6 Student Loan Refinancing Mistakes That Could Cost You — and How to Avoid Them

 August 22, 2019
How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners.

student loan refinancing mistakes

We’ve got your back! Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less

Refinance Student Loan rates starting at 1.74% APR

1.74% to 8.70% 1

Visit Lender

1.74% to 7.99% 2

Visit Lender

4.44% to 8.09% 3

Visit Lender

  • Variable APR

Lower interest rate, shorter loan period, more money in your pocket. The potential outcomes of student loan refinancing can sound appealing. And for some people, refinancing is a smart way to consolidate debt and potentially reduce the cost of student loans.

But refinancing doesn’t guarantee a lower interest rate, and refinancing federal student loans may cause you to miss out on options for student loan forgiveness. Consider, too, what could happen if you lose your job after refinancing and can no longer afford to make payments.

Before signing on the dotted line, make sure you’re not making any of these student loan refinancing mistakes:

1. Checking your rates with only one lender
2. Thinking you have to refinance all of your loans
3. Not comparing different repayment plans
4. Giving up federal loan protections (if you need them)
5. Not finding a cosigner
6. Prematurely stopping payments on your old student loans
How to avoid student loan refinancing mistakes

1. Checking your rates with only one lender

It’s essential to thoroughly compare refinancing offers before you commit to one. Offers differ among potential customers based on factors including your credit score and overall financial picture. That’s why a great lender for someone else may not be the best for your situation.

To evaluate your options, consider requesting a rate quote from multiple lenders online. You’ll enter a few basic pieces of information, including your total student debt, income and education level. You’ll then undergo a soft credit check to give the lender a sense of your financial history.

This soft check won’t hurt your credit score. Then, you’ll be able to quickly compare fixed and variable interest rates and different repayment terms. Most lenders offer terms between five and 20 years.

Once you’ve reviewed offers, you can look more closely at the lenders offering the best rates for you. Understand what fees you might be subject to, including late payment fees. Check how easy it is to get in touch with customer service and what options are available if you need a lower payment or more flexibility in the future.

Whatever your criteria for choosing a lender, make sure to shop around. That way, you can find the best deal for refinancing your student loans.

2. Thinking you have to refinance all of your loans

Be strategic about which loans you choose to refinance. Depending on your situation, it might make sense to refinance just one of your loans or to refinance multiple loans together.

Student loan interest rates should be a major factor in deciding which loans to refinance. Federal student loans have a standard interest rate that varies by year, but when you get a loan, that rate will be fixed for its entire term. Private loans can have a wide range of interest rates, depending on the borrower’s credit and financial history. For example, the fixed interest rate for federal direct loans for undergraduates for the 2019-2020 academic year is 4.53%. Fixed interest rates on Sallie Mae private student loans for undergraduates, on the other hand, currently range from 4.74%* to 11.35%* APR (which include a discount for making automatic payments). If you have student loans with interest rates higher than 5%, it may be worth seeing if you could get a lower rate by refinancing. But you can choose not to refinance loans that already have comparatively low rates.

Additionally, some borrowers might benefit from refinancing their private student loans, but not their federal ones. When you refinance federal student loans, you lose access to helpful federal programs like income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF). It’s possible to leave your federal loans alone, and to refinance only private loans into a single new loan.

3. Not comparing different repayment plans

Before choosing a repayment plan for your new refinanced loan, it’s important to run the numbers. Compare your old term and interest rate with the new ones you’ll get through refinancing. You’ll see exactly how much you’ll save on a lower interest rate or shorter repayment term. Or, if you need lower monthly payments, you’ll see how your new loan will affect your budget.

For example, let’s say you have eight years remaining on your old student loan balance of $30,000. Altogether, these loans have a weighted average interest rate of 6.80%. When you apply for refinancing, you qualify for a 4.75% interest rate.

On a seven-year repayment plan, you’ll pay just $15 more each month but save $3,657 in interest over time. On a five-year repayment plan, you’ll pay $157 more per month but save $5,217 total in interest. Plus, you’ll get out of debt three years ahead of schedule.

By crunching the numbers with a student loan refinancing calculator, you can see how refinancing your loans to a lower interest rate or different term will affect your payments. In general, the shorter the loan term, the less money you’ll pay in interest over time, but it can be smart to choose a loan repayment amount that fits your monthly budget, too.

