Student loan repayment dampens the financial plans of a lot of people in this country. The federal government may be on the brink of major plans to lessen that burden for public loan borrowers — but if you’re paying...
Student loan repayment dampens the financial plans of a lot of people in this country. The federal government may be on the brink of major plans to lessen that burden for public loan borrowers — but if you’re paying off private student loans, you’re still on the hook.
Student loan refinancing consolidates federal and private student loans to bring everything into one simple monthly payment, potentially reduce your interest rate and/or monthly payment, and adjust your repayment term to better suit your needs.
We reviewed the best student loan refinance companies to help you see your options in one place and find the option that’s best for your financial circumstances.
This post includes more details on every lender, plus all the information you need to find the best student loan repayment plan for you.
Interest rates are accurate as of May 2022 and subject to change. Variable rates listed are margins added to a base rate such as LIBOR or SOFR, which could add around 0.30% to 1%.
Best Student Loans at a Glance
|
Credible |
1.86% – 8.38% |
2.35% – 8.73% |
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|
Earnest |
Starting at 1.74% |
Starting at 2.74% |
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|
College Ave |
3.44% – 6.64% |
3.49% – 6.74% |
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|
SoFi |
1.74% – 7.99% |
3.49% – 7.99% |
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|
LendKey |
Starting at 2.14% |
Starting at 2.69% |
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|
Citizens Bank |
Starting at 1.99% |
Starting at 3.75% |
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|
PNC Bank |
2.14% – 6.64% |
2.59% – 7.19% |
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|
Purefy |
1.74% – 7.24% |
2.43% – 7.94% |
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|
Sparrow |
1.74% – 9.34% |
2.35% – 10.74% |
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|
Discover |
1.79% – 11.09% |
3.49% – 7.99% |
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|
Splash Financial |
1.74% – 8.70% |
1.99% – 8.63% |
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|
ISL Education Lending |
n/a |
4.10% – 7.86% |
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|
Laurel Road |
1.89% – 6.20% |
2.99% – 6.30% |
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|
PenFed Credit Union |
n/a |
4.49% – 6.68% |
SEE DETAILS |
Credible
Earnest
College Ave
SoFI
LendKey
Citizens Bank
PNC
Purefy
Sparrow
Discover
Splash Financial
ISL Education Lending
Laurel Road
PenFed Credit Union
What to Know Before Refinancing Your Student Loans
Refinancing your student loans can be a strategic way to reduce your costs and make repayment easier. But it comes with both benefits and drawbacks, so weigh both before turning over your loans.
Pros of Refinancing Student Loans
Potentially lower interest rate. Potential for lower monthly payment and longer repayment period. Release co-signer from original loans. Replace multiple monthly payments with just one.Cons of Refinancing Student Loans
Losing federal borrower protections and repayment flexibility. New credit request on credit report makes a temporary mark. Might come with upfront fees.The greatest potential downside to student loan refinancing applies to borrowers with federal student loans. Refinancing or consolidating federal student loan debt in any way other than a Direct Consolidation Loan from the Department of Education shifts your obligation to a private company.
That means you no longer have any of the benefits that come with federal student loans, including income-driven repayment plans, forgiveness, cancellation or flexible deferment options.
That drawback doesn’t apply if you already have private loans — you can refinance and move your loans among private companies without serious risk. But check the options of your current loan before replacing it to make sure you’re not giving up flexible repayment options you might need in the future.
How to Refinance Student Loans
You can refinance any student loans with private lenders like those listed above. But there are a few additional steps to take before refinancing federal loans to make sure you’re choosing the best option for your financial situation.
Refinance Federal Student Loans
You might have several student loans to your name, even though you only applied once and may have received money as a lump sum each semester. You can simplify repayment and refinancing by first combining all of your loans into a Direct Consolidation Loan, a student loan consolidation option that creates one balance and one monthly payment, and sets the interest rate at the average of all the loans.
If you want to reduce your interest rate — and you’re confident in your resources to stay on top of repayment — you can refinance your federal loan with a private refinancing option.
Before refinancing a federal loan with a private lender, consider these questions:
Are you in a profession that’s eligible for forgiveness after a period? A private loan won’t be forgiven. Do you expect a stable (or growing) income for the next five or 10 years? Flexible repayment options with federal loans could protect you in case of volatile or uncertain income in the future. Can you get a lower interest rate with a private loan? This is the biggest benefit to move from federal to private — without it, the benefits of federal loans far outweigh those of private loans.Refinance Private Student Loans
Refinancing private student loans is as simple as — or even easier than — taking out a private loan in the first place.
