If you are a student and are struggling with your student loan debt, there are a couple of options you ought to be aware of that can ease that debt. These two provisions are student loan refinancing and student loan forgiveness programs.
What is Student Loan Refinancing?
Fundamentally, student loan refinancing refers to the acquisition of a new loan at a brand new interest rate. You can refinance your federal loans and private loans. Student loan refinancing involves the clearing of previous loans and getting a new loan instead, with all new loan repayment terms and a more favorable interest rate.
Do you need to refinance your student loan?
Before you actually go through with it, you should stop to ask yourself if you really need to refinance your student loans. If you find yourself in one of the following situations, consider refinancing your student loans:
Having High-Interest Student Loans
It is no secret that student loans are more expensive than ever, with interest rates soaring ever-so-quickly. Since the interest rates vary, making monthly repayments is an arduous and taxing task. Student loan refinancing could help you save substantial amounts of money.
Having a Solid Credit Score
If you have managed to develop a fantastic credit score and credit history, unlike most other borrowers, student loan refinancing will help you.
What should you keep in mind before Refinancing Your Student Loans
It has been established that student loan refinancing is an excellent idea given the right circumstances. However, there are a few things you ought to take note of before you opt for it. Refinancing federal student loans will result in you losing certain privileges that come with federal loans. Here are those privileges:
Forbearance refers to the option to delay your loan repayments should you find yourself in a position where you are failing to make monthly payments. When in the forbearance period, your loans will accrue interest. This means that your overall repayment balance will increase when you resume loan repayment. Ultimately, this is an excellent short-term solution that you should use only if you have no other choice.
Income-Driven Repayment Plans
The federal government is known to offer the Income-Driven Repayment (IDR) plan. The point of this protection is to enable borrowers to handle their student loan repayments with some amount of ease. This plan takes your monthly income level into account and develops a repayment plan accordingly. IDR plans excel as a viable break from continuous loan repayments.
How do you Qualify for Student Loan Refinancing?
If you are considering opting for student loan refinancing, you ought to find out if you are eligible first. Bear in mind that private student loan refinancing lenders generally set challenging eligibility terms compared to federal loan lenders. Be sure to dig deep and find out what the exact eligibility terms are from the lenders that interest you.
One cannot emphasize the importance of having an excellent credit score. An above-average credit score can do well to set you apart from the hordes of other borrowers. In addition to having a great credit score, you may have to submit some proof of regular income that tells them that you can refinance your loan. If you do not have an adequate credit score or monthly income, you will have to get a cosigner to be able to apply for student loan refinancing.
You will need to submit the following: Credit score, your savings and assets, yearly income, or your potential annual income if you are a doctor, and degree.
What are Payoff Calculators, and How do you use them?
A loan payoff calculator can help you accurately plan out how to fend off your loan faster. Be sure to have the following information ready before you use a payoff calculator
- The precise federal or private loan amount
- The loan’s rate of interest
- The loan amount that you have to pay every month
When you have these details ready, you can open a payoff calculator and fill in the required details. Be sure to recheck the details you fill in before you hit ‘calculate,’ and you should have your results displayed after that.
These results should give a general idea of approximately how long you may take to make the loan repayments on your private or federal loan, along with the total amount of interest that you will have to pay. It is highly recommended that you do your research and look for a payoff calculator that works best for you, and do the same to find the most appealing student loan refinancing options for you.
Student Loan Forgiveness Programs
Student loan forgiveness programs can release you from the obligation of having to repay a chunk your loan or the entire loan itself, given the right circumstances. While it may sound dream-like, very few people qualify for such a provision. There are a variety of student loan forgiveness programs that may suit your fancy, but the most commonly utilized program is the Public Service Loan Forgiveness (PSLF) program.
Public Service Loan Forgiveness
This forgiveness program is specifically tailored for public sector employees. The PSLF program allows you to apply after having made 120 loan repayments towards your current loan. To qualify, you ought to be employed full-time in a state agency, local agency, or federal agency. Most government agencies and companies under the 501(c)(3) fall in this category.