BATON ROUGE, Louisiana (WAFB) – Student loans may be one of the biggest burdens on your checkbook, but right now, some student loan borrowers may be in an ideal position to save money.
Layne McDaniel, a longtime local accountant and president of the Credit Bureau of Baton Rouge Foundation, says now is the time to consider consolidating or refinancing your student loan debt.
Typically, this is the process of converting a federal student loan to a private loan or refinancing a current private student loan and taking out a new private student loan at a rate of lower interest.
Ultimately, the end goal is to save money on your monthly payments or pay off at a lower interest rate.
Currently, consumer loan interest rates are at an all-time low, McDaniel said. That’s because the Federal Reserve cut rates in the wake of the COVID-19 pandemic.
This means that many consumer loans, including some private student loans, are much cheaper for Americans.
If you have a government-owned federal student loan, you shouldn’t be considering refinancing just yet, 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 until September 30, 2020.
Again, these benefits apply to federal student loans held by the government and do not apply to federal FEEL program loans and federal Perkins loans not held by the government. They also do not apply to private student loans. So if you have any of these types of loans that are not covered by the CARES Act, refinancing or consolidating might be a good idea.
McDaniel says that when looking to consolidate, try to restructure your new loan when you have fewer payments than before. This will usually save you the most money.
Use online tools, such as those from the Consumer Financial Protection Bureau, by clicking here, to review complaints and opinions from credit companies, and to help you know if you are headed in the right direction.
Then McDaniel recommends that you ask questions. Ask a lender about flexible repayment options. If you select the default plan, you may have to pay other expensive fees. Ideally, you want to consolidate at a lower interest rate than 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 that generally a fixed rate loan with the shortest and most affordable repayment term will save the most money.
And to get the most out of it all, make sure you look good on paper. You must have a good payment history, a stable job, and a good credit rating – within 600 – to refinance your loans. If you are missing any of these components, you may need to get a co-signer.
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