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Compare your refinancing options while learning what to look for, how to apply and more.
This article was reviewed by Marguerita Cheng, a member of the Finder Editorial Review Board and award-winning advocate for ethical financial planning for over 20 years.
With student loan refinancing, you take out a new loan with hopefully lower rates or more favorable terms than your current student loans and use that to pay them off in full. Then, you repay your new loan according to your new loan terms. It doesn’t reduce the amount of debt you have, but it can reduce the amount you pay in the end.
Note that longer loan terms can increase how much interest you pay in the long run. You might want to look for a loan with both a lower APR and longer term if you’re interested in lowering your monthly repayments.
Refinancing sounds great, but it’s not for everyone. To know if you should refinance your student loans, make sure you’re in the right position to get better terms before you spend hours comparing lenders.
You could save anywhere from $100 to over $30,000 by refinancing your student loans — it all comes down to your current interest rate, loan balance, loan term and what type of offer you get when you refinance. Check out a breakdown of how much you can save in different scenarios with our refinancing savings guide.
Below is how much one person could stand to save by refinancing a $40,000 student loan with a lower interest rate and shorter term.
Current loan
New loan
| Original loan | New loan | Your savings | |
|---|---|---|---|
| Total interest | $20,758 | $8,575 | $12,183 |
| Monthly payment | $338 | $405 | –$67 |
| Interest rate | 6% | 3.99% | 2.01% |
| Term | 15 years | 10 years | 5 years |
They’d save over $12,000 in the long run, but they’d have to pay $67 more each month.
If done right, refinancing can potentially save you thousands in interest payments. But saving money isn’t the only reason you might want to consider refinancing. These are some of the most common reasons borrowers decide to trade in their student loans.
Took out a student loan without really thinking about how much it was going to cost you each month? You’re not alone. Private lenders generally don’t offer income-based or graduated repayment plans, meaning you could be on the hook for $800 a month as soon as you graduate.
While refinancing might not give you an income-based repayment plan, getting a longer loan term can make your monthly repayments more affordable.
6 ways to lower your monthly student loan repayments
While no lender is more flexible than the government when it comes to repayment plans, not all are created equal. Some offer more extensive forbearance options and in-school deferment so you don’t have to worry about your repayments if you’re planning on going back to school or want to make a career change. Some even offer support to entrepreneurs.
If you refinance for a longer term but are unable to qualify for a more competitive rate, you might save from month-to-month, but you could end up paying more on your loan. Pausing repayments to go back to school also allows interest to add up while you’re not making repayments. Make sure to consider all costs of your loan before you sign your loan documents.
The truth is that most Americans with student loans have more than one — and with multiple servicers. Keeping track of it can feel like a full-time job that you just don’t have time for.
Refinancing to consolidate your student debt into one loan (hopefully with more competitive rates) can make repayments a whole lot easier. It can also make it easier to apply for forbearance if you have an unexpected financial crisis — like getting laid off.
If your lender doesn’t offer cosigner release, the only other option you have to take them off your loan is to refinance it in your name. Not sure you’ll qualify on your own? You can refinance your loans with a different cosigner.
If you’re not happy with the company handling your student loan repayments, refinancing is the only option to change your servicer if you have private student loans. Just be sure to research the servicer for your new lender, since many use the same company.
6 best student loan refinancing offers
You might need a cosigner to refinance your student loans if you have bad credit or you don’t have a strong work history just yet.
The process for applying with a cosigner varies by lender. Some consider your cosigner’s information alone when determining your eligibility and rates. Others look at a combination between the two. Some only consider your cosigner’s credit to help you lower your rates, but still require you to meet basic eligibility requirements on your own.
However, not all student loan refinancing providers accept cosigners to begin with, so make sure your lender does before starting your application.
Asking someone to cosign your loan can be a risk — they’re taking on a debt load that they won’t personally benefit from but could hurt their credit. Luckily, many student loan refinancing options come with the opportunity to apply for cosigner release.
Cosigner release allows you take your cosigner’s name off of your loan. To qualify, you typically need to make two or three years of on-time payments and be able to meet the lender’s credit requirements on your own. Some lenders let you keep your current rates and terms, while others might adjust them to reflect your solo creditworthiness.
Top 6 banks for student loan refinancing
If you’ve already looked at a few refinancing loans, you’ve probably noticed that lenders list two different types of interest rates: Fixed and variable. What does this mean? Let’s take a look.
Fixed rates are what they sound like. You qualify for one interest rate that stays with you throughout the entire life of your loan. Your monthly repayments stay the same and it’s easy to plan your payments. Fixed rates can be a safer option: There’s no surprises here.
