A lot of students turn to private student loans to help fund their educations. Even if you receive enough federal funding to cover tuition, you might need private loans to cover your living expenses while you study.
According to a recent report , the private student loan market is 7.75% of the total student loan market. That’s a lot of money recent graduates are now working hard to pay off.
For students at public and not-for-profit schools, private loans fill the gaps between federal loans, grants, and any other funding you might receive. For students at for-profit schools, private loans may be the only source of funding available.
Unfortunately, private loans are generally more expensive than federal loans, and they don’t come with federal student loan benefits like deferment and forbearance. And because there aren’t income-driven repayment plans for private student loans, it can feel like there isn’t any relief.
But if you have private student loans, there are steps you can take to make your repayment a little easier. Let’s take a look at some of your options for refinancing your private student loans—and consider whether or not you can get your private loans forgiven.
Can I refinance my private student loans?
People often think they’re stuck with the private student loans they originally took out. The good news is that you can refinance these loans. When you refinance, the private lender you refinance with will pay off the loans you had with your previous lender and issue you a new loan.
This loan will have a new interest rate and new terms. If you have a steady job, a good credit score, and a solid financial profile, you may be able to get a loan with a lower interest rate and better terms when you refinance. And that new interest rate and loan term can mean a lower monthly payment. If you’re feeling flush and thinking about a shorter term, know that will raise your monthly payment for a while, with the upside being paying off your loan sooner.
Can I refinance my private student loans with my federal loans?
Yes, with certain private lenders (the federal government does not consolidate or refinance private student loans). When you refinance, you can essentially combine your private and federal loans. If you’re paying on multiple federal and private loans, refinancing can be a relief because it consolidates all of your student loans into one loan. However, bundling your loans together means losing out on federal loan benefits.
Additionally, some federal loans might have lower interest rates than a private lender can offer. And if you are taking advantage of loan forgiveness programs or income-based repayment plans that come with federal loans, you may not want to refinance and lose access to those offerings. Nonetheless, if you have a mix of both federal and private loans, refinancing can make your repayment journey easier.
Can I get my private student loans forgiven?
Unfortunately, there are no private student loan forgiveness programs that are similar to the federal loan forgiveness programs. If you have federal loans, you might qualify for forgiveness after 120 qualifying monthly payments (or 10 years) under certain circumstances, such as working in public service.
(Or, if you don’t work in public service , you could qualify for federal loan forgiveness after 20 or 25 years of making timely, qualifying, income-based payments.) The only way private loans might be forgiven is in the case of death or disability, and only from some lenders.
If your private loan payments are draining your bank account, consider calling your lender to discuss your options instead of falling behind on payments. You might be able to negotiate new terms that make it easier for you to pay on time. After all, it’s in their best interest to help you pay your loans back, too.
You can also consider private student loan refinancing. In recent years, lenders have begun to offer more competitive refinancing interest rates and benefits. Refinancing might allow you to find better loan rates and terms than the ones you’re currently locked in to.
What should I consider before refinancing?
If you’re thinking of refinancing, it’s likely that you’re doing so with the goals of lowering your interest rates, simplifying your repayment process, and saving money. In order to get a low rate that will make refinancing worth your while, it’s a good idea to take a look at your overall finances before you apply.
Lenders make offers based on a variety of factors including (but not limited to) proof of a stable job, a healthy cash flow, a good credit score, and a reliable history of paying back previous debts. If you need to, take a few months to work on improving your credit score. Doing so could improve your chances of getting a better interest rate.
And if you’re planning on refinancing your federal loans with your private loans, make sure you won’t miss out on federal advantages down the road. For instance, if you plan to return to school full-time, you could be eligible to defer your federal loans while you’re back in school. Once you refinance your student loans, you’re no longer able to defer payment.
When considering you for a refinance, SoFi doesn’t just look at your credit score. We also consider many other factors like your education, career, and earning potential, which might help you qualify for a better interest rate or loan terms.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
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