PSA: You May Lose Benefits If You Refinance a Federal Student Loan
If you are mired in student debt , you may be tempted to refinance or consolidate your loan. Basically, it is getting a new, completely different loan to pay off your original debt. When you take out a new student loan repayment loan, you may lose some benefits that you may need later.
Federal student loans provide for certain assistance options such as repayment or deferred payment based on income. We’ve written about these options before , but when you refinance your federal loan, you may lose these benefits. Eventually, you take out a new private loan to pay off the old one, so technically your original debt is gone, and so are the terms.
Of course, you may never need to use these federal aid options, but if you consolidate or refinance your federal loan, you will be at the mercy of your new lender, and their terms are usually worse.
The U.S. Department of Education’s Federal Student Aid website has more information about this process, so if you’re thinking about it, be sure to check out the link below.
Loan Consolidation | StudentAid.gov