Many students across America have made use of federal student loans to fund their college education, but handling student debt can be complex and stressful. Many students make their repayments and continue to struggle, but refinancing can offer a way to reduce the interest on the student loan, making the debt cheaper in the long run. Those with federal loans, however, must be prepared for a potential loss of benefits and protections if they refinance.
There are now many common options for refinancing a federal student loan with a private company. Firms like First Republic, Earnest, SoFi, and CommonBond all provide such deals, which can often make repayments cheaper. Before you go ahead with refinancing your loan, however, it is important to weigh up the consequences.
Moving a federal student loan to a private lender will result in the loss of the federal loans' perks. One such perk is being able to defer your repayments if you want to go on and attend graduate school after college. This allows you to concentrate on furthering your education instead of struggling to pay down debt. Although some private firms are trying to replicate such deals, they struggle to match the federal loan terms. For example, CommonBond, Earnest, and SoFi all offer payment deferment for those who are unemployed, but options for further education are not yet available.
Refinancing your student loan can save you a lot of money, but it's important to assess whether you are in the right financial circumstances to make this move before going forward.
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