Refinancing Student Loans

Many borrowers, especially parents and grad school graduates who took out PLUS loans, are stuck with high fixed interest rates on their student loans. In the past year, though, several companies have started refinancing services that seem to be above-board and might be worth a look.

Credible provides a marketplace in which graduates can complete a single profile form with their loan and income details and get refinancing offers from multiple lenders.

SoFi is a peer-to-peer lending service that offers loan consolidation for both private and federal loans.

Before you get too far down the path to refinancing, though, there are several things to consider:

  • Interest rate: A good rule of thumb is don’t refinance unless you can get a fixed interest rate that’s at least 1% lower than your current rate. Otherwise it’s not worth the hassle.
  • Federal loan protections: When you consolidate/refinance through a private lender, you lose eligibility for some of the federal loan protections including income-based repayment, hardship deferrals and public sector work forgiveness. If you are taking advantage of any of those, then refinancing is probably not for you.
  • Graduates only: Each of these services is for graduates only. That means that if you did not complete your degree, or if you are still in school, you are not eligible.

These services are fairly new. If you have any experience with them, or any others, I’d love to hear about it!

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