Should you refinance your student loans? Best lenders to consider

When you refinance student loans, a private lender pays off one or more existing loans and replaces them with a new loan and new interest rate. (iStock)

If your student loans have a high interest rate, you may be considering refinancing as a way to lower your interest costs. The Federal Reserve recently signaled that it may raise interest rates in 2022 and 2023, so refinancing now may allow you to lock in a low rate and save money.

Student loan refinancing lets you bundle all or some of your loans into a single new loan, often at a lower rate. This is a great option if you have more than one student loan, but it can be beneficial even if you have just one loan.

Here’s a look at how to refinance student loans, as well as some options for refinancing.

By visiting Credible, you can learn more about student loan refinancing and compare rates from multiple private student loan lenders.

  • Student loan refinancing vs. student loan consolidation
  • How to refinance student loans
  • Best student loan refinance lenders
  • Pros and cons of student loan refinancing
  • Student loan refinance FAQs

Student loan refinancing vs. student loan consolidation

People often use the terms loan refinancing and loan consolidation interchangeably, but there is a difference.

You can refinance a single student loan into a new loan with a new rate and term. A consolidation combines two or more loans into one new loan with one monthly loan payment.

Consolidation of student loans typically refers to federal student loans. You may be able to consolidate some or all your federal student loans into a federal Direct Consolidation Loan or combine your loans by refinancing into a private student loan.

For private student loans, consolidating into a federal consolidation loan isn’t an option — you can only combine private student loans through another private lender or bank.

How to refinance student loans

Refinancing your student loans is usually easier than it sounds. You simply need to find the lender offering you the best deal, apply for the loan then wait for the lender to pay off your old loans. Here’s the step-by-step process.

1. Compare rates from multiple lenders

A variety of banks, credit unions and online lenders refinance student loans. Shopping around ensures you get the lowest rate available. Most lenders will also give you an idea of the rates and loan repayment plans available to you with just a soft credit check, so you can shop around without impacting your credit.

2. Select the best offer

Once you’ve compared a few offers, it’s time to choose your lender and loan. Most borrowers go with the lender that offers the lowest interest rate, but it helps to use a student loan refinancing calculator to see how much you’ll actually save based on the interest rate and loan term.

3. Fill out the application

To lock in your interest rate, you’ll need to submit an official application. Many lenders allow you to apply online and upload the required documents, such as copies of your most recent loan statements and proof of income. The lender will also order a hard credit check at this point, which can temporarily lower your score.

4. Loan approval and payoff

It usually takes a couple of weeks for lenders to process and approve your application and pay off your old loans. In the meantime, continue to make payments on your old loans.

5. Set up automatic payments

Once your new loan has been finalized, set up automatic payments to help ensure you don’t miss a payment. Many lenders also offer a small rate discount when you set up automatic payments.

Best student loan refinance lenders

Interest rates aren’t the only factor to consider when choosing a student loan lender. Some lenders offer better customer service, more convenient payment options or flexibility if you have trouble making payments.

The following 13 lenders are Credible partners, so they’re a good starting point for your private student loan shopping.

Advantage Education Loan

Advantage Education Loan offers refinancing to borrowers who haven’t completed their degrees.

  • Loan amounts: $7,500 to $500,000
  • Loan terms: 10, 15 or 20 years
  • Repayment options: Immediate repayment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay

Brazos

Brazos works with borrowers who have a credit score of at least 720, a minimum income of $60,000 and are Texas residents.

  • Loan amounts: $10,000 to $400,000
  • Loan terms: Five, seven, 10, 15 or 20 years
  • Repayment options: Military deferment, forbearance
  • Fees: Late fee
  • Discounts: Autopay

Citizens

Citizens offers refinancing for borrowers who are U.S. citizens or permanent residents and have at least $10,000 in student loans.

  • Loan amounts: $10,000 to $750,000
  • Loan terms: Five, seven, 10, 15 or 20 years
  • Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay, loyalty

College Ave

College Ave offers loan refinancing in all states except Maine.

