What's the Deal with Refinancing?

It’s no secret that school is expensive and the stress of paying back student loans can last for many years. You’ve probably heard friends talk about things like student loan forgiveness, forbearance, and refinancing and wonder whether any of it applies to you. Don’t worry, this article is here to help! 

Understanding Student Loans

Even if you tried to save money during school, you are probably like the other 85% of graduates who took out student loans. In fact, the average university graduate has over $80,000 in loans.  

Most people have a mix of both Federal and Private loans. Here’s a breakdown of the kinds of loans you may have.

  • Federal Direct Subsidized (Stafford) Loans: For eligible undergraduates who demonstrate financial need

  • Federal Direct Unsubsidized Loans: For eligible undergraduate and graduate students but eligibility is not based on financial need.

  • Federal Direct PLUS Loans: For graduate students, professional students, and parents of dependent undergraduates. Eligibility is not based on financial need, but a credit check is required.

  • Private Loans: For graduate students, professional students, and parents of dependent undergrads. Have credit requirements set by the lender and may require a cosigner.

Each of these loan types come with their unique advantages and disadvantages. The most important thing to know is that once you graduate, the loans that were best for you during school may no longer be the best for you once you graduate.

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Refinancing 101

When you take out a loan as a student, the lender looks at you and thinks, “I don’t know how likely it is that I’ll get my money back” and charges you a higher interest rate. 

That higher cost is correlated with the risk of the loan. Once you graduate and get a steady income, you’re considered much less risky. Because lenders can see that you are more likely to pay them back, they can reduce the cost to you. But, the cost of your loan doesn’t go down unless you refinance. When you refinance, you take out a loan with a lower interest rate based on your new “less risky” status. 

Should I refinance?

It depends! 

Many graduates find that their new “less risky” status makes them eligible for lower interest rates with private lenders than what they are paying for their Federal Loans. 

In past years the average university graduate who refinanced with Juno has saved thousands of dollars on interest and fees over federal loans.

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However, it’s important to know that Federal Loans have some protections like Income-Driven Repayment Plans and Public Service Loan Forgiveness that aren’t available with Private Loans. 

Carefully consider these programs and if you will want access to them in the future when selecting your loan. The federal government has a loan simulator that you can use to help choose which plan, if any, you may qualify for. Once you refinance your Federal Student Loans, you will no longer qualify for these protections.

When Should I Refinance?

Refinancing Private Loans
If you already have private loans, now is an excellent time to consider refinancing. Interest rates are at historic lows which means you could save a lot of money by refinancing. 

Refinancing Federal Loans
In March 2020, the Federal Government voted to provide the following relief on federal student loans: suspend loan payments and temporarily set interest rates to 0%. This is known as Forbearance. As of January 2021, that forbearance is set to continue until September 30th, 2021.

Many Juno members are waiting until that time to refinance Federal Student Loans. By signing up for Juno, you’ll be notified as soon as that forbearance period expires. This way, you can apply to refinance those loans to save money on lower interest rates. 

How do I get started?

That’s where Juno is here to help. Juno uses the power of group buying to negotiate lower interest rates on student loans. Essentially, it’s a volume discount. They bring together large groups of students and then negotiate with private lenders on their behalf to get members a better deal on student loans than any single borrower could get by themself. 

It’s free to join and signing up doesn’t commit you to anything—they just add your voice to the collective and let you know when they wrap up their negotiations, giving you the option to take the deal or keep your current loan. Members have saved more than $26M in interest and fees so far. 

We recommend all graduates join Juno so that you know what your options are. 

Still have questions?
Check out our Financial Literacy Resources or email hello@joinjuno.com