Top Student Loan Refinance Providers
APR. Fixed Rate
APR. Variable Rate
5, 8, 12, or 15-year terms
Student Loan Refinance
APR. Fixed Rate
APR. Variable Rate
Pros & Cons
Joint refinancing available for married couples
Good interest rates
The lender has a reputable standing
Bachelor’s degree is a minimum requirement
Some negative customer support reviews
No longer terms available for max loan
Student Loan Type
Private student loans
Student loan refinance
What Is Student Loan Refinancing?
Student loan refinancing replaces or consolidates existing loans into one new loan. It can save money on interest, simplify payments, and lower monthly payments. Refinancing federal loans with a private lender may result in losing access to federal loan benefits, including loan forgiveness. Refinancing can reduce interest rates and combine federal and private loans into one easy payment.
Student Loan Refinancing: Key Terms to Know
- Fixed-rate and Variable-rate: These are the types of interest rates available when refinancing. A fixed rate remains constant over the duration of the loan, while a variable rate can fluctuate based on market conditions.
- Cosigner: This is a person who co-signs your student loan refinance application. They agree to be legally responsible for repaying the loan if the primary borrower fails to make payments. A cosigner can help a borrower with a low credit score qualify for a loan or secure better terms.
- Federal Loan Protections: Federal student loans offer certain protections that may not be available with private loans. This includes benefits like loan deferment, forbearance, and Public Service Loan Forgiveness. Refinancing federal loans with a private lender could result in the loss of these protections.
- Debt-to-Income Ratio: This is a measure lenders use to evaluate a borrower's ability to manage monthly payments and repay debts. It is the ratio of total monthly debts to total monthly income.
Applying for a Student Loan Refinance
The process to apply for student loan refinancing is much like applying for any other type of loan. Once you find a lender willing to work with you based on your needs and credit history, complete the loan application process and the lender will automatically pay off all your existing loans. Once the loan disbursement has gone through, you will have a new monthly payment amount, interest rate, and loan payoff date.
Best Time to Refinance Student Loans
There are several instances when refinancing your student loans could be beneficial and save you money. For example, maybe your credit score has increased significantly or the general rate environment has improved.
Here are some of the best times to refinance your student loans.
- Your finances have improved: Getting a new job with a higher salary or improving your credit score can greatly impact your finances. If you are in a better position and you can qualify for a loan with much better terms, then it could make sense to refinance for significant savings.
- You have multiple loans: Taking track of multiple loans with different monthly payments can be stressful. When you refinance, you can combine all of your student loans into one easy-to-manage monthly payment.
- You have loans with high variable rates: Variable-rate loans can be expensive to pay, especially if interest rates start to increase. By refinancing your variable-rate loans into fixed-rate, you can know exactly how much interest you will pay over the life of the loan.
- Interest rates are low: It's important to keep track of if the Federal Reserve is increasing or cutting rates. If rates are decreasing, you may want to look into your options for securing a lower rate.
When looking to refinance your student loans, the best time is when it can save you money.
Pros and Cons of Student Loan Refinancing
There are many pros and cons to student loan refinancing that you should consider before doing so. Let us take a look at some of the reasons that student loan refinancing may or may not make sense for your financial situation.
How to Refinance Your Student Loans
Refinancing your student loans is a simple process that can be done in as little as a few days. It can save you money, reduce your monthly payment, and make repayment easier due to better terms and conditions. Here are some of the basic steps that you should know.
- Asses your current situation: It is important to know where you stand before applying for any type of refinancing. Check the rates and terms of your current student loans, and look at your credit report to determine if any significant improvements would qualify you for a lower interest rate and better terms.
- Shop around and compare lenders: After you prequalify, take a look at which lenders you may want to consider. Compare rates, terms, and monthly payments to find the loan that makes sense for you.
- Apply for the loan: Prequalifying for refinancing can take only a few minutes with no impact on your credit. Once you prequalify, you can go ahead and fill out the loan application directly with the lender.
- Start paying your loan: Once you’ve signed the loan agreement and got approved, your lender should pay off your student loans on your behalf and give you a new monthly payment date and amount. Continue to make all your payments on time and in full until the end of the loan term.
Current Average Rates for Student Loan Refinancing
Interest rates for student loan refinancing depend on your credit score, refinancing amount, and loan term. The lender you choose to work with can also have an impact on refinancing rates.
As of April 2023, current interest rates averaged between 4.99% and 8.99% for fixed-rate loans and 4.54% to 9.19% for variable-rate.
- Fixed-rate: 4.99% to 8.99%
- Variable rate: 4.54% to 9.19%
Student Loan Refinancing Qualification Criteria
The specific qualification criteria for student loan refinancing vary depending on the lender, but here are some general factors that lenders may consider:
- Credit score: Most lenders require a good or excellent credit score for refinancing, typically around 650 or higher. However, minimum credit score requirements can vary from lender to lender. Some lenders may allow students with credit scores as low as 580 to obtain a loan, whereas some lenders may require a minimum credit score of 710.
- Income: Lenders may require proof of stable income or employment to ensure you can make your loan payments.
- Debt-to-income ratio: Lenders may also consider your debt-to-income ratio, which compares your monthly debt payments to your monthly income.
- Education: Some lenders may require you to have completed a degree from an accredited institution.
- Loan type: Some lenders may only refinance certain types of loans, such as federal or private student loans.
- Citizenship or residency status: Most lenders require that you are a U.S. citizen or permanent resident.
It's important to note that meeting these criteria does not guarantee approval for refinancing. Lenders may also consider other factors, such as your employment and credit history when deciding.
If you have bad credit or no credit history, the chances of qualifying are pretty low. If you do happen to qualify, you may be required to pay some of the highest interest rates on the lending market. This is where a co-signer with an excellent credit score can help you qualify and lock in a much lower interest rate.
Should I Use A Cosigner When Refinancing My Student Loans?
Using a cosigner to refinance your student loans may increase your chances of qualifying for a loan or finding a loan with a better rate. This is especially true if you have a lower credit score. Remember that if you cannot pay your loan, your co-signer will become responsible for the loan and be required to make payments. That is why it is important that both you and the co-signer fully understand what you are agreeing to before going through with a loan offer.
When refinancing your student loans, there are many things to consider. Most importantly, you should be refinancing your loans to your benefit. Whether it is to save money with a lower interest rate or lower your monthly payment, it is important to find the right loan for your situation. You can make sure you find the best student loan refinancing options by going online and prequalifying.