6 Best Reasons to Refinance Your Student Loans in 2018

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Do you feel overwhelmed by your student loan payments?

It can be time-consuming and tedious to keep track of all of them. Not to mention expensive to pay interest on several different loans each month.

This is where student loan refinancing comes in. Refinancing modifies your existing student loans to save you money, get you out of debt faster, and eliminate a bunch of headaches in the process.

Here are some of the best reasons to refinance your student loans:

1. Lock in a lower interest rate

When you refinance your student loans, you combine all your federal and private loans into one new loan with a private lender. This private lender could be a bank, credit union, or an online lender like SoFi or CommonBond.

Before giving you offers, the lender reviews your income and credit score. If you have a steady job and strong credit, you could qualify for excellent interest rates since these factors show the lender you’re not a risky candidate for a loan.

Most lenders look for a credit score of 650 or higher. If your score falls below that mark, applying with a cosigner could net you a better interest rate. Adding a cosigner to your application can be another way to reduce risk in the eyes of the lender.

The lender will offer you a variety of loan terms with both fixed and variable interest rates. Variable rates tend to be lower than fixed rates at the beginning, but they could go up or down over time. Whatever you choose, lowering your interest rate could save you lots of money over the life of your loan.

Let’s say you have $50,000 in student loan debt with an average interest rate of 6.80%. Through refinancing, you lock in a new fixed interest rate of just 4.99%. After 10 years of repayment, you would save over $5,400 on interest.

2. Lower your monthly payments

Refinancing your student loans can mean a lower interest rate, but it can also change your repayment terms.

Most federal and private loans come with a 10-year repayment term. Although student loan refinancing options vary by bank, most repayment options range from five- to 20-year terms.

If your current loan has a 10-year repayment term and you refinance to a 20-year term, your monthly payments will drop significantly. This can help increase cash flow in your monthly budget.

Let’s reconsider that example of $50,000 in debt at a 4.99% interest rate. On a 10-year term, you’d pay $530 per month. But if you lengthened your repayment term to 20 years, you’d pay just $330 every month. That monthly savings of $200 could be just what you need to make rent or buy groceries.

The federal government also offers some income-driven repayment plans, such as Pay As You Earn (PAYE) and Income-Based Repayment (IBR), but they only apply to federal student loans. Plus, you might not qualify if you don’t meet the income requirement.

Student loan refinancing helps grads who don’t qualify for income-based repayment, but also don’t make enough money yet to manage their student loan payments comfortably.

Keep in mind, though, that a longer payment term can mean more interest paid over time, even though the rate is lower. So pay attention to the total cost of the loan and consider paying it off early when your finances improve. There’s often no penalty for prepaying your loans before the term is up (but check with your lender to be sure).

3. Take advantage of a flexible repayment plan

Banks and other private lenders aren’t usually known for their flexibility, but some do offer helpful repayment options if you go back to school or run into financial hardship.

SoFi, for instance, lets you defer your monthly payments if you go back to school on a half- or full-time basis. CommonBond offers temporary forbearance in the case of economic hardship.

Some private lenders, like SoFi and Laurel Road, also honor an existing six-month grace period. If you refinance as a student or right after graduation, you may not have to start paying until your grace period is up.

That being said, refinancing your student loans with a private lender means you lose access to federal repayment plans. Some of these plans include Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR).

Plus, you won’t have access to federal loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF). So before refinancing, make sure you don’t need these federal programs.

If you run into financial difficulty after refinancing, speak with your lender about a flexible repayment plan.

4. Release a cosigner from your student loan

If your parents are cosigners on your current student loans, you already know the stress this adds to your relationships. What’s more, your loan impacts your cosigner’s credit and their ability to borrow additional funds.

When you refinance with a private lender, you could be eligible to release your cosigner. Some lenders remove your cosigner from the loan after you make on-time payments for a certain number of months. Two banks that currently offer cosigner release are LendKey and Citizens Bank.

Once released, your cosigner can improve their credit score. As a result, they’ll gain access to new lines of financial capital to buy big-ticket items like a home or car.

If you’re looking to release a parent or other cosigner from your student loans, find out which lenders will work with you. If you have good credit and steady income, it will be a lot easier to release your cosigner.

5. Switch to a bank that cares about you

Many borrowers find themselves unhappy with their student loan lender. Student loan refinancing gives you the opportunity to switch to a new bank with better customer service.

There are tons of online reviews to help you decide between lenders. Because there are so many options these days, lenders must compete for your business.

Many new lenders in the refinancing space offer extensive online and phone-based customer service. Plus, they help you throughout the application process.

Research your options before making a move. You might find it easier to work with another lender with more transparent service and educational resources. Plus, if you can get a lower interest rate on top of better service, that’s a win-win.

6. Combine multiple student loans for easier management

Did you know the average Student Loan Hero user has seven loans with two or three different student loan servicers?

On top of that, student loan servicers buy and sell loans. That means you could end up sending your payments to new places every few years. This becomes confusing and hard to manage after a while.

Student loan refinancing allows you to combine multiple student loans into one debt. And one loan is easier to organize, track, and repay.

Rather than keeping track of multiple payments and interest rates each month, you only have to worry about making one payment — with one lower interest rate.

If you’re tired of dealing with multiple student loans with various terms, research your student loan refinancing options. You could save money, time, and a whole lot of hassle.

Still wondering if refinancing is a good idea for you? Answer a few questions below, and we’ll help you find the right solution.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderVariable APREligible Degrees 
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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.