  • Loan amounts: $5,000 to $300,000
  • Loan terms: Five, seven, 10, 12, 15 or 20 years
  • Repayment options: Military deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay

Common Bond

Common Bond requires a minimum income of at least $65,000 for 15- and 20-year loans. It also offers Parent PLUS refinancing.

  • Loan amounts: $5,000 to $500,000
  • Loan terms: Five, seven, 10, 15 or 20 years
  • Repayment options: Academic deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay

EDvestinU

EDvestinU works with borrowers who are U.S. citizens or permanent residents with two personal references.

  • Loan amounts: $7,500 to $200,000
  • Loan terms: Five, 10, 15 or 20 years
  • Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay

ELFI

Education Loan Finance provides student loan refinancing for borrowers with at least $15,000 in student loan debt and a bachelor’s degree or higher from an approved school.

  • Loan amounts: No maximum
  • Loan terms: Five, seven, 10, 12, 15 or 20 years
  • Repayment options: Forbearance
  • Fees: None
  • Discounts: None

INvestEd

INvestED offers refinancing for borrowers with a FICO score of at least 670, an annual income of at least $36,000 and continuous employment for the last year.

  • Loan amounts: $5,000 to $25,000
  • Loan terms: Five, 10, 15 or 20 years
  • Repayment options: Academic deferment, military deferment, forbearance
  • Fees: Late fee
  • Discounts: Autopay

ISL Education Lending

ISL refinancing is available in all 50 states and can usually fund loans within one business day.

  • Loan amounts: Up to $300,000
  • Loan terms: Five, seven, 10, 15 or 20 years
  • Repayment options: Academic deferral, military deferral, forbearance, death/disability discharge
  • Fees: None
  • Discounts: Autopay

MEFA

The Massachusetts Educational Financing Authority works with borrowers who have made 12 on-time payments in the previous months on all loans being refinanced.

  • Loan amounts: $100,000 up to the total amount
  • Loan terms: Seven, 10 or 15 years
  • Repayment options: Military deferment, loans discharged upon death or disability
  • Fees: None
  • Discounts: None

PenFed

PenFed offers refinancing to borrowers who are U.S. citizens and have at least $7,500 in student loans.

  • Loan amounts: $7,500 to $300,000
  • Loan terms: Five, eight, 12 or 15 years
  • Repayment options: Does not disclose
  • Fees: None
  • Discounts: None

RISLA

Rhode Island Student Loan Authority offers refinancing for eligible loans that were used at a college located in any state.

  • Loan amounts: $7,500 to $250,000
  • Loan terms: Five, 10 or 15 years
  • Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay

SoFi

SoFi is available to borrowers in all 50 states.

  • Loan amounts: $5,000 up to the full balance
  • Loan terms: Five, seven, 10, 15 or 20 years
  • Repayment options: Academic deferment, military deferment
  • Fees: None
  • Discounts: Autopay, loyalty

You can easily compare prequalified rates from the above lenders using Credible. 

Other lenders to consider

The following two lenders are not Credible partners, so you won’t be able to easily compare your rates with them on the Credible platform. But they may also be worth considering if you’re looking for a student loan refinancing company.

Discover

Discover offers student loan consolidation loans for borrowers with no more than $150,000 in aggregate student loan debt. But higher limits may apply for certain fields of study.

  • Loan amounts: Up to $250,000
  • Loan terms: 10 or 20 years
  • Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay

First Republic Bank

First Republic Bank allows borrowers to refinance student loans and other debt with a personal line of credit.

  • Loan amounts: $60,000 to $350,000
  • Loan terms: Five, seven, 10, 15 or 20 years
  • Repayment options: None
  • Fees: None
  • Discounts: Autopay, loyalty

Methodology

Credible evaluated private student loan lenders in 10 different categories to determine the best lenders for student loan refinancing. This included interest rates, repayment options, terms, fees, discounts, customer service availability, as well as eligibility requirements and cosigner release options.

