If you’re swimming in student loan debt and struggling to stay current on payments, it’s time to find a solution before it’s too late. Here are 17 options to refinance student loans you should consider.
So, can you refinance a student loan? And how exactly will it help me? If you’ve ever asked yourself these questions, you’re on the right track.
The answer is yes. If you have one or more student loans, you can refinance them into one new loan with better terms. By doing so, you could lower your interest rate, monthly payment, or both.
Craig P. Anderson, president of the nonprofit Student Connections, says, “By refinancing, it’s possible to pay off your student loans faster and pay less money.” A faster payoff is always a good thing, especially if you’re paying the average student loan amount of $533 per month. [source]
Refinancing isn’t for everyone, though. Anderson says, “Make sure to do your research before refinancing.”
Read on to learn if refinancing is right for you, and the many options for doing so.
What does it mean to refinance your student loans?
Refinancing student loans refers to renegotiating the terms of existing student loan(s) into a brand new loan. This simplifies your monthly payments because you’ll only have one payment to remember.
Refinancing allows you to possibly get a better interest rate and repayment term. You also have the choice of a fixed or variable interest rate.
The Department of Education does offer a Direct Consolidation Loan, but it can only be used with federal student loans, and the rates are fixed.
Can you consolidate private and federal student loans?
It’s possible to combine private and federal student loans only when consolidating through a private lender.
Student loan consolidation entails combining your private and federal student loans into one new loan. With consolidation, the interest rate on all the loans is averaged out to create a new rate.
When should you consolidate your student loans?
Consider consolidating or refinancing your student loans if you:
- Find it difficult to make your monthly payment
- Have a large student loan debt
- Want a lower interest rate
- Want to reduce minimum monthly payments
- Wish to spend less overall on student loan debt
Click here to discover 5 scenarios where refinancing your student loans makes sense.
It’s important to note that, when you consolidate your federal student loans into a private loan, you give up certain federal loan benefits. Some of these benefits include income-drive repayment plans, forgiveness, forbearance, and deferment.
Student loan refinancing considerations
When shopping for student loan refinancing options, your goal is to pay less interest than your current loans. Keep in mind other factors that can also affect how much the loan will cost you overall:
Is there an origination fee?
Many lenders have no fees. If a lender does, that fee could eat into your savings. For example, say the loan features a lower interest rate, but you’re due to pay it off in three to five years.
After paying the fee, the savings might end up being minimal. If you’ll be paying for more than five years, the interest savings could surpass the fee.
Will you get a fixed or variable interest rate?
Variable interest rates are usually lower than fixed interest rates. The reason for that is because interest rates can and do rise. If you’re nearly done paying off the loan, the risk isn’t that high.
However, if you have many years to go, a variable interest rate could rise. This could mean paying much more in interest over the life of the loan.
Shop around for the best rates and terms
Compare rates and terms before making a decision on a refinanced loan.
SuperMoney’s student loan reviews page can help. This page contains details on the top lenders as well as consumer reviews.
When you check out student loan refinancing options, do so within a 14- to 30-day period. According to FICO, student loan inquiries made within a focused period have little to no impact on your credit score.
Top student loan lenders
Start your search with these six leading lenders, who offer some of the best rates of 2017:
SoFi started as a marketplace lending marketplace for Stanford alumni. Graduates used the platform to get better rates after graduation. The arrangement was eventually extended to other top universities.
Today, most SoFi loans come from large institutional investors. As of June 2017, the company funded $20 billion in loans and had 300,000 members.
To qualify for a SoFi student loan, you need to be a super-prime borrower with excellent credit. They also require a good education and a lucrative, steady income.
LendKey offers competitive interest rates. They’re able to do this because of their partnerships with various financial institutions, including credit unions and community banks.
Lendkey is not a direct lender. Instead, they offer various lending institutions a platform to market their products.
To qualify for LendKey student loan refinancing, you need a credit score of at least 680 and a minimum annual income of $24,000. Depending on the community lender you work with, other eligibility requirements will apply.
3. Pentagon Federal Credit Union
Pentagon Federal Credit Union is a federal credit union that offers student loans in all 50 states (and Washington DC). The company offers refinancing options for student and parent loans.
To qualify for a Pentagon Federal Credit Union student loan refinance, you need a minimum credit score of 670. See more eligibility requirements on the Penfed SuperMoney profile.
