
Sign up & start saving!
Get our weekly newsletter for the latest in money news, credit card offers + more ways to save
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Updated
You aren’t. You can change your interest rate by refinancing your student loans with another lender. While you need excellent credit to get the best deal, you can also apply with a cosigner who has strong credit to help you qualify for a lower rate. Refinancing can also help you extend your term to lower your monthly repayments — or shorten it if you want to get out of debt faster.
If refinancing is off the table, you can often negotiate your rate down with private lenders. Call up your servicer and make a case for yourself — most are willing to tweak the terms to help you avoid defaulting.
It’s true that refinancing federal student loans means you lose all of the benefits that come with this government-issued debt. But if you’re making a high enough income to afford the Standard Repayment Plan and have good credit, chances are you wouldn’t benefit from income-driven repayments, deferment or even student loan forgiveness. But you could benefit from lower rates from a private lender.
Consider what you stand to lose and if it would actually be a loss before you write off refinancing.
News of the student loan crisis might make you think you should get rid of this debt as fast as possible. Paying off any kind of debt as quickly as you can is generally a good way to save. But if you’re juggling student loans, credit card debt and car payments, you might want to have your student loans take a back seat.
That’s because student loans typically have lower rates and more flexibility if you’re in danger of defaulting than other types of debt. You can change your repayment plan on federal loans at any time without having to refinance. And student loans generally come with more options to pause repayments if you hit tough times.
Consolidating your federal student loans with a Direct Consolidation Loan will never give you a lower interest rate. The rate you get is a weighted average of the interest rate you have on all of your federal loans. That means you’ll pay the same rate or slightly more after you consolidate your loans. If you want to lower your rate, consider refinancing.
You aren’t necessarily stuck with the company that handles your student loan repayments forever. If you have federal loans, you can switch your servicer by taking out a Direct Consolidation Loan to pay off your current balances.
With both federal and private loans, you can also change up your servicer by refinancing. Research your refinancing company’s servicer to make sure you’re making a change for the best by reading reviews and looking up complaints on the Consumer Financial Protection Bureau’s website.
How to switch your student loan servicer
Repayments based on your income are only less expensive if you have a low salary, high loan balance or both. If you’re thinking of making the switch, use the repayment estimator tool on StudentLoans.gov to see how much you’d pay on all plans you qualify for. You might be surprised to find that fixed repayments are actually much less expensive than income-driven repayments — and much less of a hassle.
True, only federal loans are eligible for Public Service Loan Forgiveness (PSLF). But PSLF isn’t the only forgiveness program out there. Federal loans still qualify for more programs, but there are several options that accept private loans — especially if you work in healthcare or law. Some employers also offer student loan forgiveness as a company benefit, which usually doesn’t discriminate between federal and private loans.
You can only qualify for PSLF if you make 120 eligible repayments while on an income-driven repayment plan. This misconception is one of the main reasons why so many PSLF applicants were rejected during the first few rounds.
But there’s one exception to this rule: Congress created Temporary Expanded Public Service Loan Forgiveness (TEPSLF) in 2018, which accepts other types of repayments. However, 99% of the first round of TEPSLF applicants were also rejected.
While PSLF and many other federal forgiveness programs are free, the IRS sometimes considers student loan forgiveness to be taxable income. Often, the program deducts federal taxes from the forgiveness amount before you receive it. You also might have to pay state and local taxes on it.
Student loans might be more flexible than you think. You have options to change your rates, switch servicers and even apply for forgiveness no matter what type of loans you have. You can learn more about how it all works by reading our guide to student loans.
You only have until the end of March to get your next application in.
President-elect Joe Biden plans to extend the pause on federal student loan payments and interest past January 31st — and may cancel some debt.
Smart strategies that homeowners can use to get rid of Private Mortgage Insurance (PMI).
An alternative to high-cost students loans for STEM majors at qualifying HBCUs.
While you can get started on your loan application today — you’ll still need to wait for funding.
No relief planned for borrowers after January 31, 2021 — but there are ways to keep costs down.
You might be able to apply for more funding on your PPP loan, get a second PPP loan or take advantage of a new grant program.
Find out who’s getting checks, unemployment benefits, student loan relief and more.
Loans of up to $50,000 available from this well-established lender.
The next round of stimulus could mean a year of interest-free deferment on federal student loans.