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Friday, September 2, 2016

Can I Refinance Student Loans While I’m Still in School?

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You don’t need to start making payments on most of your student loans until 6 months after you graduate. But that doesn’t mean you should wait until then to start strategizing how you’re going to pay them back.
If you’re thinking about how to manage your student loan debt, you may want to think about refinancing. Benefits include lower interest rates, a single loan to repay, and new loan terms.
Whether you’re still working towards your degree or you’ve already graduated, refinancing could be the best option for you. However, there are some downsides to consider.
Here are a few questions you should ask yourself before you decide to refinance your student loans, especially if you’re still in school.

What is student loan refinancing?

Refinancing means taking out an entirely new and separate loan, usually with fees attached.
Based on the rules around federal student loans, most students with this type of debt can’t refinance while they’re still in school.
And for private student loans, that means you need to go through another loan application process with a lender.
The private lender has to go through a checklist of requirements with you before you can refinance. They look at your credit score, credit history, and income to determine if you qualify.
However, most students don’t have good enough credit or enough of a credit history to get a new loan. Additionally, it can be difficult to prove your income can cover the payment on a new loan while you’re still in school and not working full-time.

Can I refinance my student loans while I’m still in school?

The short answer, unfortunately, is not really.
You can only refinance your federal student loans after the grace period starts or when you start repaying them.
Let’s say you graduated, started repayment, and wanted to go back to school. You could refinance if you’ve already started repaying your original loans.
And while parents can refinance Parent PLUS loans they took out to help their child pay for college, it’s pretty much impossible to do it while the student is still in school.
Most lenders also require the child or student to meet a variety of financial requirements to determine eligibility before refinancing or transferring a Parent PLUS loan from the parent to the child.
Thankfully, there are other ways to ease the burden of student loan debt while you’re in school.
With unsubsidized Direct or Direct PLUS loans, you can pay the interest while you’re still in school. And getting a head start on paying the interest can make a big difference in your monthly payment. It can also help you avoid paying capitalized interest.

Is refinancing private student loans possible?

You have more flexibility with private student loans. These aren’t backed by the federal government, so they don’t come with the same rules or eligibility requirements.
Technically, you can refinance your private student loans. But this might not be the best option — and you may not get approval from a lender to do so.
Remember, refinancing only makes sense in some cases. It might help you if you have several different loans that you can’t keep track of. It may also help if you took out loans with high-interest rates and now qualify for considerably lower ones.
Run the numbers before starting the process to see if you’ll save money in the long run. Factor in the fees that come with refinancing, too.

Should I consider refinancing at all?

Again, refinancing isn’t always the best option. It’s only a good fit for some borrowers.
Another alternative you could consider is a repayment plan for your federal student loans. Use the time when you’re still in school to check out federal program options.
For federal student loans, these include:
  • Standard repayment plans. Direct subsidized and unsubsidized loans, Stafford loans, PLUS loans, and Direct or FFEL consolidation loans qualify for these plans. All borrowers are eligible.
  • Graduated repayment plans. Payments start low and gradually increase. You’ll most likely pay more for your student loans over time.
  • Income-driven repayment plans. These include PAYE, REPAYE, IBR, and ICR. They determine your monthly payment amount based on your current income, making your student loan payments more affordable.
Be sure to check out our comprehensive list of 70 repayment programs for more options.
And don’t forget about student loan forgiveness programs. While not all students qualify, this may be a great path to explore if you fit the requirements.


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