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If you have several student loans with high interest rates, you might want to consider refinancing them into a new consolidation loan. By consolidating the existing loans into one you may be able to reduce the financing fees and lower your overall monthly payment. While student loan refinancing is restricted to those individuals no longer attending school, it is also available to those who are in their grace period.

Can You Save Money By Consolidating? Refinancing your student loans when interest rates drop can create a substantial savings for you by possibly reducing your monthly payments and lowering the overall cost of the loan. Consolidation loans are available for both private student loans and federal student loans.

Exactly How Does This Work? When consolidating your existing student loans into a new one, the original lenders are paid off by a new lender, who may or may not be the same financing institution. Using money from the new loan, the lender pays down the debt of the old higher interest rate loans, to replace them with your new one, possibly one with a lower interest rate.

The previous repayment schedules no longer exist. In place of those schedules is a new single repayment plan, possibly with an extended time period. As an example, if your original loans had been set up to be paid back over a five year period, the new loan might be set up to be paid off over ten years. And while the accrued interest paid over the additional five years might add to the overall amount you have to pay back, your monthly payments would be greatly reduced, making the repayment more manageable.

To illustrate this, say the balances of all your existing outstanding student loans add up to $10,000, and have a 6.8% interest rate over five years. The payments for this would equal $197 each month, and over the five year course of payments you would have pay all the principle and interest totaling $11,824. But instead of struggling with paying that monthly obligation you choose to refinance your loans and consolidate them into a new one, with an extended amount of time, say ten years. Even keeping the same interest rate as the old ones, and just giving yourself more time to pay it off, your new payments would be only $115 per month, though the overall total amount of repayment would increase to $13,810.

But reducing the amount of the monthly payment might greatly reduce the monthly strain in meeting your financial obligation. Trading a higher overall repayment amount might be a good decision if you now struggle each month to make the payments.

Does It Make Sense For Me To Refinance? Refinancing your student loans is a good plan of attack when interest rates for student loans is significantly lower than the rate of your existing loans, or when the monthly burden is too high for you to meet. By refinancing and extending the terms out more years can lower your payments allowing you to change the monthly amount to some more workable.

Should you be interested in a consolidation loan, consider consulting with several different lenders, shop for the best interest rates with terms and payments you can afford.

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