Workers Credit Union is committed to providing tools and resources that help college graduates and parents understand student loan refinancing. We will go over the difference between refinancing and consolidating student loans, as well as the types of student loans available. Let’s get started.
What types of student loans do I have and where can I find them?
Keeping track of your student loans isn’t easy, especially if you’ve taken out more than one. Luckily, it’s not very complicated to track them down if needed. You can easily find out what you owe in federal student loans by visiting the National Student Loan Data System (NSLDS).
Private student loans can be found by contacting your school’s financial aid office or the original lender. If these options do not work, you can find your private student loans by reviewing your credit report at AnnualCreditReport.com. You can receive one free annual credit report from each the three major credit reporting agencies, Equifax, Experian and TransUnion.
Understanding borrower requirements – will I need a co-signer on a refinance loan?
Generally, lenders may require a borrower to have a 24-month employment history, a proven annual income, and three or more years of positive credit history. In addition, lenders may have a debt-to-income requirement which means they want to see how much money you pay out versus what you have coming in. Having a co-borrower with a longer credit history may result in having better terms and interest rates. However, the co-borrower should be aware that he or she is also deemed responsible for the loan and thus, it will also affect their credit.
What is the difference between refinancing and consolidation?
Refinancing is a revision of your debt’s terms and payment schedule. The loan balance could stay the same but the length and interest rate will be different. This could result in a shorter or longer repayment term with a higher or lower payment depending on your intent.
Why would I refinance my student loans?
- Get a better interest rate. You may have started with a high interest rate and now that you have built up a credit history your credit score may have increased, which means you could qualify for a lower interest rate.
- Remove a co-borrower. To originally qualify for the loan, you may have had to add a co-borrower. Someone who had a stronger credit history to meet certain requirements for the loan. Now that you have been paying on your student loans your score may have improved qualifying you to be a single owner of the loan responsibility.
- Lower your monthly payment. Refinancing for a lower interest rate isn’t the only way to get a lower payment. If you are able to extend your remaining balance over a longer term that could possibly bring your monthly payments down. This however may result in paying more interest since you are paying for a longer amount of time.
- Payoff the loan sooner. If you want to pay your loans off sooner you can refinance to a shorter term. This may result in larger payments each month but you will pay the loan off sooner and possibly save on potential interest.
A Direct Consolidation Loan from the federal government allows you to consolidate (combine) multiple federal education loans into one loan. The result is a single monthly payment for your federal student loans at one interest rate instead of multiple payments.
If you are looking for options for student loan refinance, or are wondering how much you could potentially save by refinancing, check out our refinance calculator!