Changing Private Student Loans to Federal Student Loans
Are you thinking about refinancing your federal student loans? You might want to check out all your options before signing on the dotted line. Once you refinance your federal student loans to private student loans, there is no going back. This article from student loan hero explains how you cannot transfer private student loans to federal student loans.
Federal student loans offer benefits over private loans, such as student loan forgiveness, forbearance, and income-based repayment plans. If you are having difficulty paying your student loans due to unforeseen circumstances, you might be able to lower your payments or stop them altogether for a short time.
The possible downside to keeping your loans with the federal government is that you might be paying higher interest than what you could get with a private lender. Currently, private lenders have some of the lowest interest rates we have seen in recent years, and as long as you believe your income will remain steady in the future, it might be best to lock in a lower interest rate.
If you are a savvy investor, you could invest the money you would put towards your loans and earn more than the interest you are paying. For example, if you got eight percent on the money that would have otherwise gone towards your student loans, and you’re only paying 3% on your student loans, you would net 5% by investing instead of just paying off your student loans.
If you’re averse to risk and are more conservative, it might be better for you to use the extra income to pay off your loans quickly. With this strategy, you’ll want to pay off your loans as fast as you can, and refinancing makes less sense.
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Your decision to refinance depends on your investment style and how much risk you are willing to take in the future. If you’re thinking about refinancing, it is best to look at multiple lenders to get the best rate. Using a service like credible.com allows you to see multiple offers. Once you know the current interest rate, I recommend checking with Juno (formerly LeverEdge), which uses collective bargaining to negotiate lower rates to get an even lower offer.
If you decide to refinance your federal student loans into private loans, there is no going back, so make sure that is what you want to do because you’ll be missing out on any benefits that federal student loans might have to offer.
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