Refinancing student loans can be simple enough; in fact, they can be so easy to get done that people often neglect to look at a few things that could save them quite a bit of money. When you're aware of every money-saving strategy there is to refinancing student loans, you find you can work your percentage down far enough that you'll end up saving thousands over the 15 or 20 years it takes you to pay your loan back.
For instance, were you aware that there is a grace period that banks, credit unions and online lenders offer you right after you graduate? If you go in for your refinancing deal within six months of having graduated, they knock something like a half percentage point off your interest rate. A half percentage point knocked off over 15 years can mean a substantial sum of money saved.
There are other saving strategies out there too. Basically, the standard interest rate they charge you is a function of their unfamiliarity with you. In other words, they charge you a higher interest rate because they're afraid that one day, you'll to stop paying and they'll be left with nothing. They charge you a higher interest rate to make up for the risk they take on doing business with you. You can change all that by being there regular with the way you pay. Set up an auto debit at your bank for the payments to go out automatically every month, and they give you a half percentage point off for it. Pay regularly without ever defaulting for three straight years, and they get so happy they knock another full percentage point off. That can be spectacular saving.
The interest rate they charge you on these students loan isn't a fixed deal. Every year, the federal government revises its interest rates; and usually, financial institutions that hold student loans will revise their rates in step. But not everyone does this. Loans like the Federal Perkins Loan are fixed rate affairs. If you had the forethought to get a fixed rate loan, you may find that when you refinance your student loans, you end up getting a rate that's far higher than what your original student loan charged. In this case, you'll need to do a considerable amount of shopping around to get the most favorable price.
If a couple of your student loans are from a private lender and you have loans from a government student loan program too in addition, you can't ever consolidate these in one plan. Federal and private loans don't mix. Usually, they'll advice you to consolidate your federal loans first and then to arrive at your private loans. Once you know how refinancing student loans works, you'll find that it really turns your financial life around.
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