Is this your last chance to refinance at historically-low interest rates? Most federal student loan borrowers will lose government safety nets if they do.
Even with federal student loans in forbearance and talk shifting to prospects for forgiveness, student loan interest rates still matter — and nothing underlines that point better than the likelihood they’ll soon increase.
Chad Pastorius, manager of strategic planning at the nonprofit lender Rhode Island Student Loan Authority, explains that while student loan interest rates may be tied to different factors than typical mortgage rates, the combination of mortgage rates’ trajectory, advance warnings of federal hikes and record inflation sends a good signal of what’s to come for student loans. And depending on the financing model, some student loan refinance lenders have already had to increase rates.
Typically, refinancing for the shortest term available will also come with a lower rate, although that could mean a higher monthly payment. On the other hand, a lower interest rate with a longer loan term could afford you a much lower monthly payment, but may mean higher total repayment costs. More: Will the Fed rate increase mean higher interest on your savings? Maybe, but it pays to shop around.
Federal borrowers who may need payment protection through programs like income-driven repayment, those who qualify for the Public Service Loan Forgiveness program and those with low student loan debt balances should not rush to refinance.
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