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Updated on Monday, November 14, 2016
Rhode Island is one of several states that has launched a student loan refinance program over the last few years. Refinancing your student loans is essentially paying off your current loans (federal or private) with another loan that has a better interest rate. A refinance can save you a bundle on interest. In some cases, it may even lower your monthly loan payment.
What sets the Rhode Island Student Loan Authority (RISLA) refinance program apart from some of the other state-run initiatives is that it’s open to anyone. You can qualify even if you live in a different state.
In this post we’ll cover:
- The RISLA refinance loan terms and eligibility criteria
- The type of student loans you can refinance
- The implications of refinancing federal loans
- Pros and cons
RISLA loan terms and eligibility requirements
RISLA offers loan terms of 5, 10, and 15 years. You can refinance $7,500 to $250,000. This refinance has no origination or prepayment penalty fees.
You need to apply with a co-signer to qualify for the lowest rates this program has to offer.
With a co-signer, fixed-interest rates range from 3.49% to 7.64% APR with auto-pay. If you sign up for direct deposit to make your monthly loan payment, RISLA offers an additional 0.25% interest rate reduction.
As for the RISLA eligibility requirements, you must:
- Be refinancing loans that were used for education
- Be refinancing loans that are in payment status
- Have a acredit score of 680 or above
- Earn at least $40,000 per year.
- Borrowers that reside at the same address must make a combined annual salary of at least $40,000 per year.
- Borrowers that reside at separate addresses, at least one of the borrowers must make $40,000 individually.
Student loans you can refinance with RISLA
You can refinance private student loans and federal student loans through RISLA.
Federal student loans you can refinance include parent PLUS loans, Stafford Loans, and both unsubsidized and subsidized Direct Loans.
Refinancing private student loans
Private student loans can be good candidates for refinancing because rates and loan terms offered by private lenders can vary widely. Some private student loans even have variable interest rates.
Keeping a variable interest loan for a long time can be risky. Variable interest rates can start off very low. The trade-off is variable rates can also increase in the future and impact your monthly payment.
Refinancing a private student loan that has high or variable interest with RISLA can stabilize your payments and save you money.
Refinancing federal student loans
Unlike private student loans, interest rates for federal student loans are set by the government.
For example, the interest rate on undergraduate subsidized and unsubsidized Direct Loans for 2016-2017 is fixed at 3.76%, which is a decent rate. If you took out undergraduate federal loans within the last few years, you may find your interest rate is already close to (or lower than) what RISLA is offering for a refinance.
Federal student loan borrowers who may benefit the most from the RISLA refinance are those with lingering undergrad loans from the early 2000s, and those with graduate or parent PLUS loans. These federal loans can carry an interest rate in the 6% to 8% range. In this case, a refinance with RISLA may be able to get you a lower interest rate.
RISLA has a calculator on its website you can use to check how much a loan refinance can save you. You can access that calculator here.
We also have a student loan refinance calculator at MagnifyMoney you can use to compare costs here.
Should you refinance federal student loans?
Savings is important, but it’s not the only factor to think about when deciding whether refinancing your federal student loans is the right move.
Refinancing your federal student loans can cause you to forfeit student loan borrower benefits like forbearance, deferment, income-based payment, and loan forgiveness.
Here’s a quick summary of these benefits and how they can help you:
- Forbearance and deferment – Forbearance and deferment can postpone your student loan payments for a short period of time while you get back on your feet if you fall on hard times or experience an illness.
- Income-based repayment plans – Income-based payment plans cap your monthly payment based on your income and family size. After 20 to 25 years of making payments within an income-based program, the balance of your loans can be forgiven.
- Public Service Loan Forgiveness – The Public Service Loan Forgiveness Program is an initiative that anyone who plans to pursue a career in public service should consider. If you get an approved public service position and make 120 consecutive loan payments while serving (about 10 years), the remaining balance of your Direct Loans can be forgiven.
One thing to note is RISLA does offer some borrower benefits, including 12 months of forbearance and a payment plan program in certain circumstances. However, the extent of the borrower benefits that you get with federal student loans goes beyond what RISLA provides.
Pros and cons
Pro: The competitive interest rates. If you apply with a co-signer, the RISLA refinance offers low and fixed interest rates.
Con: The lowest rates require a co-signer. You can’t qualify for the best interest rates this program has to offer without a co-signer. We’ll discuss a few lenders below that may offer you a low rate without a co-signer.
Pro: Anyone is welcome to apply. Being a resident of Rhode Island is not required.
Con: Refinancing forfeits student loan borrower benefits. This con is irrelevant if you’re planning to refinance private student loans since they typically offer limited borrower protections anyway. But refinancing federal student loans will cause you to miss out on the protections covered above. Make sure you’re comfortable with the implications of no longer having these perks before moving forward.
Pro: No fees. The RISLA refinance has no origination fee or prepayment penalties.
Should you consider the RISLA refinance?
The RISLA refinance is open to borrowers outside of Rhode Island, so it’s yet another refinance option that students and parents across the country can consider. But it’s also important to shop around before making a decision.
The downside of the RISLA refinance is that the most competitive rates require a co-signer. If you don’t have a co-signer, here are a few other lenders you can turn to that offer low rates:
- CommonBond – Fixed rates starting at 2.83% APR
- Earnest – Fixed rates starting at 2.98% APR
- LendKey – Fixed rates starting at 2.95% APR
- SoFi – Fixed rates starting at 2.99% APR
Keep in mind, the very best rates are given to those with strong credit scores. You may need to work on strengthening your credit history first before getting approved for a low rate on your own with CommonBond, Earnest, LendKey, or SoFI.