Student loan refinancing rates drop to dramatic new lows



As student loan refinancing rates drop, now may be the time to compare borrowing options. (iStock)

In an effort to alleviate some of the economic pressure caused by the coronavirus pandemic, the Federal Reserve chose to cut interest rates to historically low levels in early 2020. The decision to cut the federal funds rate could have a direct impact on your bottom line if you owe private student loans.

Student loan refinancing rates have fallen significantly, Credible said, as 10-year fixed-rate loan rates fell 31% from their peak on April 17. Variable rate loan rates are down 63% from their February 2018 high. If you have private student loans, refinancing now could help save you money and potentially lower your monthly payments.

Are Student Loan Refinancing Rates Going Down?

Fixed interest rates and variable interest rates for private student loans are falling across the board, in large part due to actions taken by the Federal Reserve earlier this year. If you want to take advantage of low student loan refinancing rates to save money, use Credible to compare rates from multiple lenders to see which deals are best for you financially.

HOW TO CHOOSE THE BEST STUDENT LOAN REFINANCING OFFER

In times of economic crisis, lowering the federal funds rate can help encourage consumer spending and borrowing. For example, you may be more likely to take out a car loan or personal loan when interest rates drop because a lower rate can save you money.

When the federal funds rate drops, student loan refinancing rates can follow suit. This is because private student loan lenders set fixed interest rates and variable interest rates for loans based on a benchmark rate. When the benchmark rate drops, student loan rates adjust accordingly. Again, use Credible to see what type of rate you qualify for today.

Is Now a Good Time to Refinance Private Student Loans?

Refinancing private student loans can make sense for several reasons. For example, you might want to refinance private student loans if:

  • You want to switch from a fixed interest rate to a variable interest rate or vice versa
  • You hope to lower the interest rate on your loans to save money
  • You think refinancing a student loan can help lower your monthly payment so your loans are more manageable
  • Your original loans were borrowed from a co-signer and your current lender does not offer a release to the co-signer to withdraw them from the loan

Refinancing student loans could be a good option in any of these scenarios, although it’s important to consider how much you could actually save.

WHY YOU SHOULD REFINANCE STUDENT LOANS NOW, ACCORDING TO AN EXPERT

How much can I save by refinancing my student loans?

With student loan refinancing rates so low, the savings potential is there. But how much you can save with refinancing depends on several factors, including:

  • The new interest rate for which you are eligible, based on your creditworthiness
  • How much are you borrowing and how much you’ve already paid off your existing loans
  • Whether you refinance with or without a co-signer
  • Any fees that a refinance lender can charge

According to Credible, their average borrower saves $ 17,344 by refinancing over the life of their loans. It’s a nice amount of money, but before you apply for a student loan refinance, it’s worth looking at the numbers.

Doing the math with an online student loan refinance calculator, for example, can give you an idea of ​​what your new monthly payment might be if you decide to refinance. Keep in mind that your credit score and your credit history usually play an important role in determining the loan rates and terms for which you qualify. If you have a poor credit history or bad credit, you may need a co-signer to get a loan refinance.

If you are confident in your credit score and history, use Credible’s free online tools to see what rates are available to you. Credible makes it easy to check the rates of different lenders without affecting your credit score. Also, consider reviewing your credit score and history to get an idea of ​​the interest rates you are most likely to qualify for.

HOW TO CHOOSE THE BEST STUDENT LOAN REFINANCING OFFER

Should I Refinance My Federal Student Loans?

Federal student loans receive special treatment as part of the federal government’s efforts to minimize the financial impact associated with COVID-19. For example, borrowers can take advantage of a temporary forbearance period until the end of 2020.

Federal student loans have fixed interest rates that are already low, but you may find an even lower rate now by refinancing with a private student loan lender. This could save you money, but keep in mind that by refinancing federal student loans to private student loans, you lose some protections, such as the forbearance and deferral benefits.

Other than that, refinancing federal student loans may not make sense if you are on an income-based repayment plan or looking for a student loan forgiveness. Neither is an option with private student loan lenders, so you might be better off keeping your federal student loans where they are if you’re trying to qualify for a forgiveness or if you want to keep your payments low based on your income.


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