10 Essential Things to Ask Before Refinancing Your Student Loans

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Refinancing your student loans can be a smart strategy. You can secure a lower interest rate, reduce monthly payments, or otherwise renegotiate the terms of your debt.

But like most money moves, refinancing student loans should be carefully thought out to ensure it’s the best option. Ask these 10 questions as you refinance your student loans to make the best decision.

1. What is my main goal for refinancing student loans?

The first thing you need to decide 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 be clear on which benefits are most important to you. Your overall goal will dictate your refinancing decisions 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 first figure out what your current rates are. Interest rates on federal student loans can range from just under 4% to over 7%, depending on the type of loan. Private student loan rates can be even higher, averaging around 9% to 12%.

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.

The higher your current interest rate, the more you’ll benefit from refinancing to a lower rate. A lower student loan rate will save you money as it charges less interest and will reduce monthly payments. The best lenders that refinance student loans offer rates starting as low as 1.95%.

3. What are my student loan payoff amounts?

When researching the interest rates on your current loans, you should also note the payoff amount. This is the amount you owe to pay off student loans in full. It’s higher than the current balance because it includes any interest you still owe.

The total payoff amount for all the student loans you hope to combine through refinance will be the balance of your refinanced loan.

If you have higher student loan balances, you might want to choose a longer repayment period to keep monthly payments manageable. With a lower balance, a shorter term could help you save on interest.

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?

Whether new student loan payments will be affordable will depend mostly on your income. The more you earn each month, the more you can afford to pay.

Under federal guidelines, affordable monthly payments are equal to 10 percent of your discretionary income.

Take a look at your budget and add up your bare-minimum monthly living costs. Any money left over is discretionary income, which you can decide what to do with. Calculate 10 percent of that amount and you’ll get an idea of the monthly student loan payment you can afford.

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 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. What is my credit score?

When heading into the refinancing process, you need to know what your credit score is and what it means to private lenders.

If you know your credit score, you can see what kind of interest rates and terms you might qualify for. Hopefully, your credit score has improved since you first took out student loans. It’ll be easier to qualify for a refinance and get favorable terms if you have good credit.

You can view your credit score on sites like Mint, Credit Karma, or Credit Sesame.

6. Do I need a cosigner? Is cosigner release an option?

If your income or credit score is too low, your new lender might require a cosigner to insure your student loans in the case of default. Learn more about refinancing with a cosigner here.

Alternatively, you might want to refinance a student loan in order to release a cosigner from your original loan.

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.

7. Can I combine both federal and private student loans?

If you’re planning to refinance both federal and private student loans, you’ll want to make sure that’s possible.

There wasn’t always the option to consolidate federal and private student loans together, but some lenders like Laurel Road and SoFi are now refinancing both types of loans bundled together. This can ultimately help you get a lower interest rate to save money.

Check with the private lenders you are interested in to see how they handle consolidating federal student debts with private loans.

8. Will I need federal student loan repayment options in the future?

If you’re looking into refinancing federal student loans funded through the Federal Student Aid office, you should know what you’re giving up. Federal student loans offer many options and protections that won’t be available if you refinance.

If you refinance a federal student loan with a private lender, you could lose out on options like:

  • Income-based repayment plans
  • 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.

9. Does this lender offer flexible repayment options?

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, offers community-funded loans that have flexible options including forbearance and alternative payment plans. Many private lenders will also agree to honor your grace period, so even if you refinance right after graduating you’ll still have those first six months payment-free.

10. What type of support and customer service does the lender provide?

At Student Loan Hero, this is the most important question we ask our banking partners.

As student loan borrowers ourselves, we have worked with banks that provide terrible customer service. A lender like that will add to your student loan stress and make managing this debt a miserable experience.

You will be working with your new bank or lender for the next five to 20 years. Be sure to do your research before refinancing your student loans to ensure that you save money and have no regrets.

Interested in refinancing student loans?

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. 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.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR 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. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures


4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.