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Managing Finances, Student Loans

Refinancing Student Loans: Is It Right For You?

By Amanda Woidyla

There can be benefits to refinancing your student loans, but it’s not for everyone. So how do you know if it is right for you? Here are a couple of things to consider before refinancing.

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Are your loans federal or private?

To know whether refinancing is right for you, you need to know what type of loans you have along with the different benefits they offer. You can use your Federal Student Aid (FSA) ID to access the National Student Loan Data System (NSLDS®) site to see a list of the loans you have. Federal loans are provided by the Department of Education. A loan from any other lender is considered a private loan.

Federal loans come with benefits that are typically lost when you refinance through any lender other than the Department of Education. Some of those benefits include income-driven repayment plans, interest subsidy or even student loan forgiveness based on specific career choices. Before you refinance, make sure you understand if you will lose any benefits you may be eligible to receive.

What are your current interest rates and what type of rate is it?
  • Interest rates will be either fixed or variable.
  • Fixed rates: Your interest rate remains the same for the life of your loan. Regardless of what is happening with interest rates across the country, your minimum payment will stay the same.
  • Variable rates: Your interest rate will fluctuate based on a predetermined index used to calculate interest rates for loans of many types. Typically, rates adjust monthly, quarterly or annually. This means your minimum payment fluctuates up or down based on your variable interest rate.

Understanding the types of loans and benefits you may have, along with your interest rate options, helps you determine if refinancing is right for you.

Reasons people may refinance.
  • Lower the interest rate, which should result in a lower overall loan cost.
  • Move from variable interest rate to fixed interest rate. This can result in more stability to the payment amount. However, if the new interest rate is higher, this could increase the overall loan cost.
  • Extend the term, also known as the length of time to repay the loan. This typically results in a lower monthly payment but may increase the cost of the loan long term.
  • Simplify repayment so you only need to make one student loan payment each month.
  • Remove a cosigner from the other loan(s) so it is no longer a credit risk to the cosigner.

Whatever your reason, we encourage you to strongly consider any potential loss of benefits and if you will save money by refinancing. If you’re a North Dakota resident, check out BND’s refinancing calculator to see if you can save money by refinancing! Although we can’t advise you on which option is best for you, call us if you need someone to help you figure out the numbers and potential loss of benefits.


Amanda Woidyla

Amanda Woidyla is the University and Student Development Coordinator at BND, which is a long title for “I help students plan and pay for college and plan TO pay for college.” She coordinates College Application Month, North Dakota’s branch of the American College Application Campaign and REALLY likes public speaking. Outside of work, Amanda likes to ride bikes, do yoga and pet other people’s dogs.

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