Different Types of Student Loans

Student Loan Refinance Rate

There are many different types of student loans available: Federal Stafford, Federal Perkins, Federal Parent PLUS, and various private loans. Each of these loans has their pros and cons, but Stafford loans are considered one of the best and most common options available for borrowers. Upon graduation, many borrowers are interested in learning how to refinance their Stafford loans; this can be a confusing and oftentimes frustrating process, but can provide many benefits and great economic relief to borrowers who may be in financial distress.

Determining the Type of Stafford Loan

There are two basic types of Stafford loan; both are provided by the federal government, but have slight differences. The type of loan will determine how to refinance Stafford loans in the borrower’s favor.

• Subsidized Stafford Loans – monies provided through this program accrue interest while the borrower is enrolled at least half-time in a school, but the government pays this amount. This type of loan is available based on financial need and FAFSA results.
• Unsubsidized Stafford Loans – monies provided through this program accrue interest while the borrower is enrolled at least half-time in a school, but the government does not pay this amount; the borrower is solely responsible for repaying this amount. This type of loan is available regardless of financial need.

Deciding when and how to refinance Stafford loans is a vital step a borrower must take to gain control of their financial future; he must consider benefits, terms, eligibility requirements, and application processes in order to successfully negotiate this financial transaction.

How to Refinance Stafford Loans: Terms & Benefits

There will be different interest rates connected with each type of Stafford loan; both are typically fixed rates, but can be variable rates tied to a benchmark that will determine your interest rate on a yearly basis.

Look for a refinancing plan that allows for a no payment option that lasts six months or more after graduation or for the same amount of time if the borrower is enrolled less than half-time in school. It is crucial that the borrower have enough time to establish roots and obtain a well-paying job so that he may begin his repayment plan on steady financial ground.

Depending upon the program, repayment periods can last anywhere from 10-25 years; be sure to ask questions and be fully aware of how the length of the repayment period will affect both your payment amount and overall repaid amount. Longer repayment periods allow for lower payments, but the borrower usually ends up repaying significantly more than he initially borrowed.

Also, it is important to remember when determining how to refinance Stafford loans that interest is tax-deductible; use this tidbit of information to benefit your situation.

Eligibility Requirements

Of course, the actual application conditions will vary across institutions, but there are a few constants to keep in mind when deciding with which company and how to refinance Stafford loans. The borrower must be a US citizen, permanent resident, or an eligible non-resident. Also, the borrower must be in good standing with existing federal loans; if you are in default or delinquent on any type of loan, it can affect your chances of receiving refinancing assistance. Lastly, the borrower must have completed and filed the appropriate FAFSA forms.