You gain a great deal when you refinance student loans if you do it right.

The lender you choose to refinance your loans essentially buys all of your loans from the original lenders and reissues you a new loan, leaving you with one loan for the total amount of loans consolidated. This may result in a smaller monthly payment with a longer repayment schedule and, subsequently, a lower risk of default.

But you have to start by knowing what you can do. The best way to start do that is to do a current financial assessment.

It’s easy – just list your income, then your expenses (excluding your student loans – be honest and thorough), subtract the expenses from the income, and you’re left with your “disposable income”. But it’s not yet disposable, because you have to figure in what you can reasonably pay back on your debt.

Student Loans

Then go to www.freecreditreport.com and get a free credit report and correct anything on there that may not be correct. A borrower with a good credit history is a valuable asset. If your credit is good, your lender may find value in either lowering your interest rate, or extending your loan period.

Look at your loans – Federally-guaranteed student loans generally have lower interest rates than private loans. Balance the difference in the costs between consolidating all loans together versus consolidating only the private loans and keeping federally-funded loans separate. More and more people are moving away from the Big Banks, and finding a great deal of satisfaction in community banks and local credit unions. Talk to the loan officers there about the potential for refinancing your loans locally. They may be able to help you, or at the very least offer further guidance.

Visit the U.S. Department of Education's Direct Loan Program online. Direct Loans are funded by the U.S. Department of Education through your school and are managed by a loan servicer, under the supervision of the Department. The Direct Loan Program allows you to choose your repayment plan and to switch your plan if your needs change.

Go back to your financial aid office and ask for help – they have resources that can get you on your way to refinancing your student loans.

Ask your current lender – they will be more than happy to work with you; it’s far better than you defaulting or them losing money with hiring debt collectors. Your payment can be lowered, your rate reduced, or the term extended.

Go to your credit union or a place like custudentloans.org to research what they may have to offer you. It’s worth the research time and you may be able to get a better deal, or combine all your loans into one management student loan.

Whatever you do, examine the loan docs and make sure you understand what is expected of you. Get someone you trust to look over them and talk with you about what’s in your budget (you do have one, right?) and how you can live with this new debt.