It seems like ages ago when you graduated college, but student loans are still tagging long. You can refinance student loans into your mortgage, but there are considerations. Have your student loan information ready before shopping for refinance options. Here's what you need to know before deciding how to deal with lingering student loans.
Student Loans and Mortgage Refinance: Roll Education Debt into Your Mortgage
Refinancing your mortgage to pay off student debt can provide potential benefits – including lower interest rates and the convenience of paying fewer bills each month. In order to qualify for cash out mortgage refinancing, you'll need sufficient home equity and credit scores. Refinancing rates vary, so it's important to shop multiple refinance quotes to find your best option. Refinancing involves replacing your current mortgage with another mortgage; you'll pay closing costs on your new mortgage and adding student loans into your refinance amount means you'll pay interest on a higher loan balance. Comparing your current student loan rates and payment amount to prospective refinancing terms can help you determine if consolidating student loans into a new mortgage is your best option. Using online mortgage calculators can help you consider how or if refinancing can help reduce the cost of student loans.
Another consideration before rolling student loan balances into a new mortgage is the type of student loans you have. If your education loans are federal student loans or guaranteed by the U.S. Department of Education, your loans may be forgiven in the event of your death or other specific circumstances. This may not be the case if you have privately funded student loans that were borrowed through a bank or other financial institution.
Consolidate or Refinance Student Loans: Know Your Options
Refinancing your mortgage may not be an option for dealing with student loans, but consolidating multiple student loans can help streamline bill paying and may provide a lower interest rate than you currently pay on some or all of your education loans. The Department of Education offers consolidation loans for federal direct education loans and eligible loans backed by the government, but a federal consolidation loan may not lower your current loan rates by much. Federal consolidation loans carry interest rates based on a weighted average of the rates on your current student loans. If you've already consolidated your student loans or are looking for significantly lower rates, other student loan refinance options may be available. You may save on interest by refinancing your loan balance with an unsecured personal loan or debt consolidation loan. These options can also work if you don't own a home or have enough home equity to roll your education debts into a new mortgage.
When comparing loans, it's easy to focus exclusively on interest rates, but don't forget to compare lender fees and costs. Make note of questions related to loan quotes you receive and contact lenders to address any concerns. You'll want to be certain of what types of education loans you currently have and the interest rate for each. In some cases, such as with federal direct loans, the rates can change each year. Taking time to research refinance options can help you find your best option for managing the cost of student loan debt.