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By Stephen Sellner | Citizens Bank Staff
Student loan debt is a hot-button topic for recent college grads. As a result, lots of grads consider refinancing their loans as they search for financial relief.
Still, with so much refinancing information out there, the line dividing true and false can get quite blurry, especially if you’re navigating the differences between federal options and those of private lenders.
It’s time to settle the score with student loan debt myths. Let’s find out what’s fact and what’s fiction.
Fiction. Consolidation enables you to roll multiple federal student loans into a single loan to simplify repayment. Your interest rate on a consolidated loan is determined by a weighted average of the loans you’re combining.
Refinancing, on the other hand, allows you to roll several federal and/or private loans into a new private loan. The new refinance loan will have its own interest rate (determined mostly by creditworthiness), monthly payment, and repayment term. However, refinancing also means you forfeit any benefits formerly associated with your federal loans.
Fact. You can refinance your federal loans, private loans, or both. Federal student loans have benefits like income-based repayment and loan forgiveness. If these benefits are important to you, keep your federal loans as-is and only refinance your private loans. If you have multiple private loans, you can refinance as many as you want.
Fact. You can consolidate federal loans with the federal government. With private lenders, you can refinance federal and/or private student loans.
Fiction. Your refinance loan’s interest rate is determined, in part, by your credit history. If your credit is in good standing, a cosigner might not be necessary. However, a qualified cosigner may improve your chances of being approved or getting a lower rate.
Fiction. Loan forgiveness is a benefit tied to federal loans only. By refinancing, your new refinance loan turns into a private loan. Therefore, you forfeit some benefits of federal loans.
Looking for relief from your student loan debt? Learn about our Education Refinance Loan here.
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