Pros and cons of student loan refinancing

As with any financial decision, refinancing student loans might not be right for every borrower in every situation. Before deciding whether to refinance student loans, be sure to weigh the pros and cons. 

Pros

  • A lower rate can help you save money. Many people have limited credit when they initially take out their student loans and thus wind up paying a high interest rate. If you’ve built a strong credit history since you first took out your student loans, you may qualify for a lower interest rate, which can help you pay off your loan faster and pay less interest over the life of the loan.
  • Combining several loans can simplify your finances. You may have multiple student loans spread across several loan servicers, all with different due dates. Merging those loans into one loan with one servicer and one monthly payment will simplify your payments, possibly helping you avoid missed or late payments.
  • You may be able to release your cosigner. If your parent or another family member cosigned for your existing student loan and your credit score has since improved, refinancing can release them from backing your loan.

Cons

  • You can lose federal repayment options. Refinancing from federal loans into private student loans means losing out on some federal student loan borrower protections. This includes the ability to put your payments on deferment or forbearance if you lose your job or face other financial difficulties or decide to go back to school. Some private lenders offer deferment and forbearance options, but they’re usually not as generous as those offered by the federal government.
  • You lose Public Service Loan Forgiveness options. Teachers, health care workers and other professionals may be able to have their federal student loans forgiven under the Public Service Loan Forgiveness program. Refinancing into a private loan means losing access to this program.
  • Your variable interest rate may increase. Interest rates on federal student loans are fixed. Private student loans may have fixed or variable rates. If you choose a variable interest loan because it has a low rate, that rate may increase over time.

Student loan refinance FAQs

Here are answers to some of the most common questions about refinancing student loans.

Should I refinance my student loans during the COVID-19 pandemic?

That depends on whether you have federal or private student loans. Currently, many federal student loan borrowers don’t have to make payments on their loans, and the federal government is waiving interest on these loans while the payments are paused. This administrative forbearance lasts until Jan. 31, 2022. If you refinance federal student loans into private student loans, you’ll lose that benefit.

How do I qualify for student loan refinancing?

Each bank, credit union or other lender has its own underwriting criteria. Some common requirements include:

  • Citizenship — Some lenders require borrowers to be U.S. citizens or permanent residents.
  • Minimum credit score — This varies by lender, but most private lenders prefer to work with borrowers with good credit.
  • Payment history — Some lenders only work with borrowers who have a history of on-time payments on their loans and no bankruptcies or foreclosures in the past few years.
  • Completed degree — Many lenders only refinance loans for students who completed their degree program, although some work with borrowers who didn’t graduate.

Because the requirements vary widely from lender to lender, it’s important to shop around.

What’s the difference between a fixed-rate and a variable-rate loan?

A fixed-rate loan has the same interest rate for the entire loan term. The interest rate on a variable-rate loan can change over time. In general, variable-rate loans tend to have lower rates than loans with a fixed rate — at least initially.

Will applying for student loan refinancing hurt my credit?

Comparing prequalified rates from different lenders through Credible won’t affect your credit score because it doesn’t require a hard credit pull.

When you’re ready to officially apply for a loan, the lender will need to perform a hard inquiry. A single hard inquiry will cause most people’s credit scores to drop by less than five points, according to FICO.

Can I refinance my student loans more than once?

There’s no limit to the number of times you can refinance your student loans. If you qualify for a lower rate, refinancing twice or more can help you save even more money.

But before you do, be sure to read the fine print. For example, some lenders charge origination fees, which can eat away at the money you’d save by refinancing. And some lenders might lower your rate but stretch your repayment term over more years.

For that reason, be sure to do your research and run any offer you receive through a student loan refinancing calculator to ensure refinancing again will help you accomplish your goals.

To get started refinancing student loans, visit Credible and compare prequalified rates from multiple lenders.

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