It’s no secret that a student loan debt can be overwhelming. One promising option is the opportunity to refinance student loans. Like most other kinds of debt, student loans can be refinanced to offer lower interest rates, different repayment terms, and other revisions that alleviate the burden for borrowers. If you’re wondering how refinancing student loans can save you money — and how to get the process started — consider our tips below.
Important point to note: If you have federal student loans you may not want to opt to refinance with a private lender as you could lose valuable benefits only available to federal student loans. That said, if you want to keep these benefits but still need do something to make your loans more manageable, you can consider loan consolidation with a federal Direct Consolidation Loan. There is no fee to apply for this loan.
By consolidating your federal student loans, you will be able to merge multiple loans into one. However, you will not be able to lower your interest. The federal government will use the weighted average of the interest rates for all your federal student loans being consolidated, rounded up to the nearest one-eighth of a percent.. With a Direct Consolidation Loan, you may be able to extend your repayment plan which would reduce your monthly payments. While that may cause the loan to be more expensive overall, but it may be able to help you make your monthly payment more manageable.
Understand Lender Requirements
One of the first steps to refinancing private student loans is to understand the qualifications that a lender will expect from you. Refinancing means that you must apply and be accepted for a new loan, so naturally lenders will want to make sure that you are qualified to borrow money. Some of the criteria that a private lender may judge your application on include the following:
- Whether you have a good credit score and history (typically your credit score needs to be above 660)
- Your net income after expenses such as rent or a mortgage
- The duration of your current employment (lenders generally look for at least two years of employment history)
- Your payment history on existing student loans and debt
All of these factors will determine whether or not you are able to refinance your private student loans. Typically, a refinance lender will look for candidates who have a good credit score, sufficient income, an employment record of several years, and a history of on-time payments to their existing borrower. If you are not able to qualify for a student loan refinance on your own, you may be eligible if you apply with a creditworthy cosigner.
Refinancing with a Cosigner
It’s recommended that you conduct a credit check to understand your credit history. You can do this at www.annualcreditreport.com. You should know before you apply what qualifications lenders are looking for in borrowers. Use this knowledge to guide you before you start submitting applications and getting denied—credit inquiries from lenders could affect your credit score.
If you find you are unable to refinance your student loans on your own, you might want to consider a cosigner. A cosigner will not only give you the opportunity to refinance (assuming you don’t qualify on your own), but if the cosigner has a stronger credit score and credit history, you might be to get a better interest rate than you would have received on your own.
It’s important to keep in mind that the cosigner will be just as responsible as you are to repay the loan. It may be possible to release the cosigner (if the loan terms and conditions allow for it). Generally, a lender will be willing to release the cosigner after a set number of consecutive on-time in-full payments, and you are able to meet the credit criteria set in your cosigner release terms and conditions. This is typically around 24 payments but can be less or more, as determined by the refinance lender.
Check Different Lenders’ Interest Rates
If you believe that you may qualify to refinance your student loan amounts (on your own or with a creditworthy cosigner) there are many online lenders who offer easy to access refinance quotes based on a soft credit check (a prequalification process that will not affect your credit score). These quotes will typically include an overview of rates and terms, including the interest rate for refinancing. You will likely be offered a refinance loan with the option of a fixed interest rate or variable interest rate. The final interest rate will be based upon your loan application and a hard credit check (this will effect your credit score slightly).
A fixed interest rate will ensure that you have the same monthly payment over your entire repayment term. This certainty can be meaningful to some borrowers while others are more interested in a variable interest rate loan.
A variable interest rate loan will have an interest rate that fluctuates based on the current market interest rates. This means the rate can and will change during the repayment process. It might start out low but could go up if market conditions allow for it. Variable interest rates offered at the time of refinancing tend to be lower than the fixed rate, making this rate seem more appealing. However, you want to be cautious. Since the interest rate can change during the life of the loan, you want to know what your interest rate range is—the lowest your rate can be and the highest, based on the loans terms. You want to make sure you can afford the payments at both the low and high end of the range.
