Refinance a Student
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Refinancing your student loans can potentially lead to more affordable monthly payments, substantial interest savings in the long run, and improved loan payment administration. It's important to note that there are notable distinctions among various private student loan refinance companies, and thoroughly evaluating these differences is crucial before making a choice.
While many private student loan refinance companies provide loans to support your objectives, it's essential to consider the differences that exist. Eligibility criteria, loan terms, and fees can vary from one lender to another, and the interest rate you receive may be influenced by your choice of lender. Furthermore, each lender may offer distinct benefits and features, such as discounts or complimentary services, which can vary based on your decision.
The presence of various features, including both enjoyable additions and significant contractual terms, underscores the importance of carefully assessing your options before finalizing a lender choice.
Discover the advantages of student loan refinancing.
Pros and cons of student loan refinancing.
Meeting the requirements is just the beginning; there are numerous considerations to ponder before applying for refinancing and agreeing to a loan offer.
When you refinance your student loans, you can typically enjoy up to six advantageous outcomes:
- Interest rate reduction: When you have a strong credit score, low monthly debt obligations relative to your income (or a co-signer who meets these requirements), refinancing can secure a new loan with a lower interest rate than the weighted average of your current loans. This reduction effectively reduces the overall expense of repaying your loans.
- Changing interest-rate types: If your existing loan has a variable rate and you wish to lock in a rate and corresponding monthly payment, refinancing to a fixed-rate loan may be a viable choice. Alternatively, if you currently have a fixed-rate loan but anticipate the advantages of a variable-rate loan, refinancing might be necessary to facilitate the switch.
- Lower monthly payment potential: By extending your loan term or qualifying for a reduced interest rate, you may achieve a lower monthly payment. This enables you to allocate funds towards other necessities, or you can choose to make additional payments to effectively repay your loans ahead of schedule.
- Easier expense management with loan consolidation: When you consolidate multiple loans into a single loan, it becomes more convenient to track and manage your expenses, particularly if you are currently handling loans from different servicers.
- Freeing a co-signer: In case your lender doesn't offer the possibility to release a co-signer from your private student loans, your only choice to take on full responsibility for the loan is to refinance it solely in your name. Alternatively, you can refinance with a co-signer using a lender that potentially allows co-signer release in the future.
- Handing over parent loans: In situations where parents borrow student loans to aid in their child's educational expenses, with the understanding that the child will repay the debt after completing studies and finding employment, refinancing the child's student loans can encompass the parent's loans. This facilitates the transfer of legal responsibility for the debt to the child.
Understanding the potential drawbacks of refinancing: Refinancing, particularly federal student loans, carries significant risk. It's crucial to be aware of the possible disadvantages, regardless of whether you're refinancing private or federal loans. These disadvantages include...
- Above-Average Interest Rate Autopay Discount Removal: Many borrowers enjoy autopay discounts, which provide a reduced interest rate for those who set up automatic payments. These discounts incentivize borrowers to establish consistent and timely payments, leading to potential savings over the loan term. Unfortunately, if you refinance your loan, you might lose the above-average interest rate autopay discount, and your interest rate could revert to the standard rate.
- Loss of Extended Repayment Options: Some lenders offer extended repayment options to borrowers who are facing financial challenges. These options can include income-driven repayment plans, deferment, or forbearance, which provide temporary relief by reducing or suspending monthly payments. Refinancing with a different lender may result in the loss of these extended repayment options, forcing you to make higher monthly payments without the flexibility to adjust during difficult times.
Additionally, there are certain limitations and disadvantages associated with refinancing federal student loans through a private student loan.
- Inability to Lower Payment to $0: Income-driven repayment plans offered for federal student loans can allow borrowers to lower their monthly payment to $0 based on their income level. However, refinancing federal loans with a private loan eliminates this option, potentially causing financial strain for individuals with limited income resources.
- Limited Cancellation Opportunities: Federal student loans offer various cancellation options based on specific circumstances, such as teaching in underserved areas or certain public service professions. By refinancing federal loans into a private loan, borrowers may lose access to these cancellation programs, missing out on potential debt relief based on their employment or service.
- Lack of Interest Subsidy during Deferment: Federal subsidized student loans qualify for interest subsidies during deferment, meaning the government pays the interest on the loans. However, by refinancing federal loans with a private loan, borrowers lose this benefit, and the loans will accrue interest even during periods of deferment.
