Why Refinance Student Loans

Why Refinance Student Loans

Many people ask: “Why refinance student loans?” You may have friends, classmates or colleagues who have all decided to refinance student loans. There are many reasons why you should refinance student loans. In this guide, we will show you the reasons why you should refinance student loans(and the reasons why you should not refinance student loans).

Compare The Best Student Loan Refinance Rates For 2020

Lender
APR
Minimum Credit
1.99% – 5.79%
650

Overview

KeyValue
Variable Rates:1.99% – 5.64%
Fixed Rates:2.98% – 5.79%
Minimum Credit Score:650
Minimum Income:None
Fees:None
Minimum Loan Amount:$5,000

Details

KeyValue
Eligible Loans:Private & Federal
Eligible Degrees:Undergraduate & Graduate
Loan Terms:5-20 years
Borrower Residency:All States except KY or NV
Hardship Deferment:Yes
Co-signer Option:No
2.39% – 6.01%
680

Overview

KeyValue
Variable Rates:2.39% – 6.01%
Fixed Rates:2.79% – 5.99%
Minimum Credit Score:680
Minimum Income:$35,000
Fees:None
Minimum Loan Amount:$15,000

Details

KeyValue
Eligible Loans:Private & Federal
Eligible Degrees:Undergraduate & Graduate
Loan Terms:5, 7, 10, 15, 20 years
Borrower Residency:All States
Hardship Deferment:Yes
Co-signer Option:Yes

1.89% – 6.77%

660

Overview

KeyValue
Variable Rates:1.89% – 6.77%
Fixed Rates:2.80% – 6.72%
Minimum Credit Score:660
Minimum Income:None
Fees:None
Minimum Loan Amount:$5,000

Details

KeyValue
Eligible Loans:Private & Federal
Eligible Degrees:Undergraduate & Graduate
Loan Terms:5 – 20 years
Borrower Residency:All states
Hardship Deferment:Varies
Co-signer Option:Yes

1.99% – 6.18%
650

Overview

KeyValue
Variable Rates:1.99% – 6.18%
Fixed Rates:2.99% – 6.18%
Minimum Credit Score:650
Minimum Income:None
Fees:None
Minimum Loan Amount:$5,000 ($10,000 in CA)

Details

KeyValue
Eligible Loans:Private & Federal
Eligible Degrees:Undergraduate & Graduate
Loan Terms:5, 7, 10, 15, 20 years
Borrower Residency:All states
Hardship Deferment:Yes
Co-signer Option:Yes

1.89% – 6.00%
700

Overview

KeyValue
Variable Rates:1.89% – 5.90%
Fixed Rates:2.80% – 6.00%
Minimum Credit Score:700
Minimum Income:None
Fees:None
Minimum Loan Amount:$5,000

Details

KeyValue
Eligible Loans:Private & Federal
Eligible Degrees:Undergraduate & Graduate
Loan Terms:5, 7, 10, 15, 20 years
Borrower Residency:All States
Hardship Deferment:Yes
Co-signer Option:Yes

1.95% – 3.85%

660

Overview

KeyValue
Overall Rate:1.95% – 3.85%
Variable Rates:
Fixed Rates:1.95% – 3.85%
Minimum Credit Score:None
Minimum Income:None
Fees:None
Minimum Loan Amount:$25,000

Details

KeyValue
Eligible Loans:Private & Federal
Eligible Degrees:Undergraduate & Graduate
Loan Terms:5, 7, 10, 15 years
Borrower Residency:Must live near a branch in California; New York City; Boston; Greenwich, Connecticut; Palm Beach, Florida; Portland, Oregon; or Jackson, Wyoming
Hardship Deferment:No
Co-signer Option:Yes
1.99% – 8.77%
680

Overview

KeyValue
Variable Rates:1.99% – 8.57%
Fixed Rates:2.99% – 8.77%
Minimum Credit Score:680
Minimum Income:$24,000
Fees:None
Minimum Loan Amount:$5,000

Details

KeyValue
Eligible Loans:Private & Federal
Eligible Degrees:Undergraduate & Graduate
Loan Terms:5, 7, 10, 15, 20 years
Borrower Residency:All states, except ME, ND, NV, RI, WV
Hardship Deferment:Yes
Co-signer Option:Yes

Checking Your Rate Doesn’t Affect Your Credit Score
Disclosures: Earnest | ELFI | Laurel Road | LendKey | SoFi | Splash

What Is Student Loan Refinancing?

Student loan refinancing is an excellent tool to exchange your current student loans for a new student loan with a lower interest rate. When you refinance student loans, you can combine your existing federal student loans, private student loans or both and receive a single, new student loan with one interest rate, one monthly payment and student loan servicer. The goal of student loan refinancing is to lower your interest rate, save money and pay off student loans faster.

