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8 Myths About Refinancing Your Student Loans

Now that you’re an adult, it’s time to pay off those student loans. Refinancing your student loans opens the door to an array of possibilities. By refinancing your student loans, you’ll be able to pay off your student debt more quickly and easily than ever before. Because paying off student loans is one of the biggest financial burdens you’ll face as a graduating student, getting your student loans refinanced will allow you accumulate all of your existing student loan debt into one lump sum, so that going forward you’ll only need to make single payments to pay of your loans. And by refinancing you may also be able to pay less per month, depending on the quality of your credit score. If you’re currently drowning in student loan debt, here are 8 myths you need to know about refinancing your student loans.

8 Active Myths | Suggest a Myth
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MYTH: I will lose money and time by refinancing.

On the contrary, you will likely be able to save thousands of dollars in student debt and accumulation of interest over time by choosing to refinance your student loans. You will not only have more money over time, but you'll also be able to pay it in a shorter amount of time.

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MYTH: Loan consolidation is the same as refinancing.

Its important to note that these two things, consolidating and refinancing are not the same. With loan consolidation, all loans are consolidated into single loan and payment. With refinancing, you are actually taking out a new loan that is being used to pay of debt. Therefore, essentially you are consolidating by taking out a loan after which you may need to pay higher or lower interest rates based on your credit..

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MYTH: Private lenders won't allow forbearance.

Federal loans come with a lot of perks that private lenders often do not offer, but that is not to say that none of them offer these perks. Protection such as forbearance can be found at a number of private lenders such as SoFi who will put a hold on your student loan payments until you have a job.

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MYTH: All refinancing requires a variable rate loan.

Not all refinancing requires a variable rate loan. For those that have a variable rate loan, the interest rate may change over time which may be higher or lower. So while they may not necessarily be bad, some prefer a more predictable interest rate. Fortunately, there are plenty of places such as LendKey that offer fixed rate refinancing.

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MYTH: Student Loan Refinancing is a scam by money lenders.

Many seem apprehensive by the idea of student loan refinancing, mostly because it seems to good to be true. And while there are companies out there that are only after your wallet, with enough research you can rule out companies that have hidden fees and higher interest, because they won't save you a thing.

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MYTH: I'll have to pay higher interest rates.

Refinancing does not mean you'll have to pay higher interest rates. If you do your homework, you can find a lender that will offer you a lower interest rate than what you are currently paying. However, if you have manged to mess up your credit after college, you may have difficulty acquiring those lower interest rates.

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MYTH: Federal loans can't be refinanced.

Although the government does not offer refinancing on loans, this does not mean that federal loans cannot be refinanced. On the contrary, federal loans can be refinanced just like any other loan with a private loan. However, you will not have access to any of the benefits of federal loans, including student loan forgiveness.

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MYTH: You can't refinance your student loans again.

This is also false. Even if you have refinanced student loans before, you can still do it again, provided you have already met the requirements of the lender you are looking to refinance from. As long as you meet the credit score requirements, you can refinance as much as you like.