There is endless information available about student loan refinance, but some borrowers may still be confused about the process and their options. What’s fact and what’s fiction? We can help! Here are three common student loan refinance myths debunked.
MYTH #1: I have to refinance all of my student loans.
While you typically can refinance and consolidate all of your student loans into one new loan, you do not have to! There may be reasons to exclude some of your loans from a student loan refinance. For example, federal student loans come with certain benefits such as income-based repayment or student loan forgiveness for public service, and you may wish to keep those loans separate. You can choose which loans to roll into your refinance and continue making regular payments on any you exclude.
MYTH #2: I can only consolidate/refinance my federal student loans with the federal government.
The U.S. Department of Education offers a consolidation program for federal student loans, which combines multiple federal student loans into a single payment. A Direct Consolidation Loan has a fixed interest rate for the life of the loan. The fixed rate is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent.
However, you may also be able to refinance your federal student loans with a private lender like a Student Choice credit union. Our refinance solution allows you to combine both federal and private student loans into a new loan with one easy payment. Depending on the lender you select, you may have a choice of a fixed or variable rate, as well as different repayment terms. (Keep in mind you may lose certain benefits of your federal student loans if you roll them into a private student loan refinance.)
MYTH #3: Once I have refinanced my student loans, I cannot refinance again.
If you have previously refinanced or consolidated your student loans, you may wish to refinance again at a later date to take advantage of lower interest rates or to change your repayment terms. Plus your credit score may improve over time, presenting an opportunity for a lower rate.
Ready to start your student loan refinance with a credit union? Input some basic information and we’ll show you which credit unions could be the right match for you!
Additional Considerations
It’s important to remember that every student loan situation is unique. There are many factors to consider when refinancing student loans, including a possible loss of loan benefits for any federal student loans you currently hold.
In addition, the CARES Act was passed in response to events related to the COVID-19 pandemic and includes broad relief measures for federal student loan borrowers, which are set to expire after May 1, 2022. If you are considering refinancing your federal student loans, please make sure to review these measures at www.studentaid.gov/coronavirus to understand your options.
