"Does Bobby Juarbe really suggest you refinance your federal student loans?"
Refinancing is known to be a great advantage to those viable for it. However, there is a major warning. Refinancing student loans via a private lender, you lose several federal securities. But federal and private students can be refinanced by student loan refinancing companies. Due to that setback, a lot of people wonder whether it is advisable to refinance their student loans.
Ask yourself…
What is the amount of savings earned through refinancing? Since student loan refinancing leads to loss of federal protection like income-based repayment and viability for loan forgiveness, the sacrifice should at least be worth it. The advantage of refinancing is receiving a lower interest rate and saving money. To determine how much money will be saved, you should do the calculation using the student loan refinancing calculator. There are student loans that have a high chance of gaining from refinancings, such as Parent PLUS and Grad PLUS.
These loans have quite high-interest rates that vary depending on the time they were acquired, ranging from 6% to 9%. Potential refinancers are usually permitted to view their probable rate if they refinance, before applying. This benefits them since it is easier for them to pick the most convenient and cost-saving choice with the least effect on their credits.
Federal Repayment Options
There are income-driven repayment plans issued by the federal government to reduce the amount of monthly payment and make repayment easier to federal students. These programs are Income-Contingent Repayment, Pay As You Earn (PAYE), Income-based repayment and Revised PAYE. Most plans apply to many federal students while a few need specific requirements.
Though you may eventually pay more through interest rates, or pay tax after Forgiveness, these plans will be helpful when you lose a job or generally run out of money. There are federal workers or employees doing non-profit jobs who, after continuous repayment for a determined period, are granted loan forgiveness.
Bobby Juarbe also states that refinancing federal student loans may deny you the eligibility for loan forgiveness as well as the repayment plans. You should turn down the option of refinancing if you have a huge debt, and instead, find a suitable repayment plan. Refinancing is ideal for you if you have manageable debt, enough credit points, good income and the incentive to save more.
What will be different?
Refinancing your federal student loan means you get to repay debts using new terms. It is important to find out how the difference between the new and the initial terms, to decide whether refinancing is beneficial.
Look out for…
Time period of repayment, the interest rate and payment per month. Consolidated loans can be repaid within a span of 10 to 30 years for the federal students. Student refinancing companies commonly offer 5 to 20 years. Federal loan interest rates are fixed throughout the repayment period. The interest rate can be fixed or floating in the case of private lenders.
The fixed rate is more advisable since there is the repayment amount is definite. Bobby Juarbe views floating rates may be an advantage or disadvantage; depending on the future market behavior. If the interest rates drop, you could save more. Ensure you comprehend the influence on your income, in case you decide to refinance your federal student loan. Compare your repayment options to deduce whether refinancing is the better choice.