MarksJarvis: Refinancing student loan payments has some risks

[Omaha Steve]

http://www.omaha.com/money/marksjarvis-refinancing-student-loan-payments-has-some-risks/article_a2e2b9b4-1f2d-5796-8a86-6a2f78df0511.html

POSTED: MONDAY, JULY 6, 2015 1:00 AM
By Gail MarksJarvis / Syndicated columnist

Each year I get about 1,000 questions on financial matters and thought it would be a good idea to share some of them, and my answers, from time to time in this column. I will pick the ones that I think apply to the greatest number of readers or are particularly interesting. Please send me questions, but understand that I cannot respond or answer all of them.

Q: Two years ago I finished my MBA and must pay back $150,000 in student loans. I have a good management job and can make the payments. But they’re huge. I feel pressured from them and think about what would happen in a recession or if I wanted to take a position with a lower salary. I’ve received solicitations on refinancing student loans. Should I consider refinancing? All my loans are federal student loans, mostly Graduate Plus at 7.65 percent.

A: You might be able to reduce the interest rate by refinancing, but there’s a trade-off that could provide even more pressure on you. Your loans are federal student loans, which is important for peace of mind. If you lose your job, or have an accident and become disabled, or have to take a job that pays you too little to cover payments, the government will provide relief. Depending on your ability to pay, you could escape payments for a while, reduce your payments temporarily, or even have a portion of the loan forgiven if you end up in certain public service or teaching jobs or haven’t been able to pay the loans off entirely after many years. See studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation.

If you refinance, you will no longer have federal loans but a new loan from a private lender, and banks and other private lenders don’t give relief in tough times. They may offer some inducements to work with them, but private lenders typically are far less benevolent than the government.

FULL story at link.

[missingthebigdog]

1. On the other hand

Refinancing the loans through a private lender would remove the government as guarantor, thus making them dischargeable in bankruptcy.