(WHAS11) -- According to a recent report, 70 percent of the class of 2013 has an average of more than $35,000 in college-related debt, the bulk of that amount is student loans.
In today's Consumer Watch, Good Morning Kentuckiana’s Andy Treinen has a look at one way grads can lower the interest they're paying on that debt.
It's that time of year that U.S. college students are graduating, and with a mountain of debt.
Interest rates are near record lows, so after graduation, borrowers may consider refinancing. Rates on private student loans can be high because they're based on the borrower's credit history, which, for most college students, is limited.
That can change once they graduate, get a job and build their credit profile and switching from a federal to private loan could also mean lower rates, if the borrower has good credit.
The Consumer Financial Protection Bureau is warning borrowers to consider these risks before refinancing:
- Pay attention to the APR, the monthly payment may be lower, but that may only be because it's a longer-term loan
- Some may lose student loan interest tax deduction if the new loan is not considered a student loan
- Most federal loans have fixed rates and if you switch to a private loan with a variable rate, be aware that the interest rate could rise over time
- Federal loans also have benefits that private lenders don't offer, like loan forgiveness for certain professions
- Some borrowers are currently having trouble finding opportunities to refinance
The Consumer Financial Protection Bureau is also recommending policymakers take steps to make student loan modification more widely available.
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