Thebeststudentloan.org / Student Loan Refinance
Last Revised: July 1, 2020
Refinancing your student loans can potentially lower your monthly payments, save you money on interest over the lifetime of the loan and make it easier to manage your loan payments. While many private student loan refinance companies offer loans that can help you achieve these goals, there are also important differences to consider.
Eligibility requirements, loan terms and fees can vary from one lender to the next, and the interest rate you receive may depend in part on which lender you use. There may also be additional benefits and features, such as discounts or free services, that vary depending on the choice you make.
Whether they’re fun features or important fine-print terms, the potential differences means its important to carefully consider your options before choosing a lender.
Even if you qualify, there’s a lot to consider before applying for refinancing and accepting a loan offer.
Refinancing your student loans generally offers up to six benefits:
Refinancing can carry significant risk — especially if you’re considering refinancing federal student loans.
There are a few potential disadvantages, regardless of whether you’re refinancing private or federal student loans. These include:
Additionally, some drawbacks that are specific to refinancing federal student loans with a private student loan.
Considering all these pros and cons, how they apply to your situation and possibilities for the future when you’re thinking about refinancing your student loans can help lead you to an informed and fruitful decision.
To zero in on the best student loan refinance companies, SimpleTuition started by identifying the 14 largest national lenders that offer private student loan refinancing. We scored each lender on the following criteria and the seven lenders with the best average score received the “top lender” designation.
High and low interest rates: We found the lowest and highest possible annual percentage rate (APR) with either fixed- or variable-rate loans, and compared with the average lowest and average highest APR. We awarded top marks to whichever lenders had below-average APRs.
Application or origination fees: Does the lender either charge a fee for applying for student loan refinancing or have an origination fee that’s charged once you agree to take out the loan? None of the 16 largest student loan refinancing companies charge either fee (these aren’t common with student loan refinancing in general), so they all got top marks.
Ability to refinance Parent PLUS loans: Does the lender either let you refinance a Parent PLUS loan with your loan or offer Parent PLUS loan refinancing for parents? Points were taken away if the lender didn’t offer either option.
Maximum repayment terms: If you want to lower your monthly payments, you may want to choose the longest loan term possible. Since student loans can’t have a prepayment penalty, you can still make additional payments and pay off the loans early if you’re able to pay more later. All seven of the top lenders offered up to a 20-year term, but some other large lenders capped out at a 15-year term.
Repayment term choices: While a longer repayment term can decrease your monthly payment, a shorter term could give you a lower interest rate. Which is best depends on your circumstances, so the more choices the lender offered, the more points it received.
Soft credit check prequalification: Some lenders let you see if you can qualify for a loan, and show you estimated loan offers, with a soft credit check (the kind that doesn’t hurt your credit score). It’s a great way to compare offers without a full commitment, and all seven lenders offered this.
Ability to release a co-signer: You may need a co-signer to qualify for refinancing, or to help you get a lower interest rate. But some lenders let you release the co-signer and take full responsibility for the loan after making some consecutive on-time payments and passing a credit check. Four of the seven lenders got top marks for offering a co-signer release option.
Autopay discount: Many lenders offer a 0.25 percent interest rate discount if you sign up for autopay. We took a point away if the lenders didn’t offer any discount, and gave extra points to the few lenders that offered a larger autopay discount option.
Offers unemployment protection or forbearance: If you’re having trouble making payments, some lenders let you temporarily suspend your monthly payments without having to pay a late payment fee or defaulting on the loan. Most of the top lenders offered up to 12 months of reprieve over the lifetime of the loan, and one received a higher score for offering up to 18 months.
Extra credit: Anything else that might appeal to borrowers, such as SoFi’s free career coaches or CommonBond’s promise to fund the education of a child in need, earned the lender extra credit.
In descending order, the following private student loan refinancing companies got the best average score:
Many of the 44 million Americans who have used student loans to pay for college could benefit when they refinance student loans borrowed in pursuit of their degree. Graduates (and parent borrowers, too) can often lower a monthly payment, find a better interest rate, and/or combine their several loans into one convenient payment. Our Guide to Refinance Student Loans provides a quick overview to help you make the right decision about whether or not to refinance student loans.
Student loan refinancing describes the process of taking out a new loan where the proceeds are used to pay off an existing federal student loan(s) and/or private student loan(s).
Anyone who holds education debt, including federal student loans, private student loans, or federal parent loans, is eligible to refinance student loans. However, lenders have credit, income, and other requirements that can severely limit a borrower's eligibility for refinancing.
Student loan consolidation is a form of refinancing available from the US Department of Education that is available only for federal student loans and parent PLUS loans. Learn more about consolidation.
To refinance student loans, a prospective borrower chooses a refinancing lender, and completes an application. If a co-signer is required, the co-signer must also complete a section of the application. Once the student loan refinance is approved, the new lender will work with the borrower to identify the student loans to be refinanced.
The lender will do most of the leg-work involved in contacting the previous lenders, but the borrower is often called-upon to verify account details. There are stories of borrowers refinancing as many as 25 (!) student loans into a new loan. In cases where there are many existing loans, this part of the process can take a few days to a few weeks. Once details on each of the existing student loans are in hand, the new lender finalizes the process by releasing money directly to the previous lenders.
Important! Continue to make regular payments on the existing loans until the new loan is funded.
Refinance student loans with your personal objectives in mind. Are you trying to save money on your monthly payment? Are you trying to lower your total cost of borrowing? Are you trying to streamline your finances by replacing several loans with one new loan? Those three considerations are the main drivers of why graduates and parents refinance student loans. If refinancing helps you meet one of these objectives, then it might be the right step for you.
See our list of lenders and then enter your school to see if they can offer you a loan.
First let us know which school you go to, so we can show you which lenders are offering loans for your school.
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