When you refinance student loans, you work with a private lender who evaluates your credit profile, income, debt-to-income ratio, monthly cash flow and other factors to approve your application. Lenders prefer to refinance student loans for borrowers who have:

  • Credit Score in the mid 600’s or higher
  • Stable and recurring income
  • A low debt-to-income ratio
  • Sufficient monthly cash flow to pay your student loans, living expenses and other debts

However, each lender has different underwriting standards. If you do not meet these criteria, you can apply to refinance student loans with a qualified co-signer who does meet these requirements. A co-signer can help you get approved for student loan refinancing and also may help you receive a lower interest rate.

You can use this student loan refinancing calculator to determine how much you can save with student loan refinancing.

Why You Should Refinance Student Loans

Get a lower interest rate

The main reason that borrowers refinance student loans is to lower their interest rate. When you refinance student loans, a private lender will give you a lower interest rate compared to the current interest rate on your student loans. When you refinance student loans, you should know that most borrowers choose a lender that approves them for the lowest interest rate. This helps you save the most money on your student loans.

Save money

Student loan payments can be expensive. If you want to save money, you can refinance student loans. The reason that student loan refinancing saves you money is because you receive a lower interest rate. A lower interest rate means you will save money in interest costs.

For example, let’s assume you have $50,000 of student loans at an 8% interest rate and 10-year repayment term. If you refinance student loans and receive a 3.5% interest rate and 10-year repayment term, you can lower your monthly payment by $112 and save $13,465 total.

Pay off student loans faster

Student loan refinancing can help you pay off student loans faster.There are at least two ways that student loan refinancing can help you pay off student loans faster. First, when you refinance student loans, you can get a lower interest rate. When you have a lower interest rate, less interest will accrue on your student loans. This means your student loan balance can be lower compared with your current student loans. Second, when you refinance student loans, you can choose a new repayment term. The standard repayment term for federal student loans is 10 years. If you choose a repayment term less than 10 years, for example, you can pay off your student loans faster.

Change Loan Terms

One big advantage of student loan refinancing is your ability to change your loan terms. For example, all federal student loans have a fixed interest rate and the standard repayment term is 10 years. When you refinance student loans, you can choose both your type of interest rate and your student loan repayment term. For example, you can choose a fixed interest rate or a variable interest rate. You can also choose a student loan repayment term, which typically is 5-20 years.

A fixed interest rate means your interest rate will never change while you repay your student loans. A variable interest rate means your interest can change over the course of your student loan repayment. Typically, variable interest rates are lower than fixed interest rates.

You should choose a shorter repayment period (such as closer to 5 years) if you want to pay off student loans faster. While your monthly payment will be higher, you will have less overall interest. If you want a lower monthly payment or need more time to pay off student loans, then a longer repayment term may better for you. However, the longer you take to pay off student loans, the more total interest you may pay.

Change lender or student loan servicer

Some borrowers refinance student loans to get a new lender or student loan servicer. Student loan refinancing is a helpful way to find a lender or student loan servicer that offers better customer service too.

Why You Should Not Refinance Student Loans

We know there are many reasons why you should refinance student loans. Are there any examples why you should not refinance student loans?

Here are some examples why you should not refinance student loans:

You want student loan forgiveness

If you plan to seek Public Service Loan Forgiveness or Teacher Loan Forgiveness, for example, you need to have federal student loans. When you refinance student loans, you receive a new private student loan and will not have any federal student loans outstanding. The good news is that you can refinance student loans and receive student loan forgiveness. For example, one option is to keep your federal student loans outstanding and refinance your private student loans only.

You plan to enroll in an income-driven repayment program

If you have federal student loans, you are eligible to enroll in an income-driven repayment plan, which allows you to make student loan payments based on your income. When you refinance student loans, you are not eligible to enroll in an income-driven repayment plan. The reason is because once you refinance student loans, you will have a private student loan. One option, like with student loan forgiveness, is to keep your federal student loans outstanding and refinance your private student loans only.

You are unemployed or underemployed

Lenders who refinance student loans prefer borrowers who are employed and who have stable and recurring income. If you are unemployed or underemployed, it is best to wait until you are fully employed to refinance student loans. You can also apply with a co-signer who is employed with strong credit and income. Your co-signer may help you get approved and even receive a lower interest rate.

You recently defaulted on your student loans

Lenders also typically do not refinance student loans for borrowers who recently defaulted on their student loans. Lenders who refinance student loans prefer borrowers with a history of financial responsibility and on-time payments. However, if the student loan default has been removed from your credit report, and you meet other underwriting requirements, you may be able to refinance your student loans.

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