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When refinancing a student loan doesn't make sense

 


"I'm very cautious about recommending people roll over federal loans to  private loans because they're giving up," Minsky says. There are many benefits and protections that a federal student loan may qualify for: death or disability relief, default resolution, and deferral or grace options. Federal student loans may be subject to a repayment plan based on your income and loan allowance if you make a qualified monthly payment while working full-time for a qualified employer. I have. 

 It has a lot to give up-and if you can dramatically lower your interest rates or repay your loan immediately, it makes sense to go that route. Nonetheless, Minsky recommends mitigating some of the risks with fully funded emergency funding and appropriate life and disability insurance. 

 Instead of refinancing a federal student loan, you can use the federal student loan consolidation program. Consolidating federal loans retains all the benefits, but  interest rates are a weighted average of  previous loans.  Mark Kantrowitz, vice president of research at SavingforCollege.com, said interest rates will not go down, but there are other benefits as well. 

 Integration brings all loans together into one manageable payment. In addition, the integration may extend the repayment period and reduce monthly payments. As with refinancing a personal loan, keep in mind that rolling over a loan will increase your long-term interest payments.

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