EDUCATION
How to approach refi nancing or consolidating student loans
COURIER LIFE, J PS ULY 26-AUG. 1, 2019 27
The average college student can expect to pay
between $10,000 and $23,000 in tuition fees at
public universities depending on if they live instate
or out. Those costs are even higher for private
colleges, with prices starting at $30,000, according
to The College Board, a mission-driven not-for-profi t
organization that connects students to college success
and opportunity. Millions of students and their
families simply cannot afford to pay for tuition and
boarding outright, leaving them to seek out student
loans and other options to fi nance their educations.
Today’s college students can expect to graduate
with substantial debt. According to an analysis of
government data by Mark Kantrowitz, publisher at
Edvisors, a group of websites offering advice about
planning and paying for college, members of the
class of 2015 can expect to have a little more than
$35,000 in student-loan debt upon graduation. In an
effort to make repayment more manageable, many
students opt to consolidate their loans or refi nance
for better rates.
Renegotiating, consolidating, or refi nancing can
help recent grads in various ways. Some grads may
fi nd it easier to work with a single lender, while others
may recognize how much they can save over the
life of their loans if they refi nance with lower interest
rates. But before restructuring their loans, borrowers
should take steps to understand the process
so they can rest easy knowing they made the best decision.
Know the risks. Borrowers who have federal
student loans and are looking for better interest
rates should realize that they may sacrifi ce some
benefi ts by cutting ties with the federal program.
These can include passing up on federal loan protection,
such as deferment and certain loan forgiveness
programs.
Explore the strengths of other lenders. Many
banks are out there looking to do business, but
lower interest rates may not be reason enough to
refi nance. Think about the convenience of keeping
the loan with the bank you currently use for other
accounts. This can make managing your fi nances
much easier. There may even be incentives to keep
all of your accounts with the same bank. Such perks
may include lower interest rates or fee forgiveness.
Some borrowers may want to work with lenders that
specialize in student loans.
Inquire about potential fees. Some lenders
charge fees to transfer loans. Weigh the benefi ts of
paying that fee against the perks of the new lender.
Will you really save money?
Think about interest rates. Rates are usually
separated into fi xed or variable rates. Although
variable rates can start out low, they may increase
incrementally based on the market. Fixed rates do
not vary and can be a safer option if you cannot pay
off the loan very quickly.
Verify your credit standing. Even after all of
the rate advertisements and the assumed benefi ts of
a new loan, loan rates and terms are usually based
on a borrower’s fi nancial health and credit. Be sure
your credit rating is good; otherwise the rate you
end up with may not warrant refi nancing.
Make sure loans are eligible. Not every lender
will take on student loans. Determine your eligibility
before you begin doing all the legwork required
to restructure your existing loans.
Restructuring student loans can benefi t borrowers
in various ways. But borrowers should do their
best to learn the ins and outs of restructuring before
changing their existing terms.