what experts say to consider

If you have student loans, you may be making offers to refinance that debt. But experts say many don’t see much benefit from refinancing right now, especially in light of the changes underway with federal student loans.

The Mint budgeting app sent an ad campaign on behalf of an advertising partner to users this week with the subject line, “Maybe Now is the Time to Refinance Your Student Loans and Get Up to $ 400.”

Mint emailed users this week on behalf of an advertising partner touting the bonuses available to those who refinance their student loans.

The fine print revealed that the LendKey online loan marketplace would provide payments of $ 400 to those who refinance their student loans through LendKey’s lending partners. But only loans over $ 100,000 would get the $ 400 bonus. Refinancing a loan of less than $ 20,000 would only receive a bonus of $ 100 and those with loans between $ 20,000 and $ 100,000 would be eligible for a payment of $ 200.

Mint said in a statement to CNBC Make It that the email was sent to users who had completed a “student loan” category transaction in the past 90 days, so it is likely that they are paying student loans. private versus federal loans. Refinancing federal loans at this time could mean the loss of protections and benefits.

SoFi, another large student loan refinancing company, offers users $ 10 to verify what would be their refinancing rate. There is no mandate to actually refinance in order to take advantage of SoFi’s offering and the company provides notice to carefully review your loan modifications if you choose to refinance.

Mint’s offering is not uncommon. “Many private lenders offer borrowers a few hundred dollars to encourage them to refinance,” says Mark Kantrowitz, student loan expert. But while a few hundred dollars may seem like a lot of money, many Americans are probably better off skipping these types of offers, especially those with federal student loans.

This is because due to the Covid-19 pandemic, the Department of Education has suspended federal student loan payments until September and waiver of interest rates. “The interest waiver equates to a 0% interest rate. Private refinancing can’t get any better,” Kantrowitz says.

Beyond zero interest and suspended payments, federal student loans offer many protections and benefits that borrowers could lose if they refinance federally guaranteed loans into a private loan, Kantrowitz says. These benefits typically include low fixed interest rates, longer deferrals and forbearances, income-based repayment plans and the possibility of loan forgiveness.

Additionally, if you have federal student loans, you may want to wait to refinance until you get more clarity on a possible student loan forgiveness. President Joe Biden has repeatedly spoken of a $ 10,000 federal student loan forgiveness during his campaign, says Jake Northrup, a certified financial planner and founder of the Rhode Island-based company. Experience your wealth. “There is no harm in waiting,” he adds.

On the other hand, if you have private student loans, they are not eligible for suspended payments or interest relief. Private student loans account for about 8% of the total national debt of $ 1.7 trillion on student loans, according to the MeasureOne Private Student Loans Report released in december.

If you can get a lower interest rate on your private loans through refinancing, maybe now is the time to think about it. This is true even if you have refinanced in the past, not even later than the last year since you usually do not have to pay an upfront fee with many lenders, unlike mortgage refinancing.

“Interest rates have continued to fall, which means you can continue to lower your interest rate and potentially receive cash bonuses for refinancing with certain companies,” says Northrop.

But again, experts warn you want to set yourself up for long-term success. Don’t just look at the bonus, carefully review the terms and conditions to determine if the loan will best serve your long-term interests.

Ideally, you want to consolidate at a lower interest rate than other average payments. But be aware that many lenders require a shorter repayment term to get the lowest fixed interest rates, which can result in higher monthly loan payments, Kantrowitz says. Help, Nerdwallet has a student loan consolidation calculator this can help you determine if the new loan is saving you money.

Ultimately, as with the LendPay offer, make sure you read all of the fine print involved and that you understand all of the terms of any potential refinance deal.

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