4. Giving up federal loan protections (if you need them)

When you refinance federal loans, you turn them into private loans. As a result, you lose access to federal benefits like IDR plans, which lower monthly payments to a percentage of your income, and loan forgiveness programs. Whether you can afford to forfeit these options depends on your goals and career path.

If you’re working toward federal loan forgiveness, you shouldn’t refinance your loans. If you suspect your income might drop in the future, it may be wise to keep your federal student loans and maintain access to IDR plans so you can lower your monthly payments as needed. Plus, you may not save much on interest if the rates on your federal loans are close to what you’d get by refinancing.

But it’s also important to know what refinance lenders may offer in forgiveness-type opportunities. For example, some private lenders offer flexible repayment terms or forbearance in case of financial hardship. Speak with potential lenders about your concerns; they can help answer “what if?” questions so you can refinance your student loans with a full understanding of what you’re gaining and what you may be giving up.

5. Not finding a cosigner

One way to unlock the best student loan refinancing rates is to be a competitive applicant with very strong credit. That could be the case if you scored a lucrative job out of college, are free of other debt and earn a large income. But if not, you may be able to access lower interest rates by applying with a cosigner.

Your cosigner could be a parent, a partner or another person with strong credit and solid income. They should know, though, that they take on risk when cosigning a loan. If you can’t repay the loan, the cosigner is responsible for it.

Talking through expectations alongside contingency plans if, say, you were unable to pay the bill due to a job loss, can help make sure you’re both on the same page and enable you to decide if a cosigner is the right option for you.

6. Prematurely stopping payments on your old student loans

From start to finish, the process of refinancing your student loans usually takes a few weeks. In the meantime, you must continue making payments on your original loans. If you miss payments, your loan could become delinquent or go into default, which could seriously dent your credit score.

Before you stop paying your original student loan, make sure you receive confirmation from your new lender that the new loan has been issued, and set up your first payment. Log in to your old loan account to make sure the balance has dropped to $0, which confirms that your new lender has paid it off.

Once you get the green light from your new lender and are confident the old loan balance is $0, you’re ready to make payments toward the new loan only.

How to avoid student loan refinancing mistakes

Before making changes to your student loans, do your research. Thoroughly understanding how refinancing works can help you avoid the above mistakes.

As long as you’ve thought through your options, refinancing can be a smart financial move. You could simplify your monthly payments and save on interest over time.

For more debt payoff inspiration, here are some of the best tips for paying off your student loans faster.

*Rate accurate as of August 20, 2019.

Anna Davies contributed to this repor

Interested in refinancing student loans?

Here are the top 9 lenders of 2022!
LenderVariable APREligible Degrees 
1.74% – 8.70%1Undergrad
& Graduate

Visit Splash

1.74% – 7.99%2Undergrad
& Graduate

Visit Earnest

4.44% – 8.09%3Undergrad
& Graduate

Visit CommonBond

1.74% – 7.99%4Undergrad
& Graduate

Visit SoFi

1.89% – 5.90%5Undergrad
& Graduate

Visit Laurel Road

1.74% – 7.99%6Undergrad
& Graduate

Visit NaviRefi

2.05% – 5.25%7Undergrad
& Graduate

Visit Lendkey

1.86% – 6.01%Undergrad
& Graduate

Visit Elfi

& 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 May 4, 2022.

2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 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%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Let us know if you have any questions and feel free to reach out directly to our team.

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 Apr 22, 2021 and may increase after consummation.

4 Important Disclosures for SoFi.

SoFi Disclosures

Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR 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. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

5 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.


This information is current as of April 29, 2021. Information and rates are subject to change without notice.

6 Important Disclosures for Navient.

Navient Disclosures

You can choose between fixed and variable rates. Fixed interest rates are 2.99% – 8.24% APR (2.74% – 7.99% APR with Auto Pay discount). Starting variable interest rates are 1.99% APR to 8.24% APR (1.74% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.

7 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 5/17/2022 student loan refinancing rates range from 2.05% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.93% Fixed APR with AutoPay.

8 Important Disclosures for PenFed.

PenFed Disclosures

Fixed Rate Loan Terms: 5 years/60 monthly payments, 8 years/96 monthly payments, 12 years/144 monthly payments or 15 years/180 monthly payments. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed rates range from 3.29% to 5.43% APR. Rates are subject to change without notice. Fixed APR: Fixed rates will not change during the term. This rate is expressed as an APR. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan. 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.