4. Splash Financial
Splash Financial is a marketplace lender that offers student loans in all 50 states (and Washington DC). The company offers refinancing options for student and parent loans.
To qualify for a Splash Financial student loan refinance, you need a minimum credit score of 670. See more eligibility requirements on the Splash Financial SuperMoney profile.
Earnest uses a technology that allows the company to provide loans to borrowers who wouldn’t be able to otherwise qualify for them.
Instead of only focusing on credit and debt-to-income ratio, the company uses a proprietary algorithm. This algorithm analyzes various financial factors to determine if you qualify.
To get a loan with Earnest, you need a good education, a job with high earning potential, and a good employment history. You must also demonstrate financial responsibility, including good savings habits.
These factors could lead to a refinance with low interest rates, even if you don’t have much credit history.
CommonBond is an online student lending platform that connects a community of individual and institutional investors with borrowers seeking student loans. The company offers refinancing options for student and parent loans.
You can usually get a new loan at a lower interest rate with CommonBond.
To qualify for a CommonBond student loan, you need a minimum credit score of 660. You must also be enrolled at least half-time if you’re an undergraduate and full-time if you’re a graduate student.
Upstart is an online loan marketplace that uses a proprietary underwriting model. This model allows them to assess risk by focusing on more than credit rating.
The company determines high-quality borrowers by considering various factors such as job history, area of study, and level of education. Those borrowers with good credit and promising careers can get lower rates and more favorable terms.
8. College Ave
College Ave offers student loans with competitive interest rates. The company was founded by former executives from student loan provider, Sallie Mae. College Ave’s mission is to make the student loan process quicker and easier.
The company offers several loan repayment options, allowing you to choose how long you want to pay. You can also opt for an interest-only payment for two years if finances are tight.
College Ave doesn’t divulge what the minimum credit score is to qualify. They do, however, feature a free credit pre-qualification tool. This tells student borrows if they have high enough credit scores to apply, as well as what interest rates to expect.
Continue your search with these online lenders who also offer student loan refinancing:
WeFinance is an online platform connecting borrowers to people with savings. Borrowers list loan applications that are then crowdfunded by investors. The investors receive larger-than-average returns and get the satisfaction of helping someone.
iHelp connects borrowers with more than 5,000 community banks to find the best terms and rates. In addition to a student loan, the company offers a consolidation loan for graduates. You have to have earned at least $24,000 for the past two years and have three years of positive credit history.
Discover offers a wide variety of student loans, including consolidation loans. Rates are competitive. Students are also rewarded for good grades. The company has student loan specialists to assist you. To qualify, you must have good credit, a positive repayment history, and a verifiable income capable of supporting your debt.
Everence is a credit union based in Indiana that offers student loan refinancing in all 50 states. The company provides private student loans at competitive rates and with flexible terms. You can defer payments while in school. To qualify, you need two years of satisfactory credit history and an employment and income history.
13. Wells Fargo
Wells Fargo offers student loans with competitive rates and terms. No payments are required while you’re in school, and they don’t kick in until six months after you finish school. To qualify, you must be studying full or part-time at an eligible university and have a good credit score.
14. Citizens Bank
Citizens Bank is one of the oldest and largest banks around. They offer a wide variety of student loans, including refinancing options. They have some of the lowest rates on the market and flexible terms. To qualify, they require you to have excellent credit and a good source of income.
SunTrust is one of the nation’s oldest banks, dating back to 1891, with 1,600 branches in the U.S. It offers private student loans for undergraduates and graduates at competitive rates and terms. You need good credit to qualify.
U-fi was formed by a partnership between the large student loan servicer, Nelnet, and various lending partner financial institutions. It offers student loans, including refinancing. Rates vary, depending on your credit profile and the lending partner. To qualify for a refinance, you must no longer be attending school.
Purefy partnered with PenFed Credit Union and Citizens Bank and offers refinancing options featuring lower rates and a wide selection of terms. There are personal loan advisors to assist you in finding a rate that suits you without checking your credit. To qualify, you need a minimum credit score of 670 and an annual income of at least $42,000.
To find the best refinancing options for your particular situation, you need to shop around. With SuperMoney’s student loan reviews page you can compare rates and terms of all the top online lenders to help you make the right decision.
Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including Parade.com, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.