10 Essential Things to Ask Before Refinancing Your Student Loans


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 2%.

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?

Here are the top 6 lenders of 2017!
LenderRates (APR)Eligible Degrees 
Check out the testimonials and our in-depth reviews!
2.81% - 7.12%Undergrad
& Graduate
Visit SoFi
2.57% - 6.39%Undergrad
& Graduate
Visit Earnest
2.81% - 7.12%Undergrad
& Graduate
Visit CommonBond
2.99% - 6.99%Undergrad
& Graduate
Visit Laurel Road
2.58% - 7.26%Undergrad
& Graduate
Visit Lendkey
2.79% - 8.24%Undergrad
& Graduate
Visit Citizens
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Published in Federal Student Loan Refinancing, Pay Off Student Loans, Private Student Loan Refinancing, Refinance Student Loans

  • Good stuff Andy!

    How about pre-payment penalties? On a fixed rate consolidation product, the lender wants to lock in a guaranteed rate of return from the borrower in exchange for absorbing the risk of market rate increases that would go above the rate issued on the application, so they may charge a pre-payment penalty to ensure a rate of return if the borrower attempts to pay it off early.

    The risk on a variable rate consolidation may be mitigated by pre-paying on the application while rates are low. If rates increase in the future, it may be after a significant amount of principal is repaid, effectively reducing the amount of total interest that may accrue due to future rate variability.

    Also, how about Prime versus LIBOR?

    • Great points Ken! Pre-payment penalties are such a silly concept, but a harsh reality for many borrowers. I hope additional competition between financial institutions will force banks to rethink pre-payment penalties. Also, your point about variable vs. fixed can be a great strategy if the borrower is paying close attention to the interest rate environment and has created the appropriate pre-payment strategy.

  • Julie

    My son has roughly 25,000 in private loan debt through 4 different lenders. He is a junior in college. When is the best time to start the consolidation process? Can he combine Sallie Mae loans with other private loans? I’m not worried about the federal loans. Just the private ones.

    • Hi Julie,

      That’s a great question. Typically borrowers have to wait until at least their final semester in college to start the consolidation application process. For all our lending partners, the borrower must have at least a written job offer to apply as well. So once he’s ready with these things (or has already graduated and/or already has a job), that’s the best time to start.

      Yes, any kind of student loan (federal or private from any lender) can be combined into a consolidation loan.

      Hope this helps. Let me know if you have other questions.


      Student Loan Hero

  • MYP

    I currently have 50563.89in student loans with ED Financial services at 8.00 fixed rate. If I have already consolidated my loans, can I get them refinanced with my credit score currently over 730? I have been paying on them since 1996 and the balance is not decreasing fast enough. Over 200 dollars of my 469.00 payment goes to interest only. Does the Obama student loan program assist with this as well as I have heated mixed reviews with the various companies that handle the loans. Any help would be greatly appreciated. Thanks!

  • LBA

    Between unpaid medical bills and long-standing student loans, my credit score (which used to be really good) has seen a depressive decline over the past two years. I currently owe $46k in student loans, three of which are consolidated through the Dept. of Ed Direct Loan program. The interest rate in these loans ranges from 5 to 8%. Is refinancing the best option for me, and if so, are there any lenders that will accept a low credit score?

    • Hi LBA,

      Sorry to hear about your troubles here. Currently you need a credit score around 680 or higher to qualify for refinancing. I’m afraid that it’s going to be tough to do that with a lower score unless you’re able to use a cosigner.



  • Jamie Nicole

    I previously did a student loan consolidation, not through here, and they conveniently forgot to actually payoff the whole amount of the loans on 7 accounts. I only recently found this out when I went to do a home loan and was turned down due to 7 student loans in collections for the last 4 and a half years. Mind you the department of education did this and so far are making excuses and not willing to fix it or my credit report. Is that even consolidation? Or legal? And can I transfer them out of the us department of education holding? They unfortunately are killing my credit score due to their error alone! I can’t go back to school to finish my degree because the accounts are in collections, buy a house, get a tax return, all because they made an error and refuse to fix it 🙁

  • Patti Smith

    My son has a private school loan, and make payments to Navient. He has been paying for 10 years on the school loan. Is there a way to get this loan forgiven, or refinance to an income based payment? He currently can not afford health insurance, due to school loans. He has 2 children to support, Make 13.50 an hour and is struggling with his school loan payment. Is there a “loan hunter” for lack of better term that we can contact to help us understand and figure all this out? We try to discuss with Navient, which has not lead to any change. His interest rate is variable, altho fairly low at this time. I would be of interest in a loan forgiveness program, or assistance. Thank you.

  • Mike

    So I have looked into refinancing my student loans and what I am finding is unbelievable. Currently I have one federal loan for $65,000 with a fixed interest rate of 6.125% for a 30 year term. I have 29 years left on that loan. I have no other debts (no car payment, no rent/mortgage, not even a dollar on my credit card). I see a lot about SoFi so i went to their website and put in all my info to get a rate from them. Keep in mind I have my MBA, my credit score is a 751, and I have a full time job. I am interested in the longer options (15-20 years). I am in shock that their fixed rate for me for 15 years is 6.49% and the 20 year is 6.7%. Both are HIGHER than what my percentage is now. This is already shown with the autopay discount applied. I went back and changed my income from $60,000 to $150,000 just to see what would happen to the rates. Both fixed rates for the 15 and 20 year term were STILL higher than my 6.125% now. I mean honestly, how many people that are looking into refinancing are making over $150,000 with no other debts and a credit score above a 750. How does this help the average guy. I realize some borrowers have a higher rate from the federal loans and also choose variable but come on now. Not even a rate a little lower haahha what a joke. This was not just the case with SoFi but also two other ones i looked into. When I got the reps on the phone they tried to get me to complete the application fully but also said the rates typically do not change much from the soft credit pull rates I saw originally. This just doesn’t make sense to me.

  • Marcella Prokop

    This is great, but for a person who didn’t finish his degree, it’s impossible to refinance, correct? That’s why my husband has been told.