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As graduation season approaches, you may notice more and more ads promoting student loan refinance. You may also receive offers from companies offering to lower your rate on your student loans. What does all of this mean to you? Learn what your options are and create the student loan repayment strategy that makes sense for you.

What is Refinancing?

Refinancing means using a new loan with better interest rates and/or terms to pay off an existing loan. Refinancing is commonly used with home mortgages, but can also be a great option for your student loans. Check out When to Consider Refinancing Student Loans for additional insight into potential reasons you might consider refinancing your student loans.

Who Can Benefit from Refinancing Student Loans?

If your goal is to obtain a lower interest rate and ultimately lower the total repayment costs of your loans, then refinancing is worth exploring. This is especially true if you have older private loans that may have a high interest rate, and you feel you may qualify for a lower interest rate now. Some consumers may also want to lower their overall monthly payment. They can achieve this from either a lower interest rate, or by extending the term (i.e., length of repayment) on their loan. Finally, if you have multiple loans with different lenders or servicers, refinancing combines your loans into one. This means you’ll only have to work with one entity for your student loans in the future.

What Types of Loans Can Be Refinanced?

Most companies that offer student loan refinancing allow you to include private loans and federal student loans when refinancing. (Private loans are loans made by a bank or other financial services provider you received to help fund your education. Federal loans (i.e., Direct Loans, Stafford Loans, Perkins Loans) are made by the government.) To qualify, your loans may need to be in their grace period or in repayment to be included in a refinance loan. That means you need to be out of school when you refinance those loans. You can include multiple loans from a number of different loan holders in one refinance loan. Make sure you know all of the student loans you have, and which company or organization is responsible for servicing those loans before refinancing.

Considerations and Cautions Before Refinancing

While refinancing might sound good to you, there are some things you need to consider.

  • Don’t just look at the low teaser rates. The lowest advertised rate is usually available to borrowers with the best credit scores who select the shortest repayment term. These options may not work for your situation.
  • Understand who will actually service your new refinance loan. In many instances, the lender you initially work with may not be the organization you make payments to, or rely on for customer service.
  • If you are considering including federal loans in your refinance, ensure the benefits outweigh any loss of protections or benefits only available with federal loans. For instance, if you include federal loans in a new private refinance loan, you lose access to income-driven repayment plans and the possibility for Public Service Loan Forgiveness that might be available with your federal loans.

The bottom line is, do your research and understand what course of action is best for you. Each person has unique circumstances and concerns, so refinancing may not always be best. You can learn more about refinance loans and other related articles by visiting U-fi.com.

Interested in student loan refinancing? Take the next step toward lower monthly payments.

If you have student loan debt, you have most likely heard the terms “student loan consolidation” and “student loan refinancing”. Although they sound similar and are often used interchangeably, they are actually two different programs. Therefore, understanding these programs and their key differences can help you make better student loan repayment decisions.

Student Loan Consolidation

Student loan consolidation lets you combine one or more eligible federal student loans into one new Direct Consolidation Loan. As a result, the U.S. Department of Education becomes the new lender. As the administrator of the program, they use companies such as Nelnet to originate and service the loans.

Student Loan Refinancing

Student loan refinancing is offered by private (non-federal) lenders to allow student loan borrowers to refinance one or more federal and/or private student loans into a new private student loan. Consequently, the lender of the new private student loan will be a bank, credit union, or other financial institution. Either the lender themselves or entities like Firstmark Services, a division of Nelnet, handles origination and servicing.

Which is Better?

Both programs offer many benefits. These benefits include simplifying your monthly student loan payments, locking in a fixed interest rate, and lowering your monthly payments. However, there may be some drawbacks as well. For example, if you extend your repayment term, you could increase the total cost of your loans. Therefore, you may forfeit current and potential future federal student loan benefits. Also, any incentives attached to your current loans, such as interest rate reductions for automatic payments, are lost.

Comparing Options

The table below provides a side-by-side comparison of several important features of student loan consolidation and student loan refinancing.

