Photo by thecrazyfilmgirl 
Refinancing your student loans can be a super smart move. It can save you a lot of hassle in having to deal with multiple payments, it can lower your monthly payments, and it can save you a ton of money over the life of your student loans.
But, not all student loan refinance offers are quite what they seem.
As with most financial markets, there are plenty of legitimate lenders and business–but there are also organizations that prey on those who aren’t familiar with the market.
If you’re in the market to refinance your student loans, there are a number of ways you can protect yourself from falling victim to a company that doesn’t have your best interests in mind. Here are just a few red flags to look out for.
1. Never pay a loan origination fee
The first red flag is paying an origination fee. If you’re ready to refinance your student loans and the lender asks you to pay an upfront fee to originate your loan, watch out!
Legitimate lenders won’t expect you to pay a fee just to originate your loan. And, if the one that you’re considering working with asks you to, then it’s time to shop around for a new lender.
2. Never pay an early payment or prepayment penalty
Another red flag is early payment penalties. If you’re hoping to pay your loans off, there is nothing more frustrating than making that final payment and then finding out that you’ll owe a penalty for paying off your student loan before its full repayment term.
Be sure to ask way in advance if there is an early payment or prepayment fee. And if there is, you should probably find a different lender.
3. Don’t pay for free advice
Another common way for unscrupulous organizations to take advantage of student borrowers is to charge them for “advice”, which amounts to basically reading them the information that can be found on the U.S Department of Education’s website for federal student loans.
There are plenty of legitimate lenders out there that will be happy to answer questions related to refinancing. And you can also contact your federal loan servicer for information related to your loans more specifically.
4. Only the federal government offers true student loan “forgiveness”
Many organizations will claim to offer student loan forgiveness programs for students. In reality, private lenders do not offer forgiveness and only the U.S. Department of Ed will offer some forgiveness on federal loans.
Companies making these claims often just collect a fee to tell borrowers about federal forgiveness programs, which can all be found online for free.
5. If it sounds too good to be true–you know the rest
This is a huge red flag. Yes, there are some excellent student loan lenders out there that can offer you great savings.
But, these are still companies that need to make money.
If the offer that a lender advertises just seems way too good to be true or it doesn’t make sense that they could possibly meet the promises they’re making, then chances are that they have some other motive.
One way to protect yourself is to simply shop around and compare offers from different lenders. If one seems way better than what else is on the table, then there may be some strings attached to it. Be sure to ask why the offer is so good and read any fine print associated with the loan.
The number one rule to remember when refinancing your student loans is to be careful and protect yourself.
