Refinance student loan already consolidated
The exhorbitant fees structure has compelled student and parents to borrow loans from various sectors to meet the college expenditure. The repayment of these loans begin as soon as the student finishes college. Managing various loans with heavy and varied interest rates is a big burden for the student especially if they do not land up in a job which helps them not only to maintain a reasonable lifestyle but that also enables them to pay back these loans.
In order to help the student the Congress had introduced the option of consolidating the student loans in the year 1986 to reduce the burden of repaying various loans once a student leaves college. Under this scheme the student can close all the existing multiple loans at different interest rates and open one new loan with a lower fixed interest rate. The advantage of consolidating the various loans enables the student to make only one payment during the month and he can also keep track of the loan easily and hence avoid default charges.
However the limitation of this consolidation is that, the consolidation can be done only once, and the interest rate is fixed. Hence if the interest rate gets lower, after consolidation of the loans the student will not get the benefit of the low interest rate and he continues to pay the interest rate fixed at the time of consolidation. It is here that the refinancing of the consolidated loan plays a big role.
When refinancing a student loans there are a lot of things to consider, first of all the types of loans, most of the students have a Federal student loan as well as private loans, and it may be a better option to refinance theses loans separately. The federal loans have much advantage over the private loans. For example the interest on federal loan is tax deductable, and sometimes the loan is written off under certain circumstances and for certain type of services. You can also defer payments on the federal loan if the student goes back to college.
However, there is no such option is a Private loan, these loans are just secured or unsecured and the student has to pay them back just like he pays back any other loan. Therefore, it is not advisable to combine the federal loan and the private loan. The student has to consolidate or refinance the federal loan and private loan separately, otherwise if he takes out a single private loan the federal loan also will be treated as a private loan and he will lose all the benefits applicable to the federal loan.. So if both the types of loans are mixed when refinancing the student may end up paying a higher interest rate on the combined principal than he would if he had financed the two loans separately.
Before going in for refinancing, it is essential that the student goes through his credit history and make sure he fixes all the problems before he ventures into refinancing. It will also be helpful to check out the list of lenders, because each lender has different set of requirements and compare and choose the lender whose is most suitable.