You may have seen some news articles about “record low-interest rates.” While this is true, the Federal Reserve did announce a couple of rate cuts, this doesn’t apply to the rate of federal student loans and there is no federal refinancing option. Those news articles are likely paid for and written by private lenders to generate business for student loan refinancing.

Look for the words “Sponsored by…” and “Advertising Disclosure” on any news article about student loan refinancing.

When federal interest rates drop, it makes it more affordable for banks to borrow money and ultimately re-lend that money out to the borrowing consumer. Rates for private student loans have dropped, so should you refinance? It all depends on the type of borrower you are.

Refinance Now if You Have Private Student Loans

If you already have private student loans, then now is a good time to shop around for rates. IonTuition includes refinancing offers from LendKey, and we’ve noticed some very competitive rates. By refinancing for a lower rate, you’ll be able to pay more money towards your principal balance, saving money in the long run and repaying your loans sooner. Refinancing can also lower your monthly payment, freeing up funds for other bills.

Refinance Later if You’re a Well-Qualified Borrower

If you have federal student loans, your current interest rate is 0% until September 30th. There are no private lenders offering rates lower than that. Last week, we wrote about some reasons why you should continue making your student loan payments during the interest-free forbearance period. Mainly, your entire payment will go towards your principal balance and you’ll be able to pay down much of your loan. In fact, if you received a stimulus check recently, that might be a good use of that money. If rates are still low in October, then use our repayment calculator to see how much money you can save.

Don’t Refinance if You Have Unsteady Income

There are a number of protections available to federal student loan borrowers that are not provided with private student loans. For example, income-driven repayment plans can lower your monthly payment to as little as $0/month based on your income. The goal of these protections is to help you avoid defaulting on your student loan debt. Also, you’re unlikely to qualify for refinancing if your income and credit score are not ideal.

As always, IonTuition concierge advisors are available by phone or chat to help you find the best repayment strategy for your situation. Contact them today to gain the confidence you’re doing everything you can to improve your financial well-being. May the 4th be with you!