16 Apr I have $70,000 in federal student loans. Should I refinance?

Q. Is it a good idea to refinance federal student loans that are more than $70,000? If yes, how do I get started?
— Feeling poor

A. Crushing student loan debt is a financial challenge for students everywhere, and the problem seems to keep getting worse.

There are several reasons why you might want to refinance your student loans.

First, realize you can’t refinance your loans with the feds. You’d have to move to a private lender. More on that in a moment.

Refinancing will probably lower your interest rate, said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield.

“Since rates seem to have stabilized after four rate increases in 2018, this may be a very good time to refinance,” he said. “Interest rates will vary depending on lender, credit score, debt-to-income ratio and steady, well-paid employment.”

Lowering your interest rate isn’t the only way you’ll find savings.

Stretching your student loan payments from a standard 10-year student loan repayment plan to a longer period may provide you with some monthly cash flow, Gobo said.

By making a change, you’d have flexibility in the lender you choose.

“When you first took out your student loan you were not given the opportunity to select your loan servicer,” Gobo said. “Refinancing allows you to choose a lender based on your needs. This also gives you the opportunity to compare competitive rates.”

A refinance could also help you gain financial independence, Gobo said. That’s because when you first applied for your student loan, you probably needed a co-signer. Your credit may have improved and you may be able to refinance on your own, or find a lender that may offer cosignor release after one year of prompt payments, he said.

Once you’ve decided to refinance, Gobo recommends you research the new lenders to make sure they offer some of the same benefits of federal programs, including access to loan forgiveness and the ability to switch payment plans or receive mandatory forbearance.

But there’s a good chance you will lose those protections by moving to a private lender.

Once you make the move, you can’t move the loan back to the federal program, so weigh your options carefully.

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This story was originally published on April 16, 2019.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.