Let me start out by saying that refinancing student loans is a good move for the overwhelming majority of borrowers who speak with us at DRB. After all, we are able to significantly reduce interest rates.
But what are the exceptions in which you may want to consider leaving your existing student loans in place – even if the interest rate is higher? Here are two scenarios to consider:
- If you are financially stressed and may apply for deferment or forbearance. If you are having difficulty making payments due to unemployment/underemployment or other issues, Federal student loans offer deferment and forbearance privileges that you may lose if you refinance. Deferment generally means payments and interest are frozen for a set period. Forbearance means you can reduce or skip payments, but interest will continue to accumulate. See https://studentaid.ed.gov/repay-loans/deferment-forbearance
- If you qualify for a loan forgiveness programs. Loan forgiveness or cancellation programs are sometimes provided by government agencies to encourage graduates to work in areas of need: such as education, the military or rural healthcare. Again, if you qualify for such a program, you may not want to refinance your Federal student loans as those forgiveness programs will not apply to the new loan. See: http://www.finaid.org/loans/forgiveness.phtml
We work very hard to be sure our borrowers are choosing a solution that’s best for their needs. For example, we generally focus on lending to private sector-employed professionals with higher income and credit qualifications; generally that means people who don’t fit into the situations above.
But it still can never hurt to be sure. So if you are unsure about any aspect of student loan refinancing, just call a DRB Education Finance professional at 1-855-245-0989 or email us at email@example.com.