If you’ve just graduated and are about to start paying on your student loans or if you are already well into repayment, you could still benefit from a student loan refinance. Refinancing is best done when the market conditions are right (i.e. interest rates are low) and the new terms better meet your needs than your existing loan.
Your decision to refinance should take into consideration a number of factors, including:
- What your current interest rate is
- What your current monthly payment is
- If you have a cosigner
- Your level of satisfaction with your current lender
- How many loans you currently owe on
- Your current level of income
- Your current credit score and credit history
- If you have federal or private Student Loans
We will discuss in depth each of the consideration factors to help you determine if there’s a reason you should refinance your student loan worthy of taking the plunge.
1. Save Money with a Lower Interest Rate
Student loan refinance occurs with private lenders. This is good because they are always competing with each other and as a result, you the borrower get to enjoy competitive interest rates. A vast majority of student loan borrowers have federal student loans, and there are some considerations that should be evaluated for students with federal loans.
For federal student loan borrowers, the government sets your interest rate and that’s that. This means there’s a high probability the marketplace of private loan lenders will be offering better rates than what the government has offered. However, before you jump at the savings understand the trade-offs.
Should you choose to refinance your federal loans with a private lender, you will forfeit your federal loan benefits which could include deferment, forbearance or forgiveness. The government has more options for students suffering from financial hardship, not that private lenders aren’t sensitive to this too, but the government clearly has more favorable options for students.
If you think you might need to take advantage of those benefits, it’s not recommended you take your loans out of the federal loan program. However, if you feel confident in your fiscal health over the next few years as your pay down your student loan, opting to save money could be an easy decision to make.
When looking at rates, private loan lenders offer two types of rates, fixed and variable. Fixed interest rates are similar to your federal interest rates (if you borrowed your loans after 2006), in that they do not change over the life of the loan. So, going from a 5% interest rate over 10-years to a 4% interest rate over the same period could equate to some nice savings
Private student loan lenders also offer variable interest rates. These typically start out lower than fixed rates, and are subject to change over time as the market changes. This means that not only could it go down, but the variable interest rate could also go up and up and ultimately be more than the fixed rate if things aren’t going well in the market.
Variable rates are generally more attractive to borrowers who are confident they will be able to pay off their loan quickly, before the interest rates could rise. Their decision likely includes a higher monthly payment over a shorter period of time; by over paying your monthly payment you are freeing yourself from the loan earlier than you would if you only made your minimum monthly payment. It all comes down to what’s more important, saving more money overall or saving money right now in the form of a lower monthly payment. If you do choose a variable interest rate, make sure you can afford your payment at the highest interest rate – you’ll see an interest rate range in your loans terms.
2. Lower Your Monthly Payment
While a lower interest rate will certainly lower the monthly payment, that reduction might not look very significant over the life of the loan which could be 10, 15, or 20 years or more. If your needs dictate a lower monthly payment, a student loan refinance could certainly achieve that by changing the loan terms to lengthen the repayment period.
Paying a loan over a longer period of time will definitely cause the payment to drop more noticeably, but keep in mind the longer you pay on the loan the more you will pay in interest over the life of the loan. If your budget requires you to save the money today, then this might be the right solution, even if it does cost more in the long run.
Remember, most lenders do not penalize you if you pay your loan off early. If you find yourself in a better financial situation and can afford to pay more on your loan than the minimum monthly payment, then by all means do that. That extra money you pay, will pay down the outstanding balance faster reducing the length of the repayment on the loan and minimizing the amount of interest paid overall.
| Loan Type | Amount Borrowed | Current Payment | Current Term | Total Cost of Loan | |
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| Loan Type | Amount Borrowed | New Payment | New Term | Total Cost of Loan |
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New Monthly Payments:
This calculator is provided for informational purposes only. Calculated results are based on many factors, including the assumptions provided by the user. We cannot and do not provide any guarantees, conditions or warranties as to result accuracy or applicability to the user’s particular circumstances. It is the responsibility of the user to verify that all of the output and resulting calculations are correct. This calculator should not be used by anyone to make material financial decisions and should be used solely for informational purposes. Actual terms will be set by your lender or your school. We encourage any user to seek personalized advice from qualified professionals regarding all personal finance issues. The results of this calculator are not based on any information provided by or an affiliation with any school.
3. Release Your Cosigner
Most students entering college have no credit or credit history. This situation necessitates the need for a cosigner when getting a student loan. In many instances, this cosigner is a parent. If you want to remove your cosigner from your loan, this can be done with a student loan refinance. This is because a refinance is effectively a new loan that pays off the old loan. This new loan can be all yours if you so desire.
Bear in mind though, to qualify for a loan on your own you will need to demonstrate to your new lender that you make or have enough income to make the payments and have a strong credit history to show that you are a responsible borrower. I If you still need a cosigner, you can apply for the new loan with a different cosigner.