Variable rates are slightly more complicated. They change every one to three months to reflect lending market trends, depending on the type of benchmark rate your lender uses. While they typically start lower, they can often get as high as your highest fixed interest rate.
Because of this, lenders often cap variable rates to protect borrowers from skyrocketing benchmark rates. You might have to reach out to your lender to find out what the maximum variable rate is.
An in-depth look at how fixed and variable rates work on student loans
Applying for student loan refinancing is typically less complicated than applying for a student loan, but a bit more involved than getting a personal loan. You and your cosigner can usually apply online by filling out a simple application that often doesn’t take more than a few minutes.
Often the most time-consuming part is getting your documents together and waiting for your lender to reach out to your servicers. It can take as long as a month or two total to refinance your student loans.
A step-by-step guide to refinancing your student loans
Yes, you can refinance federal student loans with several private lenders. However, you’ll be giving up many federal benefits, including flexible repayment plans and forgiveness programs.
All federal loans come with unique benefits that you stand to lose, such as:
Parent PLUS Loans are slightly different than other types of federal loans. They come with higher interest rates and are one of the few cases where refinancing can help lower your overall loan cost. They’re also in the parent’s name, rather than the student’s.
Parents generally have two options for refinancing Parent PLUS Loans: Refinancing in your name or refinancing in your child’s name. You’ll still be responsible for repaying your loan when you refinance in your name, but you could have lower rates or better terms.
Refinancing in your child’s name allows you to get better rates, but more importantly it lets you transfer the debt so you can qualify for other types of credit.
Not all lenders are willing to refinance Parent PLUS Loans, so look for one that specifically mentions it does before you start your application.
How refinancing federal student loans works step by step
In the world of student loans, refinancing typically refers to taking out a new loan to pay off your current private and federal loans with a private lender. Meanwhile, student loan consolidation generally refers to consolidating your federal loans into one federal Direct Consolidation Loan from the DoE.
Unlike refinancing, a Direct Consolidation Loan doesn’t allow you to qualify for better rates — it takes a weighted average of your current federal loan rates. However, it can help simplify your repayments while also opening you up to longer terms, more repayment plans or forgiveness programs.
How to decide between consolidation vs. refinancing
If you’re one of the 44 million Americans with student debt, you might want to consider refinancing your student loans. Even if you have a federal subsidized loan, it’s possible you borrowed during a year when interest rates were unusually high across the board.
Learn more about how student loans work by checking out our guide.
Our answers to common questions about refinancing student loans.
Can I refinance a student loan that I’ve already refinanced?
You can refinance your loans as many times as you like. But it’s not likely that you’ll get a great deal after the first few times, unless you started out with astronomically high interest rates. Weigh the pros and cons with our article on refinancing your student loans more than once.
Are there federal refinancing options for my federal student loan?
Unfortunately, there is no federal refinancing. Federal interest rates are set by law, so they have nothing to do with your income, credit score or any of the other factors private lenders consider when determining your interest and fees rate.
In short: You get what you get with a federal loan — unless you decide to refinance with a private lender. Learn more with our article on common student loan myths — debunked.
Do credit unions offer student loan refinancing?
Yes, some credit unions offer refinancing for student loans, though you’ll need to be a member or sign up during the application process to qualify. These often have softer credit requirements than other lenders out there, on top of offering a more personalized borrowing experience.
Should I sign up for the Standard Repayment Plan or refinance my federal student loans?
It depends on what your priorities are. If you’re hoping to take advantage of federal benefits like forgiveness, deferment or forbearance, you might want to stick with the Standard Repayment Plan to keep your loans federal. And you can always contact your federal loan servicer as your financial situation changes before you refinance — just to make sure it’s right for you.
But if you’re not planning to make use of those benefits, you might be able to save on interest by refinancing for a lower rate or shorter term.
You can learn more with our page on the Standard Repayment Plan versus student loan refinancing.
How much can I reduce my APR by refinancing my grad school loans?
It depends on your credit history, income and personal financial situation. However, the average borrower received a 2% lower rate by refinancing their student loans, according to data from Credible and LendKey. You can check out our page on how much you can save by refinancing your graduate school loans to learn more.
Can I refinance my student loans if I’m an international student?
Yes, you have a few options when it comes to refinancing student loans you took out as a nonresident. While some lenders might require you to have a specific visa, others might ask you to apply with a cosigner who’s a US citizen or permanent resident. You can learn more with our guide to refinancing international student loans.
Can I refinance my student loans with my spouse?
Yes, some providers like PenFed Credit Union allow you to refinance your student loans with your spouse. This can be especially helpful for stay-at-home parents with high student debt loads who rely on their spouse’s income.
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