If you are struggling with repaying your federal student loans, you can consider consolidation, although doing so will not benefit your interest rate in any way. This is because the interest rate is a weighted average that is based on the loans that you already have. While consolidation allows you to alter your terms of repayment, it will cost you more money in the long term. A debt repayment strategy is likely a better choice for taking control of your student loan debt. There are numerous companies that offer loans for terrible credit, allowing you to refinance and possibly obtain a lower interest rate.

Benefits of Refinancing Student Loans

The benefits of refinancing your student loans are explained in detail below:

• Repayment ability. If you know you can pay off your student loans, you can likely find a refinance company that will offer rates in the 3.50 percent fixed, 1.90 percent variable range. Lower interest rates allow you to pay off more of the principle each month and get out of debt faster.

• Credit score. If you have good or excellent credit, you will be able to get a much lower rate of interest.

• Flexibility. You can refinance both private and federal student loan debt and choose exactly which loans you want to change.

• Unemployment support. If you become unemployed, some companies will help you find another job and will even put your payments on pause until you are working again.

• Other perks. In other cases, you may be able to skip a payment once every year and make it up later. You may also be able to shift from a variable interest rate to a fixed one without paying a fee and avoiding origination costs.

Disadvantages of Refinancing Student Loans

While refinancing your student loans may seem like an attractive option, it will be more difficult if you have already missed payments. This is because missed loan payments lower your credit score and make it less likely that a refinance company will help you out. If this is your situation, other factors you need to consider include the following:

• Federal loans offer pay-as-you-earn and income-based repayment plans along with deferment and forbearance, if necessary. Private companies may help you with unemployment or other life issues, but they do not have the same protections the federal government does.

• If you have made 120 qualifying payments toward public service loan forgiveness while working in a full-time position in the public sector, refinancing your loans will result in your being disqualified for forgiveness. This can make your financial situation worse over the long term.

Other Options

In some cases, it can be better to simply pay off your student loan debt as it is. If you are struggling, you can consider borrowing money from family for friends to get you through a rough spot. This is often awkward and embarrassing, but it could be a better option than refinancing, and you will probably make fewer payments. Only you can decide what is best for you and your circumstances.
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