Student Loan ConsolidationStudent Loan Refinancing*
LenderU.S. Department of EducationBanks, Credit Unions, and Financial Institutions
Credit Check RequiredNoYes
Upfront FeesNoneMost lenders do not charge any upfront fees
Interest Rate TypeFixedFixed and variable rate options are offered by most lenders
Interest RateWeighted average interest rate of the loans being consolidated, rounded up to nearest one-eighth of 1%Varies. Factors may include the borrower’s and/or cosigner’s credit history; repayment term; interest rate type; highest level of education; and current market conditions
Repayment PlansStandard, Graduated, Extended, and various Income-Driven Repayment plansStandard Repayment
Repayment Term10 to 30 years depending on the amount being consolidated5 to 20 years
Allowable LoansMost federal student loans are eligible. Private loans are not eligibleFederal and private student loans are allowed by most lenders
Interest Rate ReductionRate reduction for automatic paymentsRate reduction for automatic payments. Some lenders offer an additional rate reduction to existing customers with a qualifying account
Ability to consolidate or refinance multiple timesGenerally no, unless additional federal loans are includedYes
Loss of Federal BenefitsSome benefits may be lostYes, including potentially qualifying for Public Service Loan Forgiveness on federal loans
When can you consolidate or refinanceAfter graduation, leaving school, or dropping below half-time enrollmentAfter graduation, leaving school, or dropping below half-time enrollment. Some lenders allow refinancing while in school

* Features represent those of the largest and/or most common private student loan refinancing programs. A specific lender’s features may differ, so be sure to read the program details carefully.

Choose the Right Option for You

While there are similarities between student loan consolidation and student loan refinancing, they are different programs with unique features. Firstly, if you are interested in consolidating or refinancing your current student loans,determine what you want to accomplish. Your goal may be to lower your monthly payments, lock in a low fixed interest rate, and/or lower your overall cost of repaying your loans. Next, compare the federal government’s Direct Consolidation Loan program to U-fi and other private lender programs once your goal has been set. Then, decide if consolidation or refinancing is right for you based on your financial goals and circumstances.

Want to reduce your monthly payments? Learn how to make it happen with U-fi.

Taking out private student loans or refinancing current student loans is a popular option for students. When considering loans or loan refinance, many borrowers initially focus on either the interest rate of the loan or how much their monthly payments will be. This makes sense because they determine how much a borrower pays back over the life of a loan. However, the interest rate and expected monthly payments are determined by several factors. These factors include credit history, current financial situation, future earnings potential, lender costs and desired profit margin, and selected loan repayment options.

Let’s take a look at the repayment options available. Knowing your options can help you when deciding to take out a student loan or to refinance your existing loans.

Repayment Plans

When it comes to private student loans and student loan refinancing, lenders may offer more than one repayment plan. Below are the most common plans you will encounter:

Standard

Standard repayment is far and away the most common repayment plan for private student loans. In Standard repayment, your monthly payments are a set amount. That means you pay off your loan in equal installments over the remaining term of the loan.

Interest Only

With an Interest Only repayment plan, you begin making interest-only payments over a short period of time. Later, you revert to Standard repayment. With interest-only plans, you pay more in interest than with a Standard repayment plan.  Also, your monthly payments are higher than a Standard repayment plan when your loan reverts to full principal and interest payments.

Partial

With a Partial repayment plan, your initial payment amount is set for a period of time. It then reverts to Standard repayment for the remainder of the loan term. The total cost of a Partial repayment plan will also be higher than with a Standard repayment plan.

Deferred

Deferred repayment is when you start making payments at a specified time in the future. Most lenders let you defer payments while you are in school and for six months after you leave school. Deferred repayment is the most costly, since interest accrues while you are deferring your payments. That interest is then added to the principal balance of your loan before you enter your repayment period.

Graduated

While not very common for private student loans, Graduated repayment starts with lower monthly payments that increase over time. With Graduated repayment, you pay more for the loan than with Standard repayment. This is because interest accrues on a higher principal balance over a longer term.

