NEW YORK (MainStreet) — Student loan debt is up to a whopping $1.2 trillion for the country. But defaults are down, and the economy is stronger. This has led to a flurry of offers for student loan refinances. However, if you get into a student loan refinance deal that only looks good on the surface, you could end up paying a lot more in fees with fewer protections than you have for your current loans. So how do you know if student loan refinancing is the right choice for you?
Why Is There a Refinancing Bonanza Right Now?
Mike Sullivan, the director of education with nonprofit credit counseling agency Take Charge America, believes there are a couple of reasons for the current refinance frenzy. One is the oft-stated fact that student loans cannot be discharged in bankruptcy. "Student loan lending is a very low-risk form of lending," he says. "Federal law makes them so collectible that they're easier to collect even than secured loans." What's more, with interest rates so low across the board, student loans can look like a competitive investment for banks.
John Heath, managing attorney with LexingtonLaw agrees. "We're in a much better economic climate than we were six years ago," he says. And because of this better climate, banks are much more willing to refinance a number of loan products, including student loans. So if you're dying inside every time you look at your student loan interest charges, it's time to at least start thinking about whether or not now is the right time to refinance.