A student loan is a loan used to finance your education. Since most students are young people, it is obvious to assume that most student loans are given to young people.
Because we are young when we get our first student loan, we often don't now exactly what job we will get when we graduate, and whether or not we will be able to repay the student loan.
Most students graduate, get a job, and are able to repay their student loans. Unfortunately for some students their life does not unfold exactly according to plan. They may not get the great job they had hoped for, and they may not have the money to repay their student loan as quickly as they had hoped.
It may be necessary for those students to try to consolidate a student loan by getting a debt consolidation loan to repay your student loan.
What does it mean to refinance a student loan?
To refinance a student loan, also called a school loan consolidation, means one of two things.
First, it can mean re-negotiating the terms of the existing student loan with the existing student loan lender. For example, you may have a loan requiring you to repay $500 per month for the next three years. You may be able to refinance your student loan by re-negotiating the terms of the loan with your lender, so that you only pay $300 per month, but over a longer period.
In many cases the lender will agree to this re-negotiation, because since you will now be paying for a longer period, they will earn more in interest. Of course you have to decide if the reduced monthly payment is worth it for you, because in total you will end up paying more money.
The second method to refinance a student loan is to get a brand new debt consolidation loan. In this case you are not consolidating credit card debts; you are consolidating or refinancing your student loan.
Here's an example: Assume you have two student loans, one for $10,000 and the other for $15,000, and your are supposed to repay them over the next three years. You are finding it tough to make the full payments on these loans. Now that you are finished school, the student loan lender wants to get repaid as fast as possible, so your monthly payments are more than you can afford.
If you have a good job, it might be possible for you to approach a new lender, such as your bank or credit union, to refinance your student loan into a new loan. The new lender may give you a $25,000 student loan debt consolidation loan to allow you to repay your two existing student loans.
Notice that your total debt has not decreased. You still owe $25,000. However, you now have one monthly payment instead of two, and you may have also reduced the interest rate you are paying. It may also be possible to get a five or even ten year term on your new debt consolidation loan, so your monthly payments are much lower than what you were paying on your original student loans.
If your credit is good but not great, a cosigner or guarantor, such as a parent, may be necessary to refinance your student loans.
If you have more student loan debt than you can handle, consider your options to refinance your student loans through a debt consolidation loan to lower your interest and lower your monthly payments.