If you want to cut back some of your student debt, refinancing may be your best option. Refinancing involves securing a new loan to pay off your current debt. Below, we will walk you through the step-by-step process of how to refinance student loans.
Step #1 – Apply For a Refinance With a Student Loan Lender
We work with a number of lenders to help you get the best rates. These lenders were hand chosen for their commitment to helping borrowers save money and get out of debt faster.
For more information on lenders, and their terms offered, visit our in-depth student loan refinance page here.
Step #2 – Apply Directly Online
Once you follow one of the above links, you will get started by applying directly online. In most cases, you just need your current loan amount, loan term, annual income, and social security number to get started. Companies only run a soft pull on your credit history during the initial application process, so getting multiple quotes will not negatively affect your credit score.
You may also be asked to choose a new loan term before you get a quote. Just know that you can always go back to the main screen and play around with the number until you get a better deal. It is also easy to add in a cosigner’s information at a later time.
If you would rather talk to a person, some refinance companies do let you apply by phone.
Step #3 – Receive and Compare Offers
Most companies compile offers instantly or within a few minutes. Expect to have choices from each company you apply to. You will have fixed interest rate and variable interest rate offers from each lender. Lenders will also likely offer different interest rates based on the term length.
When comparing offers, focus on term length and interest rates above all else. Fixed interest is typically the best way to go because the rate will not change and monthly payments will stay consistent. The desired term length depends on your situation. If you have the financial stability to handle larger monthly payments, choosing a shorter term length can help you get a better interest rate.
If you have competitive offers from multiple lenders, look to the company’s perks to help you make your decision. Some perks, like a reduced interest rate for making automatic payments, are widely available. Others are more unique. For example, SoFi offers borrowers complimentary career coaching. LendKey grants cosigner release after 12 on-time payments; this lets your cosigner off the hook but still lets you keep the interest rate. Lenders like CommonBond work on a social good model where student loans help fund education for students in need abroad.
Take all of these factors into consideration as you choose your lender. Whoever you end up with, make sure you read through their terms of service and disclosures. The more educated you are about your new loan, the better.
Step #4 – Check Savings with Our Refinance Calculator
Before you sign any important documents, make sure that private refinancing is financially beneficial to you. Thanks to our Refinance Calculator, finding that out only takes a minute. First, plug in your current student loan balance, your current loan term, and your average interest rate (or weighted average interest rate if you are refinancing multiple loans). Then, input the interest rate and term length of your potential new loan.
Educate Yourself on Refinancing
Understanding how to refinance student loans requires that you understand the process of refinancing and what is important in a refinance. This will help you navigate your different refinance options and choose the right one for you. Our student loan refinancing page offers a good overview of the lenders, so use that as a starting point. Are you a parent looking to refinance your Parent Plus Loans either in your name or your child’s name? We have a Parent Plus loan refinancing guide too.
Can I Refinance Federal Student Loans?
Federal student loans can be refinanced with a private lender, but they cannot be refinanced through any government programs. Federal student loans do have the option of consolidation, which is similar to a refinance but would not reduce your interest rate.
Under federal student loan consolidation, your federal loans get combined under one new loan. You do not get to choose a new loan term or interest rate; everything is standardized. The new loan’s interest rate is simply your weighted average interest rate rounded up to the nearest 1/8%. This actually makes your new interest rate slightly higher than if you were to keep your loans separate.
Why does anyone do it then? Federal consolidation comes with many perks that especially benefit public service workers and those with lower incomes. Consolidated federal loans are eligible for a number of federal student loan forgiveness programs and income-driven repayment plans. These programs help reduce monthly payments, offer forgiveness after a set number of years, and can even cover interest payments.
Decide How Much to Refinance
Before you can refinance, you need to know what amount of money you are refinancing. Log on to your private and federal student loan websites to get accurate totals. Whether you refinance all or just some of your debt is completely up to you. With private refinancing, you can choose to combine federal and private student loans into one new loan. You might want to refinance your higher interest rate loans and keep existing loans that have competitive rates.
Keep in mind that if you choose to do private refinancing with your federal loans, you lose out on the federal protections and forgiveness plans described above. But, you will have a shot at a better interest rate and/or loan term.
Is Refinancing Worth It?
Refinancing is worth it when it is financially beneficial. As you look at the refinance calculator results, ask yourself these questions:
- Does this new loan lower my overall interest payments?
- Can I afford this new monthly payment?
- Am I saving money on interest?
- Can I handle this new term length?
If you can answer ‘yes’ to all four questions, refinancing through that lender makes sense. You can afford the new payments and you save money. It is a win-win.
If you answer ‘no,’ to any of the questions, reflect on those questions. Consider trying out a different refinance option. Your second option’s interest rate may not be as low as your top choice’s, but that is okay. It can still end up saving you money, especially if it has a longer term length. Loans with longer term lengths end up having more manageable monthly payments. Just make sure it is still saving you money.
Get Started Refinancing
Now that you know why and how to refinance student loans, there is no excuse not to look into it. It is completely free, will not take up much of your time, and can save you money. At the very least, start improving your credit score so that you can refinance down the road.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.