- Swift Default Triggers and Irreparable Credit Damage: Refinancing federal loans with a private loan exposes borrowers to swift default triggers and irreparable credit damage. Federal loans typically offer a grace period of 270 days before entering default, providing opportunities to resolve the situation and rehabilitate credit. In contrast, private student loans may default much sooner, leaving little time to remedy the situation, resulting in immediate demand for full repayment and potentially causing long-lasting harm to creditworthiness.
Carefully considering the pros and cons, their direct impact on your individual circumstances, and the potential implications for the future can guide you towards an informed and advantageous decision regarding the refinancing of your student loans.
Determining the top private student loan refinance companies.
SimpleTuition's quest for the top student loan refinance companies involved identifying the 14 largest national lenders that offer private student loan refinancing. Each lender underwent evaluation based on specific criteria, and the designation of "top lender" was granted to the seven lenders with the best average scores.
Evaluating APR variations: We scrutinized the range of annual percentage rates (APRs) by assessing the lowest and highest possible rates for fixed- and variable-rate loans, comparing them to the average lowest and highest APRs. Lenders that offered APRs below the average were recognized as top performers.
Analysis of application and origination fees: We assessed whether lenders charged fees for student loan refinancing applications or levied origination fees upon loan acceptance. The 16 largest student loan refinancing companies did not impose either of these fees, resulting in top rankings in our evaluation.
Examination of Parent PLUS loan refinancing eligibility: We analyzed whether lenders permitted the refinancing of Parent PLUS loans with your loan or provided dedicated refinancing options for parents with Parent PLUS loans. Lenders that did not offer either of these choices received deductions in our evaluation.
Evaluation of maximum loan repayment terms: Selecting the most extended loan term available can help minimize monthly payment amounts. It's important to remember that although all seven top lenders offered a term of up to 20 years, certain other major lenders had a cap of 15 years for their repayment terms, despite the option for early loan repayment without penalties.
Analysis of repayment term considerations: Extending the repayment term can result in lower monthly payments, but a shorter term may come with a reduced interest rate. Determining the best option depends on individual circumstances, and lenders received higher points for providing a wider range of repayment term choices.
Prequalification convenience with soft credit check: By conducting a soft credit check, select lenders offer the convenience of assessing loan eligibility and providing estimated loan offers, without any detrimental impact on your credit score. This allows for hassle-free comparison of offers, sans the need for full commitment, which was offered by all seven lenders.
Co-signer release eligibility: While you may require a co-signer to secure refinancing or a reduced interest rate, select lenders offer the opportunity to release the co-signer's obligation after fulfilling criteria like consecutive on-time payments and passing a credit check. Four of the seven lenders were awarded top ratings for providing this co-signer release option.
Importance of autopay discount: Enrolling in autopay can result in a 0.25 percent interest rate discount, a feature offered by numerous lenders. Our evaluation considered lenders without any discount as losing a point, while extra points were awarded to the select few lenders offering a more substantial autopay discount.
Assistance through unemployment protection or forbearance: If you encounter financial challenges, certain lenders enable you to temporarily suspend your monthly payments without adverse consequences such as late fees or loan default. Among the leading lenders, the majority offer up to 12 months of relief over the loan's lifespan, while one lender stood out by providing up to 18 months of forbearance, earning a higher score.
Supplementary perks: Lenders that go the extra mile by offering appealing features like SoFi's free access to career coaches or CommonBond's commitment to financing the education of disadvantaged children received additional credit during our evaluation.
In terms of average score, the private student loan refinancing companies below ranked highest to lowest:
- CommonBond
- Laurel Road
- SoFi
- Earnest
- LendKey
- Citizens Bank
- Education Loan Finance
A closer look at our recommended student loan refinance lenders
- Enhanced approval prospects with our robust network of not-for-profit lenders
- Speedy rate check that won't affect your credit score, taking only 2 minutes
- Consistent assistance from our well-trained customer care team, accompanying you every step of the way from application until your final payment
- Applicable to a wide range of student loans, including private, federal, undergraduate, and graduate school loans
- Absolutely no charges for application, origination, or prepayment, ensuring a hassle-free experience
- Unlock savings of more than $24,000 on average and experience a fee-free process!
- Simplified process for refinancing and consolidating both private and federal student loans
- 5, 7, 10, 15, and 20 Year Repayment Terms
- Gain financial security with our unemployment protection, granting you the ability to pause payments while we actively aid you in securing new employment.
