8 Pro Tips on Student Loan Refinancing

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Refinance rates with Laurel Road start at 1.89%.

Checking your rates won’t affect your score.

Check out Laurel Road

Student loan refinancing offers a chance to lower your interest rate and choose new terms on your debt, if you qualify. But as with any approach to managing finances, refinancing isn’t for everyone.

While some borrowers could save money through refinancing, others might not see any savings — or could have trouble qualifying in the first place.

For more on the pros and cons of refinancing, we asked student loan experts what their take was. Here’s what they had to say about the benefits of refinancing — and where it falls short.

1. You could save a lot of money on interest

One of the biggest benefits of refinancing student loans is getting a lower interest rate. If you can meet requirements for credit and income — or apply with a cosigner who can — you could qualify for a low rate on your refinanced student loan.

“Refinancing can be a great way to save thousands of dollars by getting a lower interest rate,” said Travis Hornsby, a chartered financial analyst and founder of Student Loan Planner.

Let’s say you have a $30,000 student loan with a 6.8% interest rate on a 10-year repayment plan. If you refinanced that rate down to 4.5%, you’d save $4,119 in interest over 10 years.

“The big advantage with refinancing is the potential savings on interest,” said Michael Lux, attorney and founder of The Student Loan Sherpa. “It can mean lower payments each month and free up cash for things like buying a house or saving for retirement.”

Not only could you set aside the money you’re saving each month on interest, but you could throw it at your student debt to pay it off even faster.

2. … but your savings might not be as big as a lender advertises

Although lowering your interest rate may save you money, you also have to be careful not to get taken in by overblown promises from a lender.

Some might claim to offer you thousands of dollars in savings, but the math only works if you choose a specific repayment term and make a certain monthly payment.

“Lender advertisements concerning savings may not reflect the experience of individual borrowers,” said Mark Kantrowitz, publisher and vice president of research at SavingforCollege.com. “Even if the savings are real, most of the savings will come from a shorter repayment term and higher monthly payment, not from the lower interest rate.”

If you doubled your monthly payment, for instance, you could get out of debt in about half the time — with or without refinancing first.

“You can easily implement a higher monthly payment on your own, without refinancing, by making extra payments to [the] principal,” said Kantrowitz.

Although refinancing for a lower rate could maximize your savings, you also need to make sure refinancing is the right choice for your individual situation.

3. Shopping around will help you find the lowest rates

If your priority is finding the lowest interest rate, compare offers from a variety of lenders before choosing one.

“The best way to get a favorable rate is to shop around with a number of lenders,” said Lux. “Each lender uses different criteria when evaluating applicants, so the company advertising the lowest rate may not actually offer the best rate.”

Although comparing multiple offers might sound time-consuming, it doesn’t have to be. Some lenders instant rate quotes, so you can get a sense of your rate after providing just a few pieces of personal information.

Plus, these rate quotes won’t impact your credit score and don’t require any commitment. So if you’re curious if you’ll qualify, you could easily find out from lenders such as SoFi, CommonBond, and Earnest in a matter of minutes.

4. … but be careful about sacrificing federal benefits

Both private and federal student loans are eligible for student loan refinancing. But refinancing federal student loans turns them private, which means you’ll lose access to federal repayment plans, forgiveness programs and other perks.

“If you refinance a federal loan into a private loan, you walk away from important federal benefits and consumer protections, such as income-driven repayment, loan forgiveness programs, default resolution options, flexibility during times of hardship and discharges based on disability or death of the borrower,” said student loan lawyer Adam S. Minsky.

The federal government offers a variety of options to help you through periods of financial hardship, but private lenders aren’t always so flexible. Some allow you to postpone student loan payments through forbearance if you lose your job or return to school, but not all of them do.

So if you foresee needing federal programs in the future — or are working toward a program like Public Service Loan Forgiveness — refinancing your federal student loans would probably be a bad idea.

Even if you don’t mind sacrificing federal protections, check to see what benefits your prospective refinancing provider offers before committing to refinance with them. Some lenders, for instance, offer unemployment protection and even career counseling to their customers.

As Minsky advised: “Borrowers should thoroughly understand what they are getting — and what they are giving up — with any refinancing product before they sign.”

5. You can simplify repayment by combining multiple loans into one

Along with potentially saving you money on interest and choosing new terms on your student loans, refinancing also comes with another possible perk: the chance to consolidate several loans into one.

“The benefits of refinancing student loans include streamlining the repayment process by replacing multiple loans with a single loan,” said Kantrowitz.

Instead of keeping track of multiple payments and due dates, you’ll only have to remember one. This consolidation could simplify the repayment process and make it easier to pay back your debt.

Plus, you might have the option of refinancing parent PLUS loans or other loans that a parent took out on your behalf. As a result, you can assume responsibility for the loan, so your parent’s credit is no longer on the line.

This transfer of responsibility might be the solution you’ve been looking for to get your parent off the hook for your education debt.