Tip: When lenders offer a choice of repayment plans, they generally charge lower interest rates for Standard and Interest Only repayment. They charge a higher interest rate for Deferred repayment to compensate for the added risk. Choosing to make full principal and interest payments under a Standard repayment plan is the least costly repayment plan available. If you cannot afford to make full principal and interest payments, consider paying at least some amount each month. Whether you make interest-only payments or partial payments, it reduces your overall cost of borrowing.

By exploring your repayment plan options or considering loan refinance, you can find the best option for your financial situation. Whether you choose  In Part II of Choosing Your Private Student Loan Repayment Options, we’ll discuss interest rates and repayment terms. These also affect your total amount paid.

When it comes to student loans, you’ve likely heard the terms consolidation or refinance. You may have thought they mean the same thing. While they’re similar, they are actually two different options for combining your student loans.

Student Loan Consolidation

Direct Loan consolidation is a program offered by the Federal government. This program allows you to combine all of your federal student loans into a single loan. The interest rate for your consolidation loan is a weighted average of all the loans you are consolidating. It is not based on credit, like student loan refinancing. You can also switch your variable interest rate loans to fixed interest rates to avoid paying more interest if variable rates rise. Typically, student loan consolidation doesn’t save you money, but it simplifies your payments into a single monthly payment. You also get to keep your federal student loan benefits, such as income-driven repayment plans and loan forgiveness.

Student Loan Refinancing

Student loan refinancing is a program offered by private lenders. This program combines your federal and private student loans into a new loan with a new term and interest rate. The interest rate of the loan is based on creditworthiness, unlike student loan consolidation. With student loan refinancing, you can pick a term that fits your financial needs and may save you money. However, extending the term of any loan to lower monthly payments means paying more interest in the end. Many lenders offer borrower benefits with student loan refinancing, such as interest rate reductions for auto-debit payments and cosigner release. Keep in mind, if you refinance federal student loans, you no longer have the federal benefits associated with those loans. Find out if student loan refinancing is for you by asking yourself these 6 questions.

Student loan consolidation or refinance can simplify your student loans into one monthly payment. Just remember there are additional unique benefits to both options. Weigh the benefits of each program to decide the right option for your situation. As with any loan, make sure you fully understand all the terms and conditions.

You’ve made your decision. You are going to refinance your student loans. You have done the research. You’ve compared a number of student loan refinance programs. You have completed side-by-side calculations. You know which ones have the lowest interest rates, best repayment options, and the most generous borrower benefit programs. You’ve read the fine print and narrowed your choices down to your top three. But do you know your loan servicer?

Making the Choice

So which one is it going to be? Is it the lender who lists the lowest interest rate? Or perhaps the lender with the repayment plan that allows you to lower your monthly payment the most? How about the lender that offers those tantalizing borrower benefits? The ones that allow you to save hundreds of dollars more when you refinance with them?

Choosing which student loan lender to refinance with can be a difficult decision. While you should definitely consider the overall cost, monthly payment, and borrower benefits offered, there is another very important factor. You need to know who the lender and loan servicer will be after making your new refinance loan; the one you will start making your new monthly payments to.

Who are Loan Servicers?

You may be wondering why this is important. Once you refinance your student loans, many lenders have agreements to sell, or package their loans into financial securities. Thes often go to the highest bidder. The proceeds from the sale then make more refinance loans, which the lender subsequently sells. This happens over and over again. Rinse and repeat.

Lenders Decide

Ok, so the lender sells their loans, but the loan servicer the lender contracts with to manage your account and accept payments has a good reputation, which means you’re good to go, right? Maybe. That’s because the holder of your student loans (either the original lender or the buyer if the loans are sold) gets to decide where the loans are serviced. And once your refinance loan is made, the loan servicer is most important to you, since this is who you will be interacting with. It’s similar to when you buy a TV from a large retailer. The retailer sets the price and sells you the TV, but once you own it, you must contact the manufacturer with any questions or if you need customer support.

Tip: The lender and loan servicer information can usually be found on the lender’s website, in the Application and Solicitation Disclosure every lender is required to present you before you apply for a loan, or on the actual promissory note you must sign. If you don’t recognize the lender or loan servicer, you should call the financial aid office at your school to ask them if they are a reputable organization.

