Like with any student loan, one option to consider is the possibility of lowering payments. Refinancing is one of the main ways to save money each month and for the loan's lifetime. Loan servicers have this option available, and MOHELA is no exception. The process is easy and will only require around half-hour of your time.
The path to refinance MOHELA student loans is simple. Research the different lenders to find what terms work best for you. After choosing one, you’ll apply for refinancing, submit the requirements and then wait.
How Does Refinancing Work?
Student loan refinancing is essentially applying for a new loan. The lender purchases the old loans and provides you with new terms that are better than the last. Often, people do this with new lenders to take advantage of their offerings. The rates you’ll receive will depend on several factors, including:
- Your payment history
- Current credit score
- Federal interest rates
Most of the time, borrowers have better income, good payment history, and a higher credit score because of the payments they made on the previous loan. Because of that, they could capitalize on lower interest rates, making paying off the loan a lighter load on them.
If you have a federal loan and you’re refinancing to a private lender, you might lose several benefits. You will no longer qualify for loan forgiveness or income-based repayment. It’s best to consider your options before deciding.
The Benefits of Refinancing
The main reason people choose to refinance student loans is that it can reduce loan rates. That means savings, giving you more financial freedom, and reducing your payments over the loan’s life. Better payment options usually happen because the interest rate is low or there is a change in the repayment terms. Refinancing also provides a few more benefits:
- You can remove a cosigner from the student loan. That way, the borrower can have full responsibility and not pressure someone else like a parent.
- A refinancing option allows a borrower to combine multiple loans. That way you’ll only need to think and pay one fee in the one new loan.
- You can switch to a new lender. That means you’ll have more options when it comes to the perks they offer. You may also want to change if another lender has better customer service.
Refinancing is a solid option if you're in the private sector. Most loan forgiveness plans set by the federal government do not apply to those working there.
It’s also prudent to have your finances prepared for the move. Ideally, you should already have an emergency fund ready to pay if the unexpected occurs. For example, if you suddenly lose your job, you’ll still have many months of payments you can give so that your credit score won’t take a hit.
Aside from that, always check your debt-to-income ratio. The lower it is, the better your chances of staying diligent with payments over time. It won’t be long before you pay off the loan if you have prepared in advance.