How can I refinance a student loan or $46,000 I have at 8.5% into a lower rate?
Asked by klholtonI've also heard about student loan forgiveness programs. How is one eligible? I owe a lot of money and don't make that much now. The interest alone is over $350 a month.
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Answered by FinAidGrrl
If you could provide a little additional information, that would help. What kinds of student loans do you have? Have they been consolidated? Are you a teacher? If the loan is private, there isn't much that you can do to lower your rate -- most private loan rates are variable meaning that they change with the market and, sometimes, with your credit. If your loans are federal I have to ask: Are you sure the rate is 8.5%?? Federal Stafford loan interest rates have been capped at 8.25% for years. And the only way your rate would be FIXED that high there would be if you had consolidated when rates were at an all-time high (the last time rates were that high was in 1999). If you haven't consolidated yet, consider doing it right away -- it's the easiest and safest way to (1) lower your monthly payments and (2) lock in a low interest rate while still maintaining the protection of the Federal student loan programs (just make sure you apply for a *Federal* Consolidation Loan). When you consolidate, any eligible, Federal student loans that you have will be lumped into one new loan, your rate will be fixed at today's rate (5.3% if you're consolidating only Stafford loans) and your repayment term will be extended out beyond the standard 10-year repayment term (for a loan of $46,000, you will probably receive 25 years to repay). Extending your repayment term will mean that your monthly payment will be lowered (often significantly). If you have consolidated, the only way that you can re-consolidate is if you... (1) borrow a *new* Federal student loan (probably not a wise decision, financially, as it wouldn't change your overall rate much) (2) if you "have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to [you]," you can obtain a Direct Consolidation Loan, which is the other type of student loan consolidation that the federal government offers. This might be your best option. Just make sure that your current loan is a Federal Consolidation Loan (if it's already a Direct Consolidation Loan, you're out of luck). If it is, check the Dept. of Ed's website to see if you are eligible: loanconsolidation.ed.gov/borrower/beligible.shtml . There's no credit check on these loans, so it can't hurt to try! There are private companies out there that claim to be able to "reconsolidate" any federal consolidation loan. These companies are SO disreputable that I hesitate to even mention them. DON'T DO IT. They're in business only to make money off of you. Many of them don't even deal in Federal Consolidation Loans, so you could end up with a "reconsolidated" private loan with horrible terms and none of the benefits and security of the Federal student loan that you started with. Finally, about student loan forgiveness: loan forgiveness is almost always not an option for someone who has consolidated, so you will need to make the choice between Loan Consolidation and Loan Forgiveness. Before deciding, keep in mind two things: (1) interest rates are on the RISE and scheduled to rise to 6.8% in July, so if you want to consolidate, you should do it before July 1 (2) Forgiveness (a.k.a. "cancellation") of Stafford loans is rare unless you are a teacher in a low-income area. To see if you qualify for teacher forgiveness, read this site carefully: studentaid.ed.gov/PORTALSWebApp/students/english/teachercancel.jsp?tab=repaying By all means, if you qualify, go for it!
If you could provide a little additional information, that would help. What kinds of student loans do you have? Have they been consolidated? Are you a teacher? If the loan is private, there isn't much that you can do to lower your rate -- most private loan rates are variable meaning that they change with the market and, sometimes, with your credit. If your loans are federal I have to ask: Are you sure the rate is 8.5%?? Federal Stafford loan interest rates have been capped at 8.25% for years. And the only way your rate would be FIXED that high there would be if you had consolidated when rates were at an all-time high (the last time rates were that high was in 1999). If you haven't consolidated yet, consider doing it right away -- it's the easiest and safest way to (1) lower your monthly payments and (2) lock in a low interest rate while still maintaining the protection of the Federal student loan programs (just make sure you apply for a *Federal* Consolidation Loan). When you consolidate, any eligible, Federal student loans that you have will be lumped into one new loan, your rate will be fixed at today's rate (5.3% if you're consolidating only Stafford loans) and your repayment term will be extended out beyond the standard 10-year repayment term (for a loan of $46,000, you will probably receive 25 years to repay). Extending your repayment term will mean that your monthly payment will be lowered (often significantly). If you have consolidated, the only way that you can re-consolidate is if you... (1) borrow a *new* Federal student loan (probably not a wise decision, financially, as it wouldn't change your overall rate much) (2) if you "have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to [you]," you can obtain a Direct Consolidation Loan, which is the other type of student loan consolidation that the federal government offers. This might be your best option. Just make sure that your current loan is a Federal Consolidation Loan (if it's already a Direct Consolidation Loan, you're out of luck). If it is, check the Dept. of Ed's website to see if you are eligible: loanconsolidation.ed.gov/borrower/beligible.shtml . There's no credit check on these loans, so it can't hurt to try! There are private companies out there that claim to be able to "reconsolidate" any federal consolidation loan. These companies are SO disreputable that I hesitate to even mention them. DON'T DO IT. They're in business only to make money off of you. Many of them don't even deal in Federal Consolidation Loans, so you could end up with a "reconsolidated" private loan with horrible terms and none of the benefits and security of the Federal student loan that you started with. Finally, about student loan forgiveness: loan forgiveness is almost always not an option for someone who has consolidated, so you will need to make the choice between Loan Consolidation and Loan Forgiveness. Before deciding, keep in mind two things: (1) interest rates are on the RISE and scheduled to rise to 6.8% in July, so if you want to consolidate, you should do it before July 1 (2) Forgiveness (a.k.a. "cancellation") of Stafford loans is rare unless you are a teacher in a low-income area. To see if you qualify for teacher forgiveness, read this site carefully: studentaid.ed.gov/PORTALSWebApp/students/english/teachercancel.jsp?tab=repaying By all means, if you qualify, go for it!
