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Student Loan Refinance Guide
Even if you entered college with the best student loan, you might still find yourself feeling crushed by the huge debt burden attached to your name on graduation. But what if you’re able to refinance your student loan at a cheaper rate? It might just make your years of studies seem a little more affordable.
While some college graduates will have a bigger debt than others, according to The Institute for College Access & Success, the average borrowing for the class of 2018 is $29,200. However, that figure could be much more depending on the cost of the school you attend. It’s a lot of money, which is why we’ve compiled a guide on the best student loan refinance options on the market, selected based on the SimpleScore methodology.
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Best student refinance lenders
- Best Overall: SoFi
- Best for a Lender Network: LendKey
- Best for Medical School Debt: Splash Financial
- Best for Payment Flexibility: Discover
- Best Mobile App Platform: Earnest
Best student loan refinancing at a glance
Lender | Fixed Rates | Loan Amount | Terms | Key Benefit |
---|---|---|---|---|
SoFi | 2.99%–6.88% | $5,000 – full amount of qualified education loans | 5 –20 years | Soft pull on credit |
LendKey | 2.99%–7.75% | $5,000 – $300,000 | 5 –20 years | Avoid big banks |
Splash Financial | 2.88%–7.27% | $5,000 – no maximum | 5 –20 years | No maximum loan amount |
Discover | 3.49%–6.99% | $5,000 – aggregate amount of your education loan debt | 10 or 20 years | Flexible repayment options for struggling borrowers |
Earnest | 2.98%–5.79% | $5,000 – $500,000 | 5 –20 years | Customized loan terms |
Best overall – SoFi
SoFi offers decent rates and the ability to quote in lightning speed without putting a dent in your credit.
SoFi is strong on customer service and boasts an impressive 98% recommendation rate. You can refinance both federal and private loans at competitive APRs. SoFi offers pre-qualification, meaning you can check your rates and terms without impacting your credit score. Getting a quote from this lender takes a mere three minutes. There are no origination fees, late fees or insufficient funds fees. While SoFi doesn’t disclose a minimum credit score for student loan refinance, you’ll need to be employed, have an employment offer to start within 90 days or demonstrate sufficient income to be eligible.
Best lender network – LendKey
Not a fan of the big banks? LendKey shows you don’t need them for top rates and broad refinancing loan features.
LendKey is a top student loan refinance company and a great choice for tech-savvy borrowers who want to avoid big banks. You can refinance both federal and private loans at competitive APRs and check rates without affecting your credit. There are no application or prepayment fees, and enrolling in autopay will earn you a 0.25% discount. You’ll need a minimum credit score of 660, but LendKey will also consider factors like debt-to-income ratio and length of credit history. You can add a cosigner to strengthen your application, too. Forbearance options are available if you hit financial hardship.
Best for medical school debt – Splash Financial
If you’re drowning in medical school debt, Splash Financials can make things simpler and more affordable.
Splash is an online marketplace allowing you to receive multiple offers from its partners (Laurel Road, PenFed and U-Fi from Nelnet) with a single application. Rates are highly competitive, and you can get a further 0.25% discount with autopay. For those with huge medical school debts, having no maximum borrowing amount is useful, as is the ability for married couples to refinance their loans into a single debt. Eligible borrowers employed full-time as a postgraduate trainee can also make $100 monthly payments throughout their training. You’ll need a credit score of 660 to apply, but having a cosigner could help your chances.
Best payment flexibility – Discover, Member FDIC
Discover won’t offer the best rates or the most loan options, but if life gives you lemons, Discover will give you a break.
What makes Discover’s product a winner is repayment flexibility. There are academic, military, public service and medical residency deferment options. Payments can be postponed for up to 12 months if you’re experiencing financial hardship. There are even temporary interest or payment reductions available in certain circumstances. You won’t be charged prepayment, origination or late fees, and you can get 0.25% discount for autopay. You can even refinance with Discover if you didn’t graduate.
Best mobile app platform – Earnest
If you want flexible ways of managing your account and useful features like the ability to change payment dates and amounts, Earnest is the way to go.
“There’s a lot to like about Earnest. Its rates are amongst the best in the market, and you’ll get a further 0.25% with autopay. Loan terms are customizable — down to the month — which is not something available at traditional banks. Earnest makes managing your new loan much easier through its mobile app platform, which lets you change your payment date or your payment amount. However, Earnest is only available in 47 states and the District of Columbia. You’ll need a minimum credit score of 650 to apply — Earnest doesn’t allow potential borrowers to apply with a cosigner.
What is student loan refinancing?
Refinancing is all about consolidating your existing student loans with a private lender. While the process varies between lenders, as do the fees involved and the types of loans eligible for refinancing, the general idea is that you’ll simplify your various student loans by rolling them into a single debt and receiving more favorable rates and terms. Although a lower rate can result in substantial interest savings, refinancing is not suitable for everyone. For example, if your financial position hasn’t improved since graduation, it’s highly unlikely you’ll be offered a better deal. Refinancing could also lengthen the duration of your debt.