What if the lender doesn’t sell their loans, or package them into financial securities. Everything is fine then, right? If the lender doesn’t sell their loans, or sells them to a buyer that uses the same loan servicer, then you can feel pretty good about things. While there are no guarantees, if the lender uses a reputable loan servicer, then you can feel fairly confident your customer satisfaction is very important to them. The chances that they would jeopardize this by cutting corners with a low-cost, low-quality servicer just to save a few dollars is less likely.

Know Your Lender and Servicer

Knowing who the holder and loan servicer of refinanced student loans are after the loan is made is extremely important. If the lender sells their loans, be sure you know who the buyer is and which loan servicer they use. If you’ve ever had to deal with a company that provides poor customer service, chances are you wouldn’t buy from them again if you didn’t have to. With student loan refinancing it’s even more important, because if you’re unhappy with your loan servicer, the only way to switch is to refinance your loans again.

When you’ve recently entered the workforce, balancing repaying student loans and a budget can be a challenge. This is especially true if you have a standard entry-level salary. As the cost of higher education continues to rise, it becomes increasingly difficult to manage high monthly loan payments. You also need to worry about everyday expenses like rent, car payments, utilities, and groceries. At times, it feels like you have to make a choice between repaying student loans and living your life.

No matter what some newspaper columnists might lead you to believe, defaulting on your loans is never a good idea. Instead, tap into that survival instinct you developed in the classroom. Get serious about repaying those student loans – the smart way. Here are five ways to manage your loan payments as a young professional.

Stay in contact with your loan servicers.

There are generally two categories of student loans: federal and private. Regardless of the category, student loan servicers handles billing, payments, customer inquiries, and other administrative services for your loan. Servicers help you navigate loan repayment systems, find the right repayment plan, and answer your student loan questions. If you don’t know who services your federal loans, you can find out at nslds.ed.gov. This site lists all of your federal loans, along with the contact information for your servicer. To obtain contact information for your private loan servicer, review your lender’s website or call their toll-free number.

Know which questions to ask.

The questions you should ask depend on your loan type. For federal loans, ask if you’re on the right payment schedule for your financial situation. There are a variety of repayment options available. Your servicer uses information about your job, income, and federal loan amount borrowed to help you find the repayment plan that’s best for you. Options include payments based on your current income, or payments that increase periodically over the life of your loan. Whichever option you choose, remember to keep a long-term view when making decisions about repayment schedules. Consider the interest implications of any option. Private loans are different. You selected repayment terms at the time of application. Information about your private loan rates, terms, and repayment can be obtained from your private loan servicer. They can also offer information and support throughout the life of your loan.

Consider consolidation.

Depending on what type of loan(s) you have, consolidation may help you save money. If you have one or more federal loans, a federal consolidation loan can combine your loans into a new loan with a blended interest rate. It may also extend your repayment period. When you talk with your servicers, you may want to discuss this option. You can find more information about consolidation and federal loan repayment at the Federal Student Aid website.

Private student loan refinancing allows you to replace your existing private and/or federal student loans with a new private student loan under different terms. If you are repaying multiple student loans, want to lower your monthly payment, or if your interest rates are higher than you would like, you may want to consider private loan refinancing. Private student loans require a credit check, and you can often get a lower interest rate with a cosigner. Most lenders provide loans with no application or origination fees. You may also prepay your loan at any time without penalty. You will have the opportunity to see your rates and terms before finalizing your loan.

Do your research.

If you have student loans with high interest rates, refinancing with a private loan can be a great option. They may allow you to save money over the life of your loans with a lower interest rate. But private loan refinancing isn’t right for everyone. For instance, if you have federal loans that carry special repayment benefits or forgiveness programs, it might be best to explore federal loan consolidation. There are unique benefits to both, so be sure to do your research.

Stay current on your monthly student loan payments.

