Refinancing with Laurel Road
Refinancing rates from 1.89% APR. Checking your rates won’t affect your credit score.
Refinancing your federal student loans involves potential risks, including losing access to income-driven repayment plans and not being able to qualify for Public Service Loan Forgiveness.
It “can’t be undone,” said Jay Fleischman, a student loan lawyer.
You may be tempted to refinance so that you could get a lower interest rate or a smaller, more manageable monthly payment (or both). But you can’t ignore the risks of refinancing student loans.
5 risks of refinancing student loans
Here are some of the risks to consider:
You won’t have access to income-driven repayment plans
You won’t be able to qualify for Public Service Loan Forgiveness
You might need a cosigner
You could end up paying more in interest
Your student loan debt might not go away when you die
Consolidating your federal or private student loan debt into a new loan means you lose access to federal income-driven repayment (IDR) plans that can limit your monthly payments.
Some private lenders offer forbearance if you’re facing hardship, but it’s not the same.
If you’re worried about not being able to afford your student loan payments due to job loss or low wages, losing access to IDR options could be a big blow to your finances.
Refinancing your federal student loans prevents you from taking advantage of the Public Service Loan Forgiveness (PSLF) program.
You should weigh the risks of refinancing if you work at a nonprofit or for the government. With PSLF, the balance of your student loans could be forgiven after making 120 qualifying monthly payments.
There could also be other federal student loan forgiveness programs for which you won’t qualify if you refinance your student loans. In this case, it could make sense to take advantage of partial forgiveness programs and then refinance the remainder of your balance later.
If you don’t meet the credit requirements when you try to refinance with a private student lender, you might need to apply with a cosigner who has good credit, usually a family member or a friend.
A cosigner, who agrees to be responsible for your debt if you default, might insist on a shorter repayment term to limit their risk. This could result in higher monthly payments than you expected. And if you’re late or can’t make payments, it will not only impact your credit report as well as that of your cosigner, but it could also ruin your relationship.
If you refinance with a cosigner, consider looking for private lenders that release cosigners. When you make a certain number of on-time payments, you can apply to have your cosigner removed from the student loan, reducing their risk.
While some private lenders advertise low interest rates on refinancing, the reality is that you might still end up paying more. “Only borrowers with the best credit qualifications will get the lowest interest rates,” Fleischman said.
If you have to refinance to a longer term of 10 or 15 years at that higher interest rate, you’ll end up paying hundreds of dollars — or even thousands — more in interest. So check your options with a refinancing calculator to help you compare costs and make the right decision for you.
Finally, don’t forget to check for variable interest rates. “You might see a rate that looks really attractive, only to discover that it’s a variable rate that could rise over time,” Fleischman said. “That could lead to a more expensive loan and higher payments in the future.”
One of the biggest overlooked risks of refinancing student loans, Fleischman explained, is that private student loans aren’t automatically discharged when you die like with federal loans.
“Private loans … are usually settled by the estate,” Fleischman said. “So, before your assets are passed on to your heirs, they might be reduced by your refinanced student loans.”
Also, because many private loans require a cosigner, you could leave a loved one in a lurch if you die. “There are ways to get around it, but it can be difficult,” Fleischman said. “It’s not something you want your loved ones dealing with while also suffering from grief.”
When refinancing is the right option for you
For professionals who make more money in the private sector than they would by doing government or nonprofit work, refinancing to a shorter term at a lower interest rate could be the right move.
Borrowers who meet the credit requirements for the lowest interest rates and who are certain they won’t need to use an IDR plan or PSLF can potentially save on their student loan interest.
Paul Sisolak contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews! |
1 Important Disclosures for Earnest.
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 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% 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 July 31, 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 7/31/2020. 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.
2 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.
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%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 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 September 10, 2020.
5 Important Disclosures for CommonBond.
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 0.16% effective August 10, 2020.