[Read: Where to Find Financial Relief During the COVID-19 Pandemic]
How student refinancing works
Refinancing involves taking out a new loan to repay an earlier loan or loans. You can refinance different kinds of borrowings — mortgages, auto loans and of course, student loans. While the new loan will have different features and interest rates applied, the mechanics remain the same. You’ll still make regular repayments over an agreed time period, and each payment will cover interest and reduce the principal you owe.
[Read: What’s Happening to Interest Rates and Why Does It Matter?]
So why bother to refinance? It can save you a lot of money if you qualify for a lower interest rate. With a cheaper rate, you could either pay less in monthly repayments and enjoy better cash flow or keep your repayment amount the same but get rid of your debt sooner.
There are some things to consider when evaluating your refinancing options. For starters, the best student loan refinance rates advertised are usually reserved for borrowers with excellent credit, so if your credit isn’t excellent, then your rate will likely be higher. Also, refinancing can bring loan fees. Third, not all private lenders will refinance federal loans.
APR
APR stands for annual percentage rate. It represents the total cost involved in repaying a loan expressed as a percentage. It’s made up of the interest rate applicable to the loan and other charges like origination fees. When comparing loans, APRs are often more useful because they include all financing costs rather than just the interest component.
Terms
In the context of borrowing, the term of a loan refers to its duration, or the length of time you’re expected to make regular repayments. The loan term affects the repayment amount. Borrowing terms can also refer to the terms and conditions you’re agreeing to when you take out the loan.
Loan amount
This refers to the amount you need to borrow. If you have multiple student loans, the loan amount will be the sum of all your outstanding balances.
[Read: Coronavirus Unemployment: How to Apply for Benefits If You Lose Your Job]
How to choose the best student loan refinancing for you
- Check your credit report. Identify any inaccuracies and decide whether you should improve your credit before making applications.
- Determine your cash flow. Lenders also tend to look at how much money you’ve got coming in and going out each month when deciding on your application, so know your cash flow position and figure out what you can do to improve it.
- Determine how much you owe. Check your student loan statements or log onto your accounts and add up your outstanding balances so you know how much you’ll need to borrow.
- Do some initial research. It’s time to compare lenders. Pay attention to things like the rates offered, refinancing charges, account fees (like late fee and prepayment fee), how you can manage your account and whether you can prequalify to find out your rate and terms. Shortlist a few providers meeting your expectations.
- Get some quotes. Now let’s see which lender will give you the best deal. Try to make applications close together to minimize the impact of hard credit inquiries on your credit report. According to major credit bureau Equifax, multiple inquires on your credit file made within 14 to 45 days are normally treated as a single inquiry.
- Bargain with your current lender. If you’ve been offered a lower rate elsewhere, check in with your current lender to see if it can match that rate or better.
- Make a decision. Compare offers and check how your interest cost would change with different loans. Review loan features as well as assess the impact of any fees or prepayment penalties. Then sign up with the lender offering the best deal.
Student loan refinancing FAQs
Yes, you can refinance student loans more than once, either with the same lender or with different lenders each time.
No, a cosigner is not required if you have strong income and credit to support your application.
You can be approved in as little as a few minutes.
No, you can only refinance federal loans through a private lender. You can consolidate federal loans, however, through a Direct Consolidation Loan with the Department of Education.
Student loan refinancing involves getting a new loan at a different interest rate and potentially a new term. Student loan consolidation, on the other hand, combines multiple loans into a single loan.
Too long, didn’t read?
Refinancing your student loan could save you thousands if you qualify for a lower rate, but lenders are not likely going to give you a better deal unless you can show your finances have improved since you applied for the original loan. Refinancing products differ across providers, so shop around to find the best rates and loan features.
We welcome your feedback on this article and would love to hear about your experience with the student loan refinance loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.
Methodology
The SimpleScore is a proprietary scoring metric we use to objectively compare products and services at The Simple Dollar.
For every review, our editorial team:
- Identifies five measurable aspects to compare across each brand
- Determines the rating criteria for each aspect score
- Averages the five aspect scores to produce a single SimpleScore™
Here’s a breakdown of the five aspect scores and their rating criteria for our review of the best student loans of 2020.
Max Fixed Rate
Lenders who offered a lower maximum fixed rate were awarded higher scores.
Perks
We awarded higher scores for lenders that list more perks including services, discounts and special offers for their borrowers.
Transparency
Lenders that laid it all bare by publishing important data about products — APR, offered loan amounts, applicable fees and customer support contact links — scored higher for transparency.
Loan Amount
Lenders that offered higher loan amounts compared to others received higher scores.
Fees
We awarded higher scores to lenders that have fewer loan fees for borrowers.