The consequences of defaulting on education loans are very serious. If you’re not able to make your payments, contact your student loan servicer before becoming delinquent. They have trained representatives who can help you find the best solution for your needs. If you lose your job or experience other difficulties, you may be eligible for deferments or forbearances. These mean you may stop making payments for a period of time.

When it comes to repaying student loans, there are many ways to build a healthy financial future. Staying in touch with your servicer and being aware of the options available to you are some of the best ways to make smart financial decisions.

Should I consolidate or refinance my student loans? At U‑fi Student Loans, we get this question daily and it’s one every person with student loan debt should ask themselves. Of course, the answer depends on your specific situation and is not always clear cut. In many cases it makes total sense, while in others it may not, or at least not right now.

Before thinking through the different options available, you should understand the difference between consolidate and refinance.

Consolidating your student loans through the federal government’s Direct Consolidation Loan program means combining several loans into one new loan. The new interest rate is the weighted average of the interest rates from the loans you are consolidating. With refinancing, you are actually paying off your federal and/or private student loans with a new private loan. This new loan has a different interest rate and loan terms.

Now that you understand the basic difference between consolidation and refinancing, here are some things you should carefully consider:

1. Do you want to save money by lowering your overall costs?

Many people know loans with a lower interest rates generally cost less than loans with higher interest rates. But many don’t realize students who borrowed between 2006 and 2013 could substantially lower the interest rate on those loans. They may be eligible if they have good credit and refinance their loans during today’s historically low interest rate environment. Even if you’re comfortably making payments, lowering your interest rates can save on your total loan costs.

2. Are you making multiple monthly payments?

Are you making more than one monthly payment and want to simplify your life? Loan consolidation or refinancing can help. However, if you have federal and private student loans and want only one monthly payment, your only option is refinancing. You cannot consolidate private loans through the Direct Consolidation Loan program.

3. Do you want to switch your interest rate from a variable to a fixed rate (or vice versa)?

When you took out your student loans, each loan had either a fixed or variable interest rate. Understanding what type of interest rates you have is important. It affects whether or not your monthly loan payments will fluctuate over time. If you have fixed rate loans your monthly payments will remain constant. With variable rate loans your monthly payments may change over time.

Do you plan to pay off your loans in a short period of time? A variable rate loan could be a good option. The initial interest rate on a variable rate loan is typically less than on a fixed rate loan. However, the longer the repayment term, the greater the opportunity for variable interest rates to fluctuate. If rates rise, your monthly payment and total costs will rise as well.

4. Do you want to lock in a fixed monthly payment with a low interest rate?

If you prefer predictable payments that won’t change over time, then a fixed rate loan may be your best choice. With the current low interest rate environment, you could lock in a low fixed interest rate by refinancing. Your rate depends on several factors. These factors include your credit, income, education level, repayment term, and whether or not you have a cosigner.

5. Are your monthly payments weighing you down?

Are you having trouble making your monthly student loan payments? Do you just want to free up some extra cash? Refinancing your loans can be a great option. Most private loan lenders offer repayment terms up to 20 years, with some like U‑fi offering a 25-year option. By increasing the length of your repayment period, you can lower your monthly payments. However, loans with longer repayment terms typically have higher interest rates than loans with shorter terms. You will likely end up paying more in total interest over the life of the loan.

6. Will you lose any features or benefits if you refinance or consolidate your loans?

Refinancing or consolidation means you are replacing your loans with a new loan. It’s important to understand you might lose benefits tied to your original loans. For example, federal loans offer a variety of deferment, forbearance, and repayment options. These benefits assist borrowers who cannot afford their monthly payments. Federal loans also offer benefits to military service members that may not be available with private loans. Your current loans may also have borrower benefits such as an interest rate discount. Be sure to compare the features and benefits of your new loan with any you might be giving up.

If the time is right to refinance your student loans, take a moment to review several lender websites. Create a short list of top candidates. Call each candidate and ask them any questions you have, including what you will need to apply. Make sure you are speaking to the actual loan servicer. This is who you will interact with over the entire life of your new loan.

Think you’re a good candidate for student loan refinancing? U-fi is ready to help. Get started today!