Clark Howard: Refinance student loans at a lower rate

The private student loan market is opening up with the first real chance of offering refinances, or consolidation as it’s commonly called, that I’ve seen in about 10 years.

Earlier this year, The Cleveland Plain Dealer reported a company called Charter One has been advertising an Education Refinance Loan with fixed rates as low as 4.74 percent and a variable rate of 2.31 percent above the one-month LIBOR rate.

Those low rates are contingent on two things: A good credit score and a co-signer. So this offer is of no help if you’re falling behind on debts and your credit is shot.

You can refinance anywhere from $10,000 to $170,000 in private student loans with 15- or 20-year repayment options. Federal student loans are not eligible for this refinance offer. (EDITORS NOTE: A representative from Charter One emailed noting that as of September, they do refinance Federal Student Loans).

Private student loans should still be avoided at all costs. But this option may help you if you’re already stuck in one. Now there’s a new option for refinancing your private student loans from a consortium of credit unions. Visit CUStudentLoans.com and see what’s available.

When borrowing, be sure to first max out whatever federal loans you’re offered. Should your college expenses exceed your level of federal loans, consider going to a cheaper school, picking up extra work, or whatever else you have to do to avoid private student loans.

Additionally, your borrowing for a four-year degree should never exceed your expected first year’s earnings after you start working.

Finally, I always recommend that you start your degree out at a community college and then transfer to a “name school” where you plan to get your degree. You can effectively cut the cost of a college education in half by doing it that way.

Consumer expert Clark Howard’s column appears here each Thursday in conjunction with Deal Spotter, a weekly print section in The Atlanta Journal-Constitution. Find more answers to your consumer questions at Clark’s website.

- Clark Howard — Save More, Spend Less, Avoid Rip-offs — for the Atlanta Bargain Hunter blog

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