Chances were when you were first applying for student loans and receiving them; you were so happy to get the money to carry on with your schooling; you didn't grasp the long-term ramifications of having to pay them back.

If you are now at the point where you need to start relieving yourself of the burden of your debt, student loan refinancing can be a practical step to take, especially if your loan payments are going to make it nearly impossible for you to eat and pay your other expenses.

However, before you move forward, it's imperative that you understand the types, pros, cons and what constitutes refinancing your student loans.

Types of Student Loans

When considering refinancing a student loan, it is essential to keep in mind that there are two types of student loans, mainly private and federal.

The main difference between private student refinancing loans and federal student loans is that when a student refinanced his/her federal loan, the federal loan is canceled and then replaced with a new "private loan." The new loan will have an interest rate based on repayment options, credit profile, and current market conditions.

- Different lending institutions have different fulfillment requirements and criteria for a student to meet before they can benefit from refinancing. It is important to know these conditions before registering, so you don’t waste your time registering only to end up not being suitable. -

If you want to refinance your loans, you need to know the nature of your outstanding loans. In general, federal loans have lesser interest rates than private loans. Before deciding to refinance your loans, make sure you know how much money you are making compared to paying individual loans.

What Refinancing a Student Loan means?

Student loan refinancing is typically like a regular loan. Lenders will get a peek at your credit history to determine your eligibility for their product. Thus, it would be wise if you start straightening up your credit records months before you apply for refinancing. With a higher credit score, you can expect to get better rates from your lender as well as reduced administrative fees.

Lenders of federal student loans and private student loans charge interest, the percentage of the loan principal acts as the cost of the loan and the way to reduce the risk to the lender.

Pros and Cons of Refinancing your Student Loan

If you're not sure whether to refinance your student loans or not, here's a list of pros and cons to help you think about it.

Benefits of Refinancing Your Student Loan
  • Simplify Your Payments: If you refinance multiple student loans, you can simplify your monthly payments by combining them into one easy monthly fee. It is especially helpful if you make payments to more than one loan servicer.
  • Terms and Conditions: Some of the more recent private student refinancing companies appear to offer fairer terms, including more abundant opportunities when borrowers face economic difficulties and issue options based on death and disability. It is also possible that you can publish your co-signer. Be sure to check the terms and conditions of any refinancing agreement before signing up.
  • Lower Monthly Payments: You might be able to lower your monthly payments by decreasing the average interest rate on your current loans and/or extending the loan repayment term. Keep in mind, extending the term may increase your overall cost of borrowing.
  • No Upfront Fees: Private refinance loans should not have any application, origination, disbursement, or prepayment penalty fees. If they do, find a different loan provider.
  • New Borrower Rewards: You may become eligible for new, money-saving rewards programs that were previously unavailable or you have already redeemed. Borrower rewards can help you save hundreds of dollars on the cost of your loan.
Drawbacks of Refinancing Your Student Loan
  • Termination of federal programs: When refinancing federal loans with a private loan, you will lose access to exclusive federal loan programs, such as revenue-based payments, financial ance programs, and other important consumer protection measures. However, some new companies that refinance private student loans offer similar, completely discretionary, private lending programs.
  • Monthly Payment Fluctuations: If you’re on the variable interest rate, then you’ll likely experience a fluctuation in the interest rate. If prices rise, your monthly payment and total costs will also increase. The fixed interest rate may be your best option if you prefer stable monthly payments.
  • No Income-Based Payments: Quite some private lenders don’t include an income-based repayment option which allows you to make monthly payments based on your annual income and family size. An income-based repayment plan for your federal loans may be the best plan for you if you have a low-income job and a high monthly payment.
  • Higher Total Costs: If you extend the repayment term of your loan to lower your monthly student loan payments, you may end up paying more over the life of your loan. Take the time to prepare a monthly budget to determine how much you can reasonably afford to pay each month to keep your overall loan costs down.


Refinancing student loans is a big step to take. Therefore, you must be very careful before signing the contract with your lender. Take the time to read the rules to understand all your rights and responsibilities as a borrower.

So, before proceeding, be sure to consider all your options and decide which one you can live with. Unfortunately, none of us can predict where our lives will be in years. Sometimes it is better to err on the side of caution.

Interested in Refinancing Student Loans?

Here are the top 4 lenders to refinance Student Loans in 2019!
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Fixed: 3.67% - 7.25%

Variable: 2.54% - 7.43%

Fixed: 3.89% - 8.07%

Variable: 2.5% - 7.12%

Fixed: 3.39% - 6.69%

Variable: 2.8% - 6.01%

Fixed: 3.49% - 8.93%

Variable: 2.7% - 8.96%