The latest student loan refinance rates – and what to consider before refi

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Should You Refi Your Student Loans?

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For 10-year fixed rate loans, the average student loan refinance rate is now 4.86% and the average 5-year variable rate loan rate is 3.85%, according to the site. of personal finance Credible, which examined the rates accepted by borrowers. from lenders on its platform for the week ending May 1. That said, your rates will depend on your credit score and other financial factors, so you may get higher or lower rates than these. You can see the lowest student loan refinance rates you could qualify for here.

Refinancing a student loan means taking out a new loan to pay off an old loan, and in doing so, you can consolidate private or federal student loan debt to take advantage of lower rates and more competitive terms. But refinancing student loans isn’t always a good idea, which is why student loan experts recommend weighing the pros and cons of the process before you pull the trigger.

Advantages and disadvantages of refinancing student loans

Although refinancing may mean accepting a lower interest rate, if you have a federal student loan, you will need to convert the loan to a private loan. In doing so, you lose federal protections, including income-based repayment tools, certain loan forgiveness options, and the current pause in payment and interest accrual put in place due to the pandemic.

So while lower interest rates can yield significant monthly savings, if you think you may be using the protections provided by federal student loans, refinancing may not be the solution for you. you. Indeed, once you have converted your federal loan to a private loan, you can never convert it to a federal loan again.

However, if you have a private student loan, you are not at risk of losing federal protections, so if you have increased your credit score or had a change in your finances that could lower your rate or improve your terms, the refinancing could largely benefit you. Another thing to consider is to shorten the term of the loan, which may increase your monthly payments, but ultimately save you money over the term of the loan because your repayment period will be shorter and you will have less interest to be repaid over a shorter period.

Marketwatch Picks has put together a guide including 5 questions you should ask yourself during the refinancing process and if you are still unsure if refinancing is right for you due to the potential pitfalls involved. And this guide can help you save thousands of dollars when refinancing student loans.

*Prices correct at time of publication.

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