Mountain of student loan debt? Consider refinancing

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By Andrew Michalscheck By Andrew Michalscheck

PHOENIX-- It's that time of year, after all the pomp and circumstance, US college students are graduating 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.

But 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 the risks before refinancing: Pay attention to the APR,  your monthly payment may be lower, but that may only be because it's a longer term loan.

You may lose your student loan interest tax deduction if the new loan is not considered a student loan. Most federal loans have fixed rates. If you switch to a private loan with a variable rate, be aware your interest rate could rise over time.

Federal loans also have benefits that private lenders don't offer, like loan forgiveness for certain professions. The bureau also says borrowers are currently having trouble finding opportunities to refinance. It's recommending policymakers take steps to make student loan modification more widely available.