Read this article if you’re looking to refinance your student loans but aren’t sure which borrower benefits you actually need.
Estimated read time 10 minutes.
Refinancing your student loans can slash your interest rates and save you thousands and even tens of thousands of dollars in interest. For those who qualify it’s a no-brainer. You can keep making the same monthly payment and see each payment get you closer to your debt free dream. There are a multitude of student loan refinancing companies out there. So how do you decide which company best suits your repayment style? This article will discuss the various borrower benefits offered by refinancing companies and describe the folks who need them.
Loan Forgiveness Upon Death
This is a borrower benefit attached to all federal student loans. Essentially if the borrower dies the remaining loan balance is forgiven. That means no one can go after your estate or living family members to get the money to repay the balance. Some refinancing companies offer this benefit while others will collect the money from your co-signers or estate. Most refinancing companies have insurance and will go to their insurance rather than dragging the money out of your living relatives.
Do you need to refinance with a company that offers loan forgiveness in the event of borrower death?
If you don’t carry enough life insurance to cover the cost of your funeral and end of life expenses (other debts) plus the cost of your student loan debt you should choose a company that offers the benefit of loan forgiveness upon borrower death. If something tragic were to happen to you it would make an awful situation worse by leaving your family to repay your debt.
Companies that offer loan forgiveness upon borrower death are: Earnest, DRB, RISLA, CollegeAve, SoFi, EdvestinU, and Citizens Bank.
Companies that don’t offer loan forgiveness upon borrower death or offer restricted loan forgiveness upon borrower death are ELFI, CommonBond, iHELP, and LendKey.
Flexible Monthly Payments
Federal loans carry many different repayment plan options. This gives borrowers maximal flexibility to adjust their payments to their financial situation. When refinancing student loans repayment plans are eliminated and you are left with the monthly payment and term of your loan as decided in your contract. Some refinancing companies offer the opportunity to reassess your monthly payment and change it if needed while others remain rigid and adhere to the terms of your loan.
Do you need to worry about the flexibility of your monthly student loan payment?
If you have unpredictable income you may be better off choosing a company that offers more flexibility. It should also be noted that unpredictable income is a reason to consider keeping federal loans instead of refinancing because federal loans offer the most gracious repayment plans and periods of forbearance for financial hardship.
Companies that offer the option to change your monthly payment are: RISLA, Earnest, and iHELP.
Periods of Deferment and Forbearance
Deferment is pausing monthly payments generally without the accrual of interest while forbearance is the ability to pause monthly payments while interest accrues. Generally when refinancing companies offer the ability to pause payments interest continues to accrue on the loan. Education related forbearance and deferment are attached to all federal loans. That means if you enroll at least half-time you’re able to pause payments on your student loans (interest accrues on unsubsidized loans).
Do you need to worry about being able to pause your monthly payments?
If you’re considering returning to school in a way that decreases your monthly income (i.e you stop working or drop down to part time) you need to be sure to refinance with a company that offers this benefit. It will come at a cost as interest will accrue in most cases throughout the period of paused payments.
Companies that offer the ability to pause payments for education are: Earnest, SoFi, CommonBond, Citizens Bank,
Companies that offer the ability to pause payments in the case of financial hardship are: Earnest, SoFi, CommonBond,iHELP, EdvestinU, Citizens Bank
What are the benefits you’ve got to have in order to refinance your student loans? Let me know in the comments below or on the Repayable Facebook page.
Additional resources
My $7,000 Student Loan Mistake
Student Loan Refinancing: A Millennial’s Guide to Earnest
How to Refinance if You’re a Pharmacy Resident
Eight Questions to Ask Student Loan Refinancing Companies
A note about the links to refinancing companies.
The links to the refinancing companies in this article are affiliate links. That means if you follow this link and choose to refinance your loan we will both get money. I want you to choose the company that makes the most sense for you and gives you the best interest rate while also meeting your benefit needs as a borrower.
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