How refinancing your student loan can “increase your cash flow”

Refinancing student loans can save you money and make payments more manageable. (iStock)

If you’re interested in refinancing your student loan, there is a very powerful incentive: historically low interest rates. You can now save thousands with a student loan refinance. In fact, this is one of the many reasons why refinancing requests have soared over the past few months.

“Prices can’t be much lower, so now is one of the best times to set what may be the lowest interest rate you will ever see,” said Jonathan Howard, financial advisor at SeaCure Advisors in Lexington, Kentucky.

The US Federal Reserve cut interest rates to near zero in early 2020 to mitigate the economic effects of the coronavirus pandemic. This move resulted in interest rate cuts on both government student loans and private student loans. With the Fed’s key interest rate expected to stay low through 2022, this offers an opportunity to save money.

If you want to quickly reduce your student loan debt (and save money is your goal) then you should visit the online marketplace Credible to learn more about the refinancing process. Just fill in some simple information to see how a refinance might affect your loan payment and if it could shorten the life of the loan.

Before refinancing student loans, it is helpful to weigh the pros and cons.

How Can Student Loan Refinance “Increase Your Cash Flow”?

Refinancing can now be useful if you are hoping for a lower interest rate on your loans or want to switch from a variable loan to a fixed-rate loan.

“The biggest benefit is that you can increase your cash flow by refinancing at a lower interest rate,” said Howard. A lower interest rate means less interest will be paid over the life of the loan and you can use more money for other financial goals.

Howard said that among the people who could benefit from student loan refinancing are borrowers who:

  • Good to excellent credit and credit history
  • Constant and secure income
  • Loans outstanding with interest rates higher than what exists in the market today

Even if you don’t have perfect credit (although there are easy ways to improve your credit score), it may be worth considering refinancing if you have someone ready to go along with it. A co-signer with a solid credit history could help you qualify for the best student loan refinance rates.

If you want to know what rates you can qualify for, you can use an online tool like Credible to compare the options of different private lenders. Checking your rates doesn’t affect your creditworthiness.

What are student loan refinancing rates?

Using an online student loan refinance calculator can also help you estimate the expected monthly payments for a new loan. You can also estimate how much you can save at a lower interest rate.

What happens when refinancing student loans?

Student loan refinancing simply means taking out a new loan to pay off your existing loans. In the future, you would make payments for the new loan.

Refinancing student loans is different from consolidation. When you refinance, you will get a new loan from a private student loan lender, ideally with a lower interest rate and monthly payment than your previous loan.

When you consolidate student loans, you are still bundling your existing loans into a single loan. However, this is usually associated with federal student loans and the goal is to streamline monthly payments rather than lowering your interest rate.

Comparative purchases to get quotes from multiple lenders can also help ensure you get the cheapest loan as rates vary. You can use Credible to compare student loan refinance rates from multiple private lenders at the same time without affecting your creditworthiness.


Is It Worth It To Refinance Student Loans?

If you have a personal student loan, a refinance could help you get a lower interest rate if the current interest rates apply. Refinancing multiple personal loans into a single loan could also make it easier to manage your monthly payments. Just keep in mind that if you don’t have a long credit history, you may need a co-signer.

Federal student loan refinancing could also result in a lower interest rate or help you overcome the default, but be aware of the tradeoffs that come with it. If you are hoping for student loan waiver or want to keep deferral and deferral protection, it may be better to try consolidating your loans instead.

The pre-qualification can help you assess whether refinancing is the right step. Use an online tool like Credible to get pre-qualified student loan refinance rates from multiple private lenders.


When shouldn’t you refinance student loans?

Refinancing your student loan can potentially save interest and lower your monthly payments. But it is not right for every borrower.

For example, if you have a government student loan, refinancing into a private student loan means you will lose certain benefits such as deferment and deferral periods. You are also not eligible for federal CARES Act student loans, including the option to temporarily suspend payments.

“Federal loans provide the best consumer protection in the student loan market and offer lending options that are not available in the personal loan arena,” said Howard. “Make sure you don’t lose any forgiveness rules by refinancing.”

The federal student loan cancellation program could help reduce some of your student debt burden. However, you need to sign up for an income-based federal student loan repayment plan, which you can’t do if you refinance them with private student loans.

Also, consider how long it will take to pay off your loans after refinancing. If student loan refinancing means adding more years to your repayment period, you can still end up paying more interest even if you get a lower interest rate.

Don’t Ignore Low Student Lending Rates – WHY YOU SHOULD REFINANCE TODAY

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