Are you one of the millions of students who owe thousands of dollars in student loan debt? If so, you may be looking to refinance your loan, or multiple loans in some cases. Over 40 million people throughout the U.S. owe an average of $36,510 on their federal student loans, so it comes as no surprise that borrowers may be in search of relief. If you’re wondering if it’s possible to refinance and save some money with a lower rate or other renegotiated terms of your loan, the short answer is both yes and no.

Refinancing: Federal vs Private

Technically, a federal loan issued by the government cannot be refinanced in the traditional sense (i.e., it would remain a loan issued by the government, only with different terms). Instead, if you pursue this route, your federal student loan would need to be refinanced into a private student loan issued by a private lending institution such as a bank or credit union.

With that, there are important pros and cons to consider before making the switch. Refinancing into a private student loan may lower your monthly payment or interest rate, but there are certain benefits with a federal student loan that you may relinquish, such as access to forbearance or deferment relief, income-based repayment plans or loan forgiveness programs. Because of the impact the coronavirus has had on the economy, there have been many adjustments, such as interest-free payments and loan forgiveness, made by the government to federal student loans and private student loans are not eligible for those benefits.

Consolidation as an Alternative

If you currently have multiple federal student loans and want to retain the protections afforded by government loan programs, there is another option available that can streamline your payments and/or potentially save money in the long term. While refinancing is not offered for federal student loans, consolidation is an alternative that many federal student loan borrowers pursue. Consolidating means that, in effect, all of your smaller existing loans are lumped together into one larger newly issued loan. The new loan will not have a smaller interest rate, rather it will be a fixed interest rate that’s calculated on the weighted average of your previous rates rounded up to the next ⅛%. Another benefit is the ease of making just one set monthly payment. Many borrowers find this to be a great convenience and appreciate the peace of mind that comes with only having to keep track of one payment instead of multiple.

Where to Go From Here

It can be difficult to know what the right decision is on getting help with your student loans, and the answer can be different for everyone. If you are having difficulty managing or making payments on your federal student loans, consider consulting with student loan debt and relief counsel before moving forward on a refinance or restructure. At Debt Legal Defense, our experts are available to help and offer guidance so you’ll be prepared with a plan that fits you best. Call us at 210-468-1008 or contact us online today to learn more.