Yes, you can refinance federal student loans. Refinancing your student loans means having a private lender pay off your existing balance by giving you a new loan with new terms. Here are more details about refinancing federal student loans and how to go about the process.
Refinancing Federal Student Loans
Federal student loans help pay for college. At the time you got your existing loan policy, you may not have been satisfied with your interest rates. You may consider refinancing your federal student loans when your current financial situation has changed. Your few years studying in college may have given you enough time to boost your credit score, which means you could get more favorable interest rates with a new student loan policy.
How To Refinance Federal Student Loans
There are three steps to refinancing your federal student loan:
- Shop and Compare Providers: Assess all your options for private student loan providers. Find one with a policy that suits your current financial situation.
- Apply and Sign Documents: Submit your documents to the private student loan provider of your choice. Some private lenders may require you to undergo screening to assess your qualification for their policies.
- Pay Your Old Loan: Be sure to confirm whether your new student loan has completely paid off your federal student loans when you sign your private lender’s documents.
What Happens When You Refinance Federal Student Loans?
When you refinance your federal student loans, you will get a new policy with new terms according to your current credit score and financial situation. You can only refinance your federal student loans through a private lender. The federal government has no student loan refinancing programs. The federal government does have student loan consolidation options, which are different programs altogether.
The private lender will pay off your existing federal student loans through the new policy they give you. You can no longer return your government loans to the federal student loan program when you refinance them through a private lender. Accordingly, you will lose access to the following federal student loan benefits:
- Payment and Interest Waiver: The pandemic prompted the government to freeze existing federal student loan payments and interest. No private lenders have taken student loan relief initiatives.
- Payment Postponement: The federal government has deferment and forbearance programs that help you by pausing your federal student loan payments. This postponement mainly benefits students who face sudden financial issues.
- Repayment Plans: The federal government offers flexible repayment plans that may depend on your income. The repayment program will adjust the amount you pay back according to your monthly salary.
- Loan Forgiveness: There are several federal loan forgiveness programs available to public service workers. If you work in the healthcare sector, teaching industry, or for a non-profit, you will lose access to federal loan forgiveness programs designed for these workers.
- Loan Discharge: Certain federal student loan policies carry loan discharge benefits that may eliminate remaining balances if they meet the correct conditions.
Conclusion: Can You Refinance Federal Student Loans?
You can refinance federal student loans through private lenders. The private lenders will pay off your existing federal student loans by giving you a new student loan policy, which you must pay off according to the new terms. If you are wondering whether refinancing your federal student loans is a good idea, visit our article on the pros and cons of refinancing student loans.