Student loans are becoming higher and higher with every passing year. The total American student debt was $1.2 trillion in 2013, and the cost of higher education has only gone up since. As defaulting on student debt isn’t legally an option in this country, many students are seeking alternatives to pay back their crushing loans.
Federal student loans typically have high interest rates. In response to this, private companies have seen an opening. Private investors now refinance student loans, offering students lower interest rates. This can work out well for newly graduated students struggling with the high interest rate of their federal student loans.
However, choosing to privately refinance a student loan is a big decision. Once the choice is made, there’s no going back. What this refinancing involves is paying off the existing federal debt by taking on a new, private loan. For those struggling with high interest rates, this can be a blessing. Some private refinancers also offer extensions of loan terms, which will result in lower monthly payments.
However, federal loans offer certain protections these private loans do not. Some federal loans can be forgiven if a borrower is eligible. There are also options for reduced payments and deferment for borrowers who are struggling. Private lenders rarely offer these options. Going through a tough financial time has no impact on what you owe the private lender in most cases.
Student debt is a troubling problem today. Many young adults are working to pay off their loans in whatever way they can, and private refinancing is one path. Ask a student loan lawyer what options are available to help lower your student loan debt problems.