Student loan refinance rates have fallen. What to consider before refi


Experts advise borrowers to weigh the pros and cons of the process before making the decision to refinance.

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Student loan refinance rates fell slightly. For 10-year fixed-rate loans, the average student loan refinance rate fell from a week before to 4.39%, the lowest since March, and average 5-year variable-rate loan rates dipped slightly to 3.78%, according to Credible’s latest rates for the week ending April 17. You can see the lowest student loan refinance rates you could qualify for here.

How does student loan refinancing work?

When refinancing student loans, a borrower consolidates private or federal student debt into a brand new loan, ideally with more competitive rates and better terms – effectively taking out a new loan to pay off old loans. As simple as it sounds, refinancing student loans can be tedious. That’s why experts advise borrowers to weigh the pros and cons of the process before making the decision to refinance.

Advantages and disadvantages of refinancing your student loans

Borrowers with federal student loans face a tough decision when it comes to refinancing because even though they may qualify for a lower interest rate, the only way to refinance a federal loan is to convert it to a private loan. During this process, a borrower loses federal protections such as income-contingent repayment and loan forgiveness options. And federal loan payments and accrued interest have been suspended due to the pandemic. This means that if you plan to use any of the protections given to those with federal student loans, you may want to reconsider refinancing, even if you might get a lower rate.

However, there are far fewer issues for private borrowers. Since your loans don’t have federal protections, you’re in a much better position to take advantage of lower rates (you can see the lowest student loan refinance rates you could qualify for here) or any change in your finances that would lower your interest rate or shorten the term of your loan. This could save you a significant amount each month and for the duration of your loan if you manage to secure a lower rate and better terms. Note that while a shorter loan term will increase your monthly payments, this decision will save you more on the loan term because your repayment term will be shortened.

If you’re still on the fence about refinancing student loans, MarketWatch Picks has put together a guide with 5 questions you should ask yourself during the refinance process. Although you can save thousands of dollars when refinancing student loans, it’s important to consider some pitfalls that can affect your decision.

*Prices correct at time of publication.

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