Some say that variable rate refinancing is advantageous. Benefits of a variable interest rate include the following:
- Overall interest rate may be lower
- Greater flexibility in repayment options
- Can save money over the life of the loan May offer ability to pay off sooner
- The interest rate structure that you qualify for will depend on lender as well as your credit history.
Compare Top Refinance Lenders
SoFi Student Loans
- Rates as low as 1.74% variable and 3.49% fixed1
- No fees or prepayment penalties
- Unemployment protection
1Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% 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.
College Ave Student Loans
- Variable rate range: 3.44% – 6.64% APR1
- Fixed rate range: 3.49% – 6.74% 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 4/12/2022. 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.
Earnest Student Loan Refinancing
- Variable rates starting at 1.74% APR (including 0.25% Auto Pay discount)*
- Fixed rates starting at 2.74% 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 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% 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.
*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 4/29/2022. 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.
You Put in the Work. Now Reap the Rewards.
- Variable Rates between 1.87% - 6.52% APR1
- Fixed Rates between 2.30% - 5.96% APR1
- No application or prepayment fees
- Cosigner release with 24 consecutive on-time payments2
1Interest Rates
Fixed interest rates range from 2.30% APR (with auto debit discount) to 5.96% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. The fixed interest rate will remain the same for the life of the loan.
Variable interest rates range from 1.87% APR (with auto debit discount) to 6.52% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. Variable rates may increase after consummation. Variable rates for Nelnet Bank Refinance Loans are calculated as the One-Month SOFR plus the applicable Margin percentage. Variable rates will be based on the highest One-Month SOFR as published by the Federal Reserve Bank of New York and/or the Wall Street Journal “Money Rates” table on the twenty-fifth day (or the next business day) of the immediately preceding calendar month. The variable rate may change on the first day of each month if the SOFR index changes. This may result in higher monthly payments. The current One-Month SOFR index is 0.05% as of January 1, 2022.
Auto Debit Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.
The lowest rate for each loan type requires automatically withdrawn (“auto debit”) payment. The lowest rate is available only to the most creditworthy applicants. Not all borrowers will receive the lowest rate. The interest rate and Annual Percentage Rate (APR) may be higher depending upon (1) the credit history of the borrower and, if applicable, the cosigner, (2) the repayment option and loan term selected, (3) the loan type selected, and (4) the highest level of education attained. If approved, applicants will be notified of the rate qualified for within the stated range.
2Cosigner Release. A request for the cosigner to be released can be made by either the borrower or cosigner when each of the following conditions has been met:
- The account must have been in full principal and interest repayment for at least 24 months.
- Twenty-four consecutive, on-time principal and interest payments, or lump sum equivalent, must have been made. NOTE: A lump sum payment does not replace the requirement to have been in full principal and interest repayment for at least 24 months. Interest-only or fixed-pay payments while enrolled in school do not qualify towards the 24 consecutive on-time payments.
- The loan must be current at the time of request.
- The loan must not have been in deferment, hardship forbearance, or other alternative payment assistance plan within the past 24 months.
- The loan must not have been permanently modified from its original terms in the credit agreement.
- The primary borrower must be a U.S. citizen or have permanent residency in the United States.
- The primary borrower must meet the age of majority requirement in their permanent state of residency.
Requirements are subject to change. If all of these conditions have been met, then an application for cosigner release may be submitted. The primary borrower is required to demonstrate they have the ability to assume sole responsibility for the loan(s) by providing proof of income, meeting debt-to-income requirements, and having a satisfactory credit history. (A credit report will be obtained during the review process).
3Refinance Loan Eligibility: You must be a U.S. citizen or permanent resident alien with a valid U.S. Social Security number, and be the legal age to enter into binding contracts in your state/territory of residency, or be at least 17 years of age and apply with a cosigner who is at least the age of majority in their state/territory. Non-residents can apply with an eligible cosigner who is a U.S. citizen or permanent resident alien with a valid U.S. Social Security number. The student loans you refinance must be in their grace or repayment period, and you can no longer be enrolled in school on a half-time or more basis. You must have at least $5,000 in student loans to refinance. You, or your eligible cosigner, must have an annual income of at least $36,000. Approval subject to credit review. Other credit criteria may apply.
