If you’re a college grad making timely payments on your student loans, refinancing could help you lower your monthly payment and/or reduce the overall interest you pay on your student loans. As you think about your options, here are some important questions to consider.
First, Ask Yourself...
- What do I hope to accomplish by refinancing? Do you want to lower your interest rate, repay your debt faster or free up cash? Do you have multiple loans with multiple payments due at different times and want to streamline your budget to have just one payment? If you have a steady, reliable income and have built up your credit since graduating, refinancing your loan(s) could be an attractive option. Most private lenders, including Navy Federal, will allow you to refinance and consolidate federal and private student loans together. If you have federal student loans, make sure you review all their benefits (income-based repayment plans, loan forgiveness for public service or certain forbearance and deferment options), so you can decide if a lower interest rate, lower monthly payment or more time to pay back your debt is worth losing them. Navy Federal also offers a refinancing option for parents with Parent PLUS loans as well as private loans taken out to pay for one (or more) student/child—giving parents more freedom to focus on other financial goals.
- What’s my credit score? While federal student loan rates are set by federal law and aren’t based on your credit score, private student loans rates are generally determined by your credit score and history. Check your credit score—if it improved since you took out your student loans, you may be eligible for a lower interest rate by refinancing.
- When do I need a co-signer? If you’re in the process of building your credit, adding a credit-worthy co-signer may help you qualify and get a lower rate. Some lenders, like Navy Federal, will allow you to request a co-signer release after you make a certain number of timely payments.
- Do I have Servicemembers Civil Relief Act (SCRA) benefits? If you’re an Active Duty servicemember who incurred federal and/or private student loan debt before the start of your service, you may be eligible for an interest rate cap of 6% through the SCRA. Before you refinance, check to see if you’ll lose this benefit.
Next, Ask Your Lender...
- Do you offer a variable or fixed interest rate, and how is it calculated? Your loan’s interest rate is probably the most important factor to consider when refinancing. Fixed rates are more predictable for budgeting. You’ll have the same payment every month. But, you might get a lower rate with a variable-rate loan. The difference is that, for a variable-rate loan, the interest rate changes with the index rate, meaning your monthly payment could go up or down. Ask about how the annual percentage rate (APR) is calculated and how much and how often the interest rate could change.
- What are the repayment terms and conditions? The repayment terms and conditions of your loan are the things you and your lender agree on (like when your monthly payments begin, how much they’ll be and whether there are fees for late payments or safety nets for hardships like job loss). Find out if you can get a reduction in interest for scheduling automatic monthly payments, a benefit offered with Navy Federal’s student loans.
- What are the potential terms of my new refinanced loan? The term of the loan is different from the terms and conditions. It’s the length of time you agree to repay the loan (like 5, 10 or 15 years). Longer terms will mean you’ll probably have a lower monthly payment, and shorter terms will mean you’ll probably pay less interest over the life of the loan.
When you’re ready to connect with a lender, see if refinancing with Navy Federal makes sense for you. It just might be the solution you’re looking for.