- Creating positive change - CommonBond's commitment to social good means that for each fully funded degree, they sponsor the education of a student in need overseas for an entire year.
- Say goodbye to paperwork and enjoy the simplicity of our fully online application process, designed to make your life easier.
- Instantly access your personalized rate offer in under 2 minutes, without affecting your credit score.
- Skip the fees! There are no application or origination fees attached to our services.
- Take control of your loan repayment with no restrictions or penalties for early repayment.
- Universally applicable to student loans spanning private, federal, undergraduate, and graduate school programs.
- Enjoy significant savings of more than $20,000 on average when refinancing your loan with Laurel Road.
- Say goodbye to unnecessary expenses - we don't charge any application or origination fees.
- We've got your back with our unemployment protection benefit, offering the flexibility to pause loan payments and offering job search assistance if you face unemployment.
- Regardless of your income level, we have no minimum income requirement, making our services accessible to everyone.
- Take advantage of our career support services, tailored to help you thrive in your professional endeavors and enhance your personal brand.
- Enjoy the convenience of our services, available for borrowers with both private and federal loans.
- Enjoy the advantage of lower rates determined by a thorough assessment of your entire financial profile, offering a more holistic perspective than just your credit score.
- Experience financial relief and save money by choosing to refinance your student loans with Earnest.
- Benefit from the freedom to customize your loan terms according to your unique circumstances, while receiving reliable and personalized service from our in-house team throughout the lifetime of your loan.
- Keep more money in your pocket with our fee-free approach, eliminating charges for origination, prepayment, and loan disbursement.
- Take advantage of our two-minute rate check, which provides you with tailored rates without the need for a credit check or affecting your credit score.
- Take control of your budget with our excellent rates and flexible terms, which could result in a decreased monthly payment, giving you more room to breathe.
- Streamline your loan management by consolidating your payments into a single monthly payment, providing you with ease and peace of mind.
- Say goodbye to unnecessary charges with our fee-free policy, ensuring $0 application, origination, or late fees at any stage of your loan.
- Benefit from our automatic payment feature that not only ensures timely payments but also grants you a 0.25% interest rate reduction, reflected in our lowest listed APRs.
Complete Guide to Refinancing Student Loans
For the 44 million Americans who financed their college education with student loans, refinancing can offer significant benefits. Graduates and parents alike can potentially reduce their monthly financial strain, access more favorable interest rates, and simplify their repayment journey by consolidating multiple loans. To aid you in making an informed choice regarding student loan refinancing, our Guide to Refinance Student Loans presents a concise yet comprehensive overview, equipping you with the knowledge needed to assess whether refinancing is the right path for you.
Student Loan Refinancing Explained
Student loan refinancing entails securing a new loan to repay existing federal and/or private student loans.
Refinancing Student Loans: Who's Eligible?
Refinancing student loans is an option available to those who hold education debt, be it federal student loans, private student loans, or federal parent loans. Nevertheless, it's essential to meet specific criteria established by lenders, including credit history, income level, and other financial qualifications, to be eligible for the refinancing process.
Consolidating student loans combines multiple debts.
The US Department of Education offers student loan consolidation exclusively for federal student loans and parent PLUS loans, providing an opportunity to refinance multiple loans into one. Find out more about consolidation.
How to refinance your loans?
Refinancing student loans requires the borrower to choose a lender, complete an application, and potentially involve a co-signer. Once approved, the borrower and lender collaborate to determine the specific loans that will be refinanced.
The lender handles the majority of the necessary tasks, such as reaching out to the previous lenders, while the borrower may be asked to verify account details. Some borrowers have shared their experiences of refinancing up to 25 student loans into one. If there are numerous existing loans, this phase can take anywhere from a few days to a few weeks. After obtaining information on each existing student loan, the new lender completes the process by transferring funds directly to the previous lenders.
It is crucial to continue making regular payments on your existing loans until the new loan is officially funded.
Do I qualify for student loan refinancing?
Evaluate your specific aims before deciding to refinance your student loans. Are you looking to reduce your monthly expenses? Are you interested in minimizing the overall cost of your loans? Do you want to simplify your financial obligations by merging multiple loans into one? These are the key factors that drive graduates and parents to refinance their student loans. If any of these objectives resonate with your situation, refinancing could be a suitable choice.