Whether you should refinance student loans depends on your situation. You should refinance your student loans if:
You’re in a good financial situation. Do you have a higher income or credit score? If so, now would be a good time to refinance your student loans.
You have private student loans. Refinancing when you have private student loans has little to no downsides, as long as you can secure better terms. If you have private student loans, it might be a good move to refinance.
You don’t need federal student loan benefits. If you refinance federal loans, they won’t be eligible for benefits like loan forgiveness and student loan relief. If you don’t think you’ll ever use the federal student loan benefits and you can secure better terms by refinancing, it’s probably a safe bet.
You would save money. There is no reason to refinance your loans if you can't lower your total repayment costs or lower your monthly payment. To find out how much you can save by refinancing your student loan(s), simply complete the two-minute Sparrow application.
Although there are many benefits to refinancing your loans, it may not be for everyone. There are specific benefits of a federal student loan that a private refinance loan may not offer:
Loan forgiveness: If you refinance a federal student loan to a private student loan, your refinanced loan will no longer be eligible for federal student loan forgiveness. Federal student loan forgiveness programs, such as Public Student Loan Forgiveness (PSLF), are only applicable on federal loans.
Deferment: Refinancing can restrict the options you have to postpone your payments in the event that you lose your job or fall into financial hardship. Private lenders’ deferment policies vary.
Income-Driven Repayment Plans (IDR): Federal loan holders can apply for an IDR plan that reduces their minimum monthly payment and makes it a percentage of their discretionary income. When you refinance, you will be ineligible for any IDR plan.