44.2 million Americans owe a total of 1.4 trillion in private and federal student loans, according to the Federal Reserve. Are you one of the many who are paying more than they need to? Have you been wondering, “Should I refinance my student loans?” If you have, here’s a complete guide on how to refinance student loans.
Not only will refinancing your student loans help you cut down on your borrowing costs, it can also add a level of convenience as you’ll only need to make one payment per month.
While there are factors to consider before choosing to refinance, such as losing the benefits of Federal loans, these five lenders are helping Americans shave thousands off their student debt.
LendKey offers to refinance federal and private loans at fixed or variable interest rates and charges no origination fees.
It saves customers an average of around $16,000 over the life of the loan. That’s about half what SoFi saves customers, but still significant. Further, loan terms range from five to 20 years. CEO Vince Passione says clients often consolidate a number of higher interest loans into one loan with a lower rate.
A difference between LendKey and other lenders is that it’s an online platform connecting borrowers with a network of credit unions and banks, rather than being the lender itself. Each loan will be funded by a lender from the network.
To find out if you qualify, you can apply, and LendKey will only perform the soft credit pull. Cosigners are allowed and may help you get approved or get a lower interest rate.
SoFi has refinanced $14 billion in student loans for over 194,000 members, and 65% of them say they would recommend the service to a friend.
What are the terms and costs?
SoFi has no hidden fees or payment penalties, it offers very competitive interest rates, and it lets you choose between a fixed or variable interest rate. You can refinance both federal and private loans.
However, SoFi advises borrowers to carefully consider the benefits that will be lost after a federal student loan is refinanced (i.e., economic hardship programs, public service forgiveness, etc.). Further, loan terms are flexible, ranging from five to 20 years.
SoFi is a good option if you are a U.S. citizen or permanent resident who:
- Has graduated from a Title IV accredited university or graduate program
- Owes at least $5,000 in high-interest student loans (Graduate PLUS, private, or Direct)
- Has a strong monthly cash flow
- Has a responsible financial history
- Is employed, has a job offer with a start date within 90 days, or has sufficient income from other sources.
For those who aren’t eligible alone, you can apply with a cosigner. If you’re interested in finding out the rates and terms you qualify for, you can find out without hurting your credit score. Then, use SoFi’s student loan refinance calculator to see how much you will save.
Next up is CommonBond. CommonBond aims to provide creditworthy borrowers with lower rates than traditional institutions. CEO and Co-founder David Klein says that CommonBond’s refinance loans save its customers an average of $24,000 over the life of the loan.
Through this lender, clients can refinance up to $500,000 of federal, private, and previously consolidated loans. Fixed and variable interest rates are available, there are no origination fees or prepayment penalties, and terms range from five to 20 years.
You are eligible if you have at least $2,000 in Title IV accredited universities and graduate programs, and if you meet the underwriting requirements. To find out what if you qualify and the rate you can get, apply without any impact on your credit score.
Upstart offers student loan refinancing and considers many factors when evaluating applicants. The company looks at your FICO score, years of credit, education, area of study, and job history to understand your future potential. In fact, it was the first platform to leverage machine learning and artificial intelligence to generate rates and automate the borrowing process.
Upstart’s standard loans range from $1,000 to $50,000. However, it offers student loan refinancing up to $200,000 through its partners. If you want to see what rates and terms you can get, the lender also utilizes a soft credit inquiry so your credit will not be impacted.
Earnest is another lender that utilizes technology to extend low-cost loans to financially responsible individuals. It takes a more comprehensive look at applicant’s financial profile, looking beyond the FICO score to an applicant’s career trajectory, savings patterns, and more. This means that applicants who are denied elsewhere may be able to get approved with Earnest.
The lender’s student loan refinancing product saves clients an average of $21,810 over the life of their loans. If approved, you will be able to finance as little as $5,000 and up to the total amount of student loans listed on your credit report. Variable and fixed interest rates are available, and terms range from five to 20 years.
If you would like to see what you qualify for, Earnest also allows pre-approval that won’t hurt your credit score.
Find the best option to refinance your student loans today
Which lender is the best of the best when it comes to refinancing your student loans right now?
Being that all of these lenders allow you to quickly check your rates and terms without affecting your credit report, it’s best to get pre-approved with all of them so you can compare the offers.
The best lender for one person won’t necessarily be the best for another because everyone has a different financial picture. Some lenders will be better suited for you than others.
For example, SoFi offers some of the lowest interest rates but also has some of the strictest approval requirements. If your credit score isn’t great, but you have been building it and have a strong financial story, Upstart and Earnest will likely be a better fit.
Your best bet is to shop around and then compare each lender’s eligibility requirements, fees, interest rates, terms, overall costs, and customer service quality. Then, choose the one that will save you the most and offer you the best experience.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.