When it comes to refinancing student loans, navigating your options can be tricky and confusing. Here are 6 tips to keep in mind when looking into refinancing your student loans:
Pay your bills on time!
If money is tight, don’t consider skipping payments on any of your bills. This will severely damage your credit score and in the long run make interest rates offered to you increase. Instead, check out your refinancing options to seek a lower monthly payment.
Weigh your options.
If you have federal loans, you should keep in mind that refinancing could disqualify you from potential benefits such as repayment plans and loan forgiveness programs. Take a look at this comprehensive guide to refinancing for more information
Choose the right repayment plan for your budget.
If you can make larger monthly payments, choosing a short term loan will allow you to focus on paying off the principle and minimize the amount of interest you pay overall. For those who can’t make large monthly payments, long term loans are also available. Explore these options here.
Try to make the same monthly payment you made before refinancing.
This will reduce the term of the loan and get you out of debt faster.
Think twice before pulling money from your 401(k) to pay off student loans.
In addition to penalties for early withdrawal, you’ll lose your employer match and could even face an increase in taxes.
Don’t forget to optimize for student loan debt when filing your taxes.
It’s possible to deduct the interest you pay on a qualified loan and claim it as an adjustment to income.