If your financial situation improves, student loan refinancing could help you get a lower interest rate, lower monthly payment or both. You could save hundreds or thousands of dollars in the long run.
You could also try refinancing if you’re having trouble repaying private loans. A lender might offer a longer repayment period with lower monthly payments that’ll fit more easily into your overall financial plan.
Steps to Refinance Student Loans
Whether you’ve got federal or private student loans, follow these steps to refinance:
Note any must-haves about your current repayment plan, like income-driven repayment, interest, terms, or options for forgiveness or deferment. Look for those in new loan offers. Apply for pre-qualified rates with an online lender or marketplace. You’ll see interest rates, monthly payments and terms you could qualify for. A marketplace lets you see offers from several lenders at once. Choose a lender, and officially apply. Fill out the full application to apply for the loan. Accept an offer and set up a payment plan. If eligible, a lender will make you a loan offer, and you can choose to accept it and take the loan. You’ll also be able to set up a payment plan, including opting into automatic payments. Pay off existing loans. In most cases, a student loan refinancing company will pay off your existing loans directly. Repay the loan. Use auto-pay or set monthly reminders to make your payments, so you avoid late fees and unnecessary interest. Stay abreast of your lender’s repayment options, so you can adjust if you need to skip or defer a payment in the future. If your lender offers income-based repayment, you’ll likely have to report your income once a year and more often if it changes.Loan Refinancing Costs to Consider
The main benefit to student loan refinancing is the potential to save money. Make sure you don’t accept a loan offer that eats up those savings in unexpected fees!
Before you accept an offer, review the agreement carefully and look for these common costs:
Interest: Note the annual percentage rate (APR) listed for the loan. It can be fixed or variable. Variable rates usually come with a lower base rate but will change with the prime rate. Fixed rates stay the same for the life of your loan, so you know exactly what you’ll pay into the future. Look for an interest rate that’ll save you money in the long run compared to what you’re paying now. Origination fee: This isn’t common for student loan companies, but some lenders charge a fee upfront when you receive your loan. Origination fees are usually around 2% or 3% of the loan amount and come out of the amount disbursed to your current lenders. Late fee: Most loans you take out will include a fee for late payments, usually a percentage of the payment due. Many student loan lenders are doing away with late fees and building in options for flexible repayment, so look for options that skip this fee.Can You Refinance If You Had a Cosigner?
If you took out private student loans originally, you might have used a creditworthy cosigner like a parent, relative or family friend. They remain responsible for the loans until they’re paid off.
Some private student loans come with an option for cosigner release after around 12 to 18 months of on-time payments, as long as you have the credit and income to qualify to take on the loan yourself. If your loan didn’t come with a cosigner release option, you could release them by refinancing, instead.
Refinancing pays off the old loan, so the cosigner will no longer be responsible for the debt. As long as you can qualify for a new loan on your own, you don’t have to involve the cosigner anymore.
Frequently Asked Questions (FAQs) About Student Loan Refinancing
We’ve rounded up the answers to some of the most common questions about where to refinance student loans.
Refinancing usually is NOT worth it if you have federal loans that could qualify for forgiveness or cancellation. In other cases, student loan refinancing should get you a lower interest rate than your existing loans. The savings that comes with lower interest is the main benefit of refinancing. But refinancing could also be worth it for you if you’re having trouble keeping up with monthly payments for existing private student loans — you might get a lower monthly payment, even if you don’t get a lower interest rate.
Struggling to keep up with monthly payments is NOT a good reason to refinance federal student loans — look into income-driven repayment plans instead so you can maintain repayment flexibility and borrower protections. To qualify for a lower interest rate, apply to refinance when your financial situation, income and credit history are better than they were when you took out the original loan. You should be in a position to look more creditworthy to lenders and be comfortable keeping up with the monthly payments for the next five to 10 years.
Student loan refinancing could save you money if you get a lower interest rate than you’re paying on your current loans. Lower interest could save you hundreds or thousands of dollars over the life of the loan and keep your monthly payments lower.
Most student loan lenders offer student loan refinancing without an upfront fee, though some charge an origination fee of 2% or 3% of the loan amount. Once you get the new loan, you’ll have to make new monthly payments, and your balance will accrue interest at your new rate.
Refinancing student loans shouldn’t hurt your credit as long as you repay on time. Seeing pre-qualified rates won’t affect your score at all, and applying for a loan will only ding your credit score temporarily. Refinancing into a loan you have trouble repaying could be bad for your credit score through late payments and debts in forbearance.
Contributor Dana Miranda is a Certified Educator in Personal Finance® who has written about work and money for publications including Forbes, The New York Times, CNBC, Insider, NextAdvisor and Inc. Magazine.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.