Refinance Loan Limits:
Minimum loan amount: $5,000
Maximum student loan limits:
$125,000 for borrowers with an undergraduate degree.
$175,000 for borrowers with a graduate, MBA, or law degree.
$500,000 for borrowers with a graduate health professional degree.
Nelnet Bank, and any associated logos or design marks, are trademarks or service marks of Nelnet, Inc. All loan programs and terms are subject to change or may be discontinued at any time without notice. Certain restrictions and limitations may apply.
Splash Financial Refinance Loan
- Rates as low as 1.74%1 Variable APR and 1.99%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.
Automatic Payments
Nearly every lender has some form or another of an interest rate reduction incentive for automatic payments (payments deducted right from your bank account and sent directly to the lender). The discount generally ranges between 0.25% and 0.5%. This savings may seem small but can add up over time. It’s important to ask the lender about this during your research phase if this is something you know you will want to take advantage of.
Choose Your Loan Terms
It’s in your best interest — no pun intended — to shop around for the best refinancing offer. Different lenders will offer different refinance rates and refinancing your student loans with a lower interest rate can save you money over the life of your loan. Once you have been approved for a few refinancing offers, you should choose the loan terms that are best suited to your financial situation.
The first factor that most people will look at is the interest rate. Obviously, the lower the rate, the better the deal. Consider the aforementioned difference between fixed and variable rates, though, to decide which one is truly best for you.
Evaluate other terms of the loan too, such as its repayment period which can be as short as 5-years and as long as 20 years or more. The repayment period determines how much or little your monthly payment will be. Longer terms equate to lower payments and shorter terms higher payments.
You may find yourself looking at a refinance loan which offers a lower interest rate but a shorter repayment period, thus resulting in monthly payments that are too high if the interest rate reduction isn’t big enough. While interest rate is an important factor to look at when choosing a refinance lender—be sure to look at the big picture and choose the loan terms that are best for you.
Submit All Applicable Documents
Once you’ve chosen a refinance lender who offers agreeable terms, it’s time to accept their offer. Lenders will require that you submit certain documentation to support the information that you furnished on your refinance loan application. Documentation requirements will vary from lender to lender, but you can typically expect to be asked for the following:
- Valid photo ID
- Payoff quote from original lender
- Proof of income and employment
- Authorization to pull your credit report and credit history for a full credit check – if applicable, your cosigner will also have to provide this authorization
Photo ID should include your current address — the one listed on your application — in order to confirm your identity and place of residence. Acceptable forms of ID will likely require a photo and must not be expired, the recommended forms of ID to use are a driver license, state ID or passport.
The payoff quote from your original lender will typically come in the form of a letter indicating the lump sum that would be required in order for you to completely pay off the loan and close the account. Your refinance lender will need this because they will pay off your original lender before issuing you a new loan.
Lastly, you will need to furnish proof of income and employment — or W2s or 1099s if you are self-employed — in order to prove to your new lender that you are, in fact, capable of making monthly payments on the new loan amount. Lenders will typically ask for two or three of your most recent pay stubs to satisfy this requirement.
Continue Paying Until Balance is Transferred
Once you’ve been approved for a student loan refinance offer, chosen a lender, and submitted all the necessary documents, you’re ready to start enjoying lower payments on your student loans. This is worth celebrating! Congratulate yourself on your accomplishment and look forward to the freedom that a lower interest rate will afford you…but don’t forget about your original loan just yet.
It’s important to continue making payments on your original loan until your refinance lender has officially paid it off and closed the account. You should keep in touch with both the original lender and your refinance lender to stay aware of any progress updates on the completion of this process. Until your balance is transferred to your refinance loan servicer, you need to continue monthly payments on your original loan.
Find Student Loan Relief Through Refinancing
Student loan debt can be overwhelming, but it can be made more manageable when you refinance your loan. Whether you’re looking for a variable or fixed rate interest, you can likely find a lender who will offer agreeable terms and help alleviate your student loan woes.
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