Risks Associated With Refinancing a Student Loan
Refinancing a student loan can help you save on interest, but is not always ideal. When deciding if this is a good option, it is helpful to know the risks associated with refinancing. The Hero student loan mitigates some of these risks.
As we told you earlier , refinancing is the process of converting your current loan to a new one with a completely new set of conditions, rates and small print.
This can be a great option for saving money , but before you get down to business, there are some risks to consider:
When you refinance federal student loans (including subsidized and unsubsidized direct loans, PLUS, Perkins, etc.), you replace them with a new private loan. This means that you will no longer be eligible for any federal loan benefits; this can mean an inflexible repayment structure for many borrowers.
The biggest loss could be in the form of losing the opportunity to sign up for an income- driven repayment plan that caps monthly payments as a percentage of your income … When it comes to refinancing your student loans, know if you will be ditching fixed interest rates. benefit of variables. Of course, this is a gamble – it can end up saving you a lot of money if the stakes are kept low. But they can also grow, which will cost you dearly in the long run.
Bottom line: This decision should not be taken lightly, so do your research and understand what you are getting yourself into. Student Loan Hero offers some additional tips at the link below.
What are the risks of refinancing a student loan? | Student loan hero