Student Loans

The Ultimate Guide to Student Loan Refinancing

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The Ultimate Guide Student Loan RefinancingAccording to The Federal Reserve, approximately 44.7 million Americans hold a total of $1.6 trillion in student loan debt in 2018. That means the average student loan borrower owes around $47,671. That is a staggering number for any person who is starting out in life. Student debt is a huge burden that can last for decades and impede one’s ability to achieve life goals.

Student loan debt can be stressful but you do have options available to you. One of those options is to refinance your existing student loans into one new loan with better rates and terms for a simpler payment and faster payoff. In this student loan refinance guide, we’ll cover everything you need to know about refinancing.

Refinancing Student Loans

Student loan refinancing is when you apply for a new loan with a private lender to pay off existing student loans. Once approved by a lender, your existing loans are paid off and you’ll have one new student loan with new terms, rates, and repayment schedule.

There are three scenarios when considering a refinance:

  • Graduated with one student loan and want to save by refinancing into a lower-rate loan to shorten the term or lower the payments.
  • Graduated with multiple student loans and want to simplify repayment by refinancing into one loan with a lower rate and better term.
  • Or didn’t graduate college with no plans to return and want a better rate and term.

In these scenarios, refinancing may be a good option to save money and pay off student loans faster.

How refinancing can be beneficial

Currently, interest rates are at an all-time low so if you’ve graduated recently or been out of school for some time, refinancing can help lower payments and the total cost of borrowing. It can streamline the repayment process by combining multiple loans into one loan. And can help you choose a different term by shortening or extending the repayment schedule.

Read more on how you can potentially save thousands with a student loan refinance?

Can you refinance federal and private loans together?

A federal student loan is borrowed money and funded by the federal government to help pay for your education. Whereas, private student loans are nonfederal loans made by a lender such as a bank, credit union, state agency, or a school.

If you have both federal and private student loans you cannot consolidate the loans together under the federal consolidation program. However, you can refinance federal or private student loans separately or together through a private lender.

Federal student loan consolidation

A federal student loan consolidation is a process of combining one or more federal loans into a single new loan. It’s available for most federal loans including Stafford, PLUS and SLS, FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans, and Direct loans. Private student loans cannot be consolidated with federal student loans.

When you refinance federal student loans into a private student loan, you lose federal benefits such as income-based repayment options and student loan forgiveness programs.

Private student loan refinancing

A private consolidation loan is refinancing. It combines existing private student loans into one larger loan. The consolidation may include private and federal student loans.

In a private consolidation loan or refinancing, you are replacing your original student loans with a new loan. You will have a single monthly payment making repaying your loan simpler. Newly refinanced student loans may have fixed or variable interest rates. The interest rate you are offered is dependent upon your credit and other factors.

You can refinance your student loans with private lenders who may offer better rates, terms, and benefits that fit your financial needs. However, any private student loans or refinanced loans will lose any federal student loan benefits.

Things to consider:

  • How much federal and private student loans do you have?
  • Is it beneficial to consolidate your federal loans and separately refinance private loans?
  • Are you planning to apply for federal student loan forgiveness programs?
  • Will refinancing your federal and private loans together save you money?
  • Is the new private loan payments more affordable?
  • Does your existing private student loan have any prepayment penalties?

When it comes to refinancing, you have many options. Review which lender in our financial marketplace has the best deal for you.

The best reasons to refinance student loans

The best reason to refinance is to save you money, simplify and lower payments, reduce the total cost of borrowing that results in paying off student loans sooner.

With federal student loans, consider using the federal consolidation program. Call your federal student loan servicer and inquire about consolidating your federal student loans. And also ask about federal repayment options such as income-based repayment (IBR), graduated plans, and extended plans.

With private student loans, refinancing can give you one single payment as opposed to multiple payments with varying interest rates and terms. You may also save money by locking into a fixed-rate loan and a shorter term.

If you have a mixture of federal and private student loans, think thoroughly about the benefits of refinancing the two types of student loans together.

How many times can you refinance

There is no set limit in the number of times you can refinance. That is up to you or the lender and your ability to get approved.

Why would you want to refinance more than once? Sometimes rates can drop significantly or your financial situation has improved and can qualify for better rates and terms.

Read the Best Student Loan Refinance Marketplace >>>

When should you refinance?

There is no perfect time to refinance because many variables are at play. Refinancing student loans is a payoff strategy that can help you eliminate student loans sooner and save money. Look into refinancing when you’re

Don’t wait until you can no longer afford to make payments. Waiting until you’re financially distressed, decreases the chance of approval. Consider refinancing when you’re in a good position.

Has there been a positive change to your income or credit? Then you may be a better candidate to refinance especially if your credit score has improved and your debt-to-income ratio has lowered.

Just graduated from college? Many lenders offer refinancing for recent college graduates. They take into consideration the probability your income will grow as you enter the workforce and begin your career.

Look into refinancing to take control of your finances. Check your rates with companies like Credible and LendKey without impacting your credit score.

How to choose a student loan refinancing lender

Checking your rates with most lenders do not impact your credit score. So it doesn’t hurt to see where you stand.

You have options so don’t despair. Here are a few things to look for:

  • Check rate without affecting your credit score
  • No application fee
  • No origination fee
  • No prepayment penalty
  • Additional benefits or repayment features

Visit our financial marketplace to find the right lender.

What happens if you need a cosigner?

Many lenders allow you to add a cosigner to your loan. A cosigner can be added early in the process. Or you can check your rate and offers and then decide if adding a cosigner will get you better terms.

A few lenders offer cosigner release benefits after a set number of on-time repayments. A cosigner release means you can remove your cosigner from the loan without having to reapply or refinance the loan.

Ideally, you want to have student loans refinanced under your name only. But sometimes you need a cosigner. Make sure you and the cosigner understand the legal commitment they’re making when cosigning a loan.

Best Student Loan Refinancing Marketplaces

When using a student loan refinancing marketplace, there is no need to visit multiple websites and complete multiple applications. You can find the best rate and terms from multiple lenders in one platform.

Completing one application and getting multiple offers is a key differentiator when using a student loan refinance marketplace. It saves you time and can significantly raise the chances of finding better terms to pay off your student loans faster and save money.

Review the Top Student Loan Refinancing Offers >>>

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Jason Vitug

Jason is the founder of phroogal, creator of the award winning project Road to Financial Wellness, and author of the bestseller and New York Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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