Student Loan Refinancing 101: Just the Essentials

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Student loan refinancing involves restructuring your student loans with a new lender to save money on interest and get better repayment terms.

I refinanced my student loans a few years ago, and it helped me save thousands on my debt. Now, I’m sharing the process with other borrowers who are looking for savvy strategies that work.

Please note that student loan refinancing isn’t for everyone, and not every borrower is going to qualify. But we’ll get into all that in a bit.

For now, let’s dive into what student loan refinancing is and how it can help you crush your student loan debt ahead of schedule.

What is student loan refinancing?

Student loan refinancing is the process of giving one or more of your student loans to a lender in exchange for a new loan with better terms.

If you qualify, you could snag a lower interest rate on your loans, saving you hundreds or even thousands of dollars over the life of your loan.

Plus, you can choose new repayment terms, usually between five and 15 years.

  • Choose a short term to get out of debt faster.
  • Choose a long term to lower your monthly payments.

Both private and federal student loans are eligible for refinancing — the choice is yours.

Lots of banks and lenders offer student loan refinancing, including Credible, LendKey, and SoFi.

Check out our full list of the best refinancing providers here and get up to $200 back on your refinanced student loan! 

 

See the Full List

 

What are the pros of refinancing student loans?

Student loan refinancing has a bunch of benefits. Here are the top ones:

  • Save money on interest. If you qualify, you could get a lower interest rate. Score!
  • Choose better repayment terms. Maybe you want a short term to get out of debt fast. Or maybe your payments are way too expensive, so you want a long term to lower them. Through refinancing, you can choose new terms that fit your goals.
  • Select a variable or fixed interest rate. If you’re paying loans off fast, you might choose a variable rate to get the most savings. If you want to lock in a low rate for the life of your loan, you can select a fixed rate that won’t change over time.
  • Consolidate multiple loans into one. When you refinance multiple loans, you combine them into a single, new loan. No more driving yourself crazy tracking multiple payments and due dates! You can simply make one payment to one lender each month.
  • Ditch your lame student loan servicer. Hate your servicer? Been there. By choosing a new lender, you can change to a new servicer, hopefully with a lot better customer service.
  • Get other sweet perks. Some lenders offer unique benefits to their customers, such as career coaching and professional networking.

What about the cons?

Student loan refinancing isn’t for everyone. Here are some potential downsides.

  • Lose access to federal programs and benefits. If you refinance federal student loans with a private lender, you turn them private. As a result, you lose access to federal repayment plans and programs. If you’re counting on Public Service Loan Forgiveness, for instance, don’t refinance your federal loans!
  • Miss out on income-driven repayment plans. Federal loans are eligible for income-driven repayment plans, but private loans aren’t. Although some lenders will let you defer payments if you run into financial hardship, none offer income-driven plans at this time.
  • Struggle to qualify.* Student loan refinancing is only available to borrowers with decent credit and a steady income. That’s because lenders want to ensure you’ll be able to pay your loan back. If you don’t meet these requirements (and can’t apply with a cosigner who does), you might not be able to refinance student loans until your credit and/or income are stronger.

*As mentioned, you can apply with a creditworthy cosigner, as long as that person is comfortable being on the hook for your debt in the event you can’t pay. Note that some lenders offer cosigner release (ie, they’ll remove your cosigner from your loan) after a period of on-time payments.

How to refinance student loans

Refinancing student loans isn’t that hard. In fact, the toughest part is probably the mental hurdle of facing your loans, especially if you’re feeling overwhelmed.

But logistically, the process is pretty straightforward. Here are the main steps:

  1. Gather the details of your loans, including loan amounts and interest rates.
  2. Check your rates with a variety of lenders. Getting an instant rate quote won’t impact your credit at all, and it lets you see if you pre-qualify and compare multiple offers. Marketplaces like Credible and LendKey make it easy to compare offers from several lenders at once, or you can head directly to a lender website, such as SoFi or ELFI, to check your rates.
  3. Choose an offer you like and submit a full application. This will ask for basic personal information, along with the financial details of your loans.
  4. Wait two to three weeks for approval. Keep paying all your loans in the meantime. You don’t want to stop paying your loans until you’re 100% sure your new loan is up and running.

Who are the best banks and lenders for student loan refinancing?

Here are our recommendations for the best banks for student loan refinancing in 2020. They offer competitive interest rates, flexible terms, and good customer service.

For more details of rates and terms, head to our list of the best student loan refinancing banks and lenders.

What are my next steps?

Learn more about the pros and cons of student loan refinancing here.

Get answers to frequently asked questions about student loan refinancing.

Ready to apply? Check your rates with our recommended lenders.

Want better rates? Here are the best banks to refinance student loans:

 Variable rates start at...Fixed rates start at...Repayment termsWelcome bonus Check your rates
refinance student loans1.98%2.99%5 - 20 years$200Visit LendKey
refinance student loans1.99%2.98%5 - 20 years$200Visit Earnest
refinance student loans1.89%2.80%5, 7, 10, 15, and 20 years$120Visit Laurel Road
refinance student loans1.92%2.49%5 - 20 years$100 or $200, depending on the amount you refinanceVisit Credible
refinance student loans2.25%2.99%5, 7, 10, 15, and 20 years$100Visit SoFi
refinance student loans2.39%2.79%5, 7, 10, 15, and 20 years$100Visit ELFI
refinance student loans1.98%2.83%5, 7, 10, 15, and 20 yearsN/AVisit CommonBond