4. Change Lenders for Better Customer Service
Sometimes it happens that we aren’t satisfied with our current lender or loan servicer (in the case of federal loans). One way to change this is to refinance your student loans with another lender, preferably one that offers the type of customer service you are looking for.
Many credit unions are known for offering excellent customer service for example and it might be worthwhile to refinance your student loan at a credit union if you qualify for membership, as that is a requirement to do business at a credit union.
5. Bundle Loans Together to Make Payments More Manageable
It’s not uncommon for students to graduate college with multiple loans, since each year students are required to resubmit the FAFSA (Free Application for Financial Student Aid). Each year new loans are issued. If it turns out that the federal loans were not enough to cover the cost of attendance, there may be private loans to contend with too. This could result in a number of payments due each month on different days with different minimum payments making the repayment process a logistical nightmare.
If this is you, and you are struggling with several loan payments and would like to simplify the process. refinancing student loans will allow you bundle these individual loans together to be one loan. This will make the entire process easier to manage by only having to be concerned with the one loan now.
How to Get the Very Best Terms
Banks are businesses and as such want to ensure that the money they loan you will be repaid. This is why they are very concerned with your work history, level of income, credit score and credit history. All these items speak to your ability and willingness to pay your debts on time. Someone with a demonstrated ability to pay debt on time and a sufficient level of income will indicate to lenders their ability to pay and responsible behavior. These type of people are ideal candidates for loans in the lenders eyes.
To attract these desirable borrowers, lenders will often offer better interest rates and terms to individuals with excellent credit and more than sufficient income. They want your business just as much as you want them to help you. It’s mutually beneficial and they know it, which is why they work hard to woo you to choose them with low interest rates and favorable terms.
More Options if You Have Federal Student Loans
If you have federal student loans and worry that you might someday need that financial hardship protection that is offered within the federal loan program, you still have options. The U.S. Department of Education offers programs for loan forgiveness if you work for qualified employers for a set period of time. There are income-driven repayment plans to lower your monthly payment to be more manageable with respect to your income and expenses.
Lastly, they offer Direct Loan Consolidation where you can take all those loans and bundle them together, but your interest rate will essentially be the same. The rate one for the new one single loan will be the weighted average of all the loans included in the consolidation rounded up to the nearest 1/8th percent. Meaning you could effectively be paying slightly more in the end but you will still retain your federal benefits and now have a more manageable single loan payment.
Best Student Loan Refinance Lenders
College Ave Student Loans
- Variable rate range: 3.44% – 7.99% APR1
- Fixed rate range: 3.99% – 7.99% APR1
- No application or prepayment fees
- Apply in 3 minutes or less for instant credit decision
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community 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.
1The 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.
2This informational repayment example uses typical loan terms for a refi borrower who selects the Full Principal & Interest Repayment Option with 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.
3$5,000 is the minimum requirement to refinance. The maximum loan amount is $250,000 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 8/11/2022. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
ELFI Student Loan Refinance
- Customers are saving an average of $309 every month and an average of $20,936 in total savings after refinancing their student loans with Education Loan Finance1
- Variable and fixed rates starting from 2.48% APR and 4.29% APR2
- Prequalify in as little as two minutes
- Award winning customer service from your dedicated Student Loan Advisor who is matched to you from the moment you sign up
1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.
2Rates accurate as of 9/23/22. The interest rate and monthly payment for variable rate loans may increase after closing. Your actual interest rate may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10 year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. To qualify for refinancing or student loan consolidation through Education Loan Finance, you must have at least $10,000 in qualified student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary Education Loan Finance institution. Education Loan Finance Parent Loans are limited to a maximum of the 10-year term.
SoFi Student Loans
- Rates as low as 3.24% variable and 3.99% fixed1
- No fees or prepayment penalties
- Unemployment protection
1Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 3.24% APR to 8.24% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
Splash Financial Refinance Loan
- Rates as low as 2.49%1 Variable APR and 2.59%1 Fixed APR
- No pre-payment penalties, origination, or application fees
- See rates in 3 minutes without affecting your credit score2
1The rates displayed may include a 0.25% autopay discount.
2To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Earnest Student Loan Refinancing
- Variable rates starting at 2.49% APR (including 0.25% Auto Pay discount)*
- Fixed rates starting at 3.74% APR (including 0.25% Auto Pay discount)*
- Choose your own monthly payment
- No fees of any kind and exceptional customer service for the life of your loan
- Check your rate in under 2 minutes
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.
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.99% APR to 8.74% APR (excludes 0.25% Auto Pay discount). Variable rates range from 2.74% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years 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%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
*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. Not all borrowers will qualify for our lowest rates, and your rate will be based on creditworthiness at time of application.
The information provided on this page is updated as of 8/25/2022. 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 [email protected], or call 888-601-2801 for more information on our student loan refinance product.