6. … but be careful about which student loans you refinance

Although refinancing lets you simplify repayment by consolidating multiple loans, you don’t have to refinance all your loans. Instead, you might benefit from cherry-picking just one or two to refinance, depending on where you’d see the greatest interest savings.

For example, let’s say a lender is offering you a refinanced student loan at 5.00%. One of your loans has a 7.00% rate, so this reduction would save you money. But your other loan has a 4.00% rate, so accepting this offer could obviously cost you extra on that particular loan.

Instead of refinancing all your loans, figure out how you’d benefit the most. In some instances, you might have better luck just by focusing on your high-interest loans with the debt avalanche method of repayment.

“Some borrowers may be better off targeting the highest-rate loan for quicker repayment,” said Kantrowitz. “You can’t do that after consolidating. If the interest rate on the refi will be higher than most of the interest rates on the refinanced loans, except for one or two, you may save money by accelerating repayment of the highest-rate loans instead of refinancing.”

7. Refinancing more than once could lower your interest rate even more

Since refinancing has the potential to lower your interest rate and restructure your debt, it stands to reason that refinancing multiple times could benefit your finances further.

But refinancing more than once is likely only worth the effort if you can snag a lower interest rate the second or third time around.

“There might be an advantage to refinancing a student loan more than once … in an economic environment where interest rates are dropping,” said student loan lawyer Jennifer Weil.

However, Weil notes that this “is not where we are right now.” (For example, the Federal Reserve Bank of St. Louis rates continuing to rise over the short term.)

Another reason to refinance again would be if your credit score and income have gone up, and you want to see if you could qualify for even better terms.

Finally, you might refinance again to remove a cosigner from your loans. But before going this route, check to see if your lender already offers cosigner release after a period of on-time repayment.

8. … but be strategic about choosing a fixed or variable rate

When you refinance student loans, you have the chance to adjust your monthly payment by choosing new repayment terms, usually between five and 20 years. You’ll also get to choose between a fixed rate, which stays the same over the life of your loans, and a variable rate, which could fluctuate with the market over the years.

Choosing between fixed and variable rates is entirely dependent on the student’s loan situation,” said Jacob Dayan, CEO and co-founder of tax services company Community Tax. “The length of time at which the loan will be paid back is a strong indicator when choosing between fixed and variable rates.”

Currently, variable rates usually start out lower than fixed ones, so they could save you money if you’re planning to pay your loan off quickly. But if you’re selecting a longer repayment term, a variable rate becomes more risky.

“Students who are able to pay off their loan relatively quickly have often sided with a variable rate,” said Dayan. “However, the longer it takes a student to pay off the loan with variable rates, the more chances there are for the rates to change over the lifetime of the loan. If a student’s future income is uncertain, and they don’t plan on paying off the loan quickly, many students consider fixed-rate student loans for more consistency.”

Use our student loan payment calculator to estimate the short- and long-term costs of each repayment plan and interest rate. By doing out the math, you can focus in on a repayment plan that works for your budget.

Weigh the pros and cons of refinancing to see if it’s right for you

The student loan experts we spoke with agree that refinancing has the potential to save you money on interest and restructure your debt with a plan that’s beneficial for your finances.

But you should also be careful about giving up federal protections, since these could come in handy if you lose your income or if you are in danger of going into default.

Whenever you’re dealing with loans, it’s important to benefits and drawbacks before making changes.

That way, you won’t make a challenging situation worse, but instead can make an informed choice that helps you conquer your student loan debt once and for all.

Interested in refinancing student loans?

Here are the top 6 lenders of 2021!
LenderVariable APREligible Degrees 
1.89% – 5.99%1Undergrad
& Graduate

Visit Splash

1.99% – 5.64%2Undergrad
& Graduate

Visit Earnest

1.99% – 6.84%3Undergrad
& Graduate

Visit CommonBond

1.91% – 5.25%4Undergrad
& Graduate

Visit Lendkey

2.25% – 6.53%5Undergrad
& Graduate

Visit SoFi

2.17% – 4.47%6Undergrad
& Graduate

Visit PenFed

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of Feburary 1, 2021.

2 Important Disclosures for Earnest.

Earnest Disclosures

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 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% 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 October 26, 2020, 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 10/26/2020. 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 [email protected], or call 888-601-2801 for more information on our student loan refinance product.

© 2020 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.

3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. 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 0.15% effective Jan 1, 2021 and may increase after consummation.

4 Important Disclosures for LendKey.

LendKey Disclosures

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.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 02/17/2021 student loan refinancing rates range from 1.91% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.

5 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: 1. Fixed rates from 2.99% APR to 6.99% APR (with AutoPay). Variable rates from 2.25% APR to 6.53% 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 2.25% APR assumes current 1 month LIBOR rate of 0.12% plus 2.38% 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. See eligibility details. 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. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *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.Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

6 Important Disclosures for PenFed.

PenFed Disclosures

Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99%-5.15% APR and Variable Rates range from 2.17%-4.47% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are 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.