Tampa Student Loan and Bankruptcy Attorney Blog — January 26, 2023
As we are getting closer to a repayment start date, I wanted to briefly mention that there are several things that should be considered before choosing to refinance a federal student loan:
- Income Driven Plan availability – the new Repaye program will have an incredibly low payment with ultimate forgiveness that should benefit all but the very highest of wage earners.
- The IDR Waiver program is causing a one time account adjustment to occur this year giving forgiveness credit for any long term extended forbearances as well as complete write off of loans where repayment has exceeded 20 years for undergrad and 25 years for grad loans regardless of payment plan length.
- TPD – Total and Disability discharge availability – while private loans may have a disability insurance, it is still rare and hard to get.
- PSLF – Public Service Loan Forgiveness – nothing in the private arena even comes close to PSLF which is now finally working.
- Death Discharge – Most people aren’t aware that when a federal student loan borrower dies, the loan dies with them – it’s not even probated – this is very different from private loans which are claims that must be paid in a probate process which may prevent an inheritance to heirs.
Why do folks even want to refinance a federal student loan to a private debt? Generally, it’s to save interest. Federal loans on average carry a 6.8% annual rate. Some grad and Parent Plus loans are in the low 8% range. But in our presently high interest environment, this interest savings doesn’t usually exist. Gone are the days where a refinance could be obtained at a low 2-3%. Perhaps one day we may get back to those low rates, but it’s certainly not expected in the near term.
