BATON ROUGE, La. (WAFB) - Student loans can be one of the biggest burdens on your checkbook, but right now, some student loan borrowers may be in a sweet spot to save money.
Layne McDaniel, a longtime local certified public accountant and president of the Credit Bureau of Baton Rouge Foundation, says now is an excellent time to consider consolidating or refinancing your student loan debt.
Typically, this is the process of converting a federal government student loan into a private loan or refinancing a current private student loan and taking out a new private student loan at a lower interest rate.
Ultimately, the end goal is to save money on your monthly payments or pay back at a lower interest rate.
Currently, consumer loan interest rates are at a historic low, explained McDaniel. That’s because the Federal Reserve cut back rates as a result of the COVID-19 pandemic.
This means many consumer loans, including some private student loans, are a lot cheaper for Americans.
If you have a government-held federal student loan, you should not consider refinancing right now, according to McDaniel. Many federal government loans receive relief benefits from the CARES Act. Some of these benefits include a zero percent interest rate and suspended monthly payments through September 30, 2020.
Again, these benefits apply to government-held federal student loans and do not apply to FEEL-program federal loans and Perkins federal loans not held by the government. Nor do they apply to private student loans. So, if you have any of these types of loans not covered in the CARES Act, then refinancing or consolidating might be a good idea.
McDaniel says when looking to consolidate, try to restructure your new loan where you have fewer payments than you had before. This will generally save you the most money.
Use online tools, like those on the Consumer Financial Protection Bureau, by clicking here, to review credit company complaints and reviews, and to help you know if you’re heading in the right direction.
Next, McDaniel recommends you ask questions. Ask a lender about flexible repayment options. If you select the default plan, you may be on the hook for other expensive fees. Ideally, you want to consolidate at a lower interest rate than on your current loan.
Use NerdWallet’s student loan calculator, by clicking here, to see if a new loan will actually save you money. Of course, if you want to find something that fits your monthly budget. McDaniel says, typically, a fixed-rate loan with the shortest repayment term that is affordable will save the most money.
And to get the best out of all of this, make sure you look good on paper. You need to have a good payment history, a stable job, and a good credit score – in the high 600s – to refinance your loans. If you’re missing any of these components, you may need to get a co-signer.
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