Refinancing with Earnest
Refinancing rates from 2.47% APR. Checking your rates won’t affect your credit score.
But like most money moves, refinancing needs to be carefully thought out to ensure it’s the best option. While it might benefit some borrowers, it won’t make sense for everyone.
So if the question “Should I refinance my student loans?” is on your mind, here are 10 other questions you should ask yourself first to make the best decision.
1. What is my main goal for refinancing student loans?
The first thing you need to think about is what outcome you’re hoping for by refinancing student loans.
There are some great reasons to refinance student loans: You can lock in lower interest rates, reduce monthly payments, or get rid of debt faster.
It’s important to get clear on which benefits are most important to you. Your central student loan refinancing goal will guide your decision and help you choose the loan that will best meet your needs.
This student loan refinance calculator can help you compare refinance terms and see which gets you closest to what you want.
2. What interest rates can I get?
If you want to get a lower interest rate, you need to figure out what your rates are. Over the past 10 years, interest rates on federal student loans have ranged from 3.40% to 8.50%, depending on the type of loan and the rates offered at the time of origination. Private student loan rates have an even wider range, from about 4% to about 15%.
When you refinance your loans, you replace existing student loans with a new one. This gives you a chance to shop for a lower interest rate and get a better deal.
The higher your current interest rate, the more you’ll probably benefit from refinancing to a lower rate. You’ll also need to have good credit and to meet the underwriting criteria of the best lenders that refinance student loans.
A lower student loan rate can save you money since it reduces both your monthly payments and the amount of interest you’re assessed over the life of the loan.
3. What are my student loan payoff amounts?
When researching the interest rates on your loans, also note your loan payoff amount — the payment you’d need to make to pay off your student loans in full. It will be higher than the balance displayed on your loans because it includes any interest you still owe.
The total payoff amount for all the student loans you hope to combine through refinancing will be the balance of your new loan.
Refinancing student loans can change your loan terms and monthly costs. If you’re considering refinancing student loans, you’ll want to make sure your new payments will be manageable.
Wondering if refinancing is a good idea for you? Answer a few questions below and we’ll help you find the right solution! Otherwise, scroll down to read on.
4. How much can I afford to pay each month?
Once you have your payoff amounts, you can use our student loan payment calculator to see what your monthly costs could look like.
Depending on your needs, you’ll want to decide on the right student loan repayment period:
- A longer student loan term will result in lower monthly payments, which could be important if you have a low income, high living costs, a high student loan payoff amount, or a combination of these.
- A shorter repayment term will help you get out of debt faster and often comes with a lower student loan rate, helping you get out of debt while paying less.
Of course, borrowers’ abilities to repay will also depend on their unique circumstances.
The payments you’ve already been making can give you a baseline of what’s affordable for you. If you’re already making extra payments, that’s a good sign you could afford to switch to a shorter repayment period to save even more.
But if it’s been a struggle to make payments, consider refinancing under terms that will lower the payments and give you more room in your budget.
5. Will I need federal student loan repayment options in the future?
Are you struggling with payments, do you have an unstable income, or is your financial situation otherwise uncertain? These could be signs that refinancing isn’t right for you, at least not if you have federal loans.
That’s because refinancing with a private lender pays off federal student loans and replaces them with a new private student loan. This action is irreversible and will mean losing access to several important protections granted to federal student loan borrowers.
If you’re looking to refinance federal student loans, you should know what you’re giving up. Federal student loans offer many protections that won’t be available if you refinance:
- Alternative repayment plans, including affordable income-driven repayment options
- Federal student loan forgiveness programs
- Deferment or forbearance under federal rules
You should be confident that you can keep up on payments both now and in the future before giving up these protections.
6. Do I have good enough credit to refinance my student loans?
Your credit history will be a core factor that lenders will consider when deciding whether to approve or deny your student loan refinance application. Reviewing your own credit can help you see if you have a good credit score to refinance student loans.
It’ll be easier to qualify for a refinance and get favorable terms if you have good credit. A good-to-excellent credit score is required by most lenders, with minimum score requirements typically set at 650 to 680. Most lenders also tie refinancing rates to credit scores, with the lowest rates extended to borrowers with excellent credit (in the mid-700s and above).
Many refinancing lenders will also provide a free soft credit check. This option will generate a student loan refinance rate offer without triggering a hard inquiry on your credit report, which could lower your score by a small margin.
7. Do I meet lenders’ income requirements?
Generally, lenders will want to see that you have a steady income, which will allow you to afford monthly payments and repay your student loans.
Most lenders have income requirements but don’t publish them. As a general rule, an annual income in the range of the national median household income of $61,372 (per the U.S. Census Bureau) will give you a decent chance of qualifying for refinancing, with higher incomes viewed even more favorably.
But income isn’t the only factor that lenders look at to decide if you can afford your student loans. Many will be interested not only in how much you make, but also in how much you owe relative to your pay. This is measured with a debt-to-income (DTI) ratio that finds what percentage of your monthly income goes toward minimum payments on existing debt.
The lower your DTI, the better — a 43% DTI is typically the highest you can go to be considered for new credit, but most lenders prefer a DTI of about 30% or lower.
Use our DTI calculator to find out whether this factor will work in your favor or against you when applying to refinance student loans.
8. Do I need a cosigner? Is cosigner release an option?
If you’re rejected for student loan refinancing, or think that your income or credit score is too low to qualify, don’t give up.
Many lenders will allow you to refinance student loans with a cosigner who meets their lending requirements. Adding a cosigner can also help you snag a better student loan refinance rate than what you’d be offered on your own.
Alternatively, you might want to refinance a student loan to release a cosigner from your original student loan, replacing it with a new loan that doesn’t include the person. Perhaps your parents cosigned a student loan with you when you first entered college, for instance. If you now have a reliable job and a good financial history, it might be a good idea to remove them as a cosigner. Refinancing can allow you to do that.
9. Does the refinance lender offer flexible repayment options?
Even if you are confident in your ability to repay your student loans, there are no guarantees in life. It could still be wise to consider refinancing with lenders that offer borrower protections, such as deferment and forbearance.
While refinancing student loans means you’ll lose access to federal repayment plans, your lender might still provide flexible payment options.
Check to see if they have policies that allow you to adjust your payments if you’ve hit a rough financial patch. You should also ask about their policies and willingness to work with borrowers who are struggling to repay.
SoFi, for example, provides unemployment protection on its student loans, allowing borrowers to pause payments in the case of a job loss.
Many private lenders, such as Laurel Road, will also agree to honor your grace period — which, for federal loans, covers the first six months after you leave school. So even if you refinance right after graduating, you’ll still have some payment-free time to get on your feet.
10. What type of support and customer service does the lender provide?
It’s important to get the initial terms and rates right on your student loan refinance. But you should also consider the kind of experience each lender offers.
As student loan borrowers ourselves, we have dealt with loan servicers or lenders that provide poor customer service. A lender like that will add to your student loan stress and make managing this debt a miserable experience.
But a lender with solid customer service can help you manage your student debt more effectively and quickly resolve any issues that might arise.
You’ll be working with your new bank or lender for the next five to 20 years. Be sure to do your research and shop around before refinancing your student loans to ensure that you save money and have no regrets.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
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 will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 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% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
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.
The information provided on this page is updated as of 08/21/18. 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 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.24% – 7.24%3||Undergrad & Graduate|
|2.47% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|