case, we’re discussing the benefits of student loan refinancing. Here are a few of the standard and common reasons for deciding to refinance your student loans.
Obtain a Lower Interest Rate
So what’s the number one reason why you would refinance your student loans? To get a better interest rate! Student loans are generally offered with two different kinds of interest rates: fixed or variable. Variable rates fluctuate with the market, but fixed rates remained fixed throughout the life of your loan. Let’s say you have a fixed rate. Ten years down the road, you may find yourself with an interest rate that doesn’t reflect the current market rate. And that’s where refinancing comes in! If you qualify for student loan refinancing (refinancing is offered by private lenders), then you can essentially trade out one or multiple student loans (both federal and private) for one single loan with a new interest rate. Depending on your creditworthiness, you can get a lower rate and save money on interest over the life of your loan.
Simplify Monthly Payments
Many students are forced to take out multiple student loans during their college career. This can lead to a confusing monthly payment situation down the road. If you have both private and federal student loans, then it can get quite tricky. You could have multiple payments due at different times of the month, and you could get either overwhelmed or just annoyed at the whole process. Well, when you refinance your student loans, you are also consolidating them into one single loan. That means one payment once a month. Sounds pretty simple!