Category: Student Loan Refinancing

Student Loan Refinancing Guide: Introduction

This student loan refinancing guide covers the key aspects of how to refinance student loans and save money in the process. Student loan help comes in many shapes and sizes – student loan refinance, student loan consolidation, student loan forgiveness and the more nebulous cousins, student loan deferment and student loan forbearance.

Today, we’re going to look closely at student loan refinance (and explain how you can potentially save more money with student loan refinance over student loan consolidation).

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What is Student Loan Refinance?

The goal of this student loan refinance guide is to get you a better deal on your student loans so you can pay them faster and save money as you do it. Student loan refinance is also about getting you a lower interest rate based on your financial profile, and not just the same fixed interest rate that the government offers regardless of your financial profile.

• Lower payment. Lower your monthly student loan payments
• Lower interest rate. Get a lower interest rate
• Change loan term. Shorten or extend your student loan term
• Fixed vs Variable. Switch from a fixed interest rate to a variable interest rate, or vice versa
• Simplify payments. Simplify your monthly student loan payment with a single student loan repayment

You can use the Mentor Student Loan Refinancing Calculator to calculate your potential savings when you refinance your student loans.

Sounds great, right? You are probably asking yourself a few questions:

• Why can I save so much money with student loan refinance?
• What’s the difference between student loan consolidation and student loan refinance?
• What is the eligibility criteria?
• Am I a good candidate to refinance student loans?
• Who are the best student loan lenders with whom to refinance student loans?

Many people have never heard of student loan refinancing and did not realize it was even an option. That’s why we put together this Student Loan Refinance Guide to help you understand the basics, navigate your options, answer key questions, provide the facts, and help you through the student loan refinance process.

Student Loan Refinance vs Student Loan Consolidation?

Well first, there is a difference between student loan consolidation and student loan refinance.
Student loan consolidation, specifically direct loan consolidation, is offered by the federal government, and applies only to federal student loans. As the name suggests, student loan consolidation means you just combine your existing federal student loans into a single student loan. The interest rate on your new consolidated student loan is simply a weighted average of the interest rates on your existing student loans.

Student loan refinance, or private student loan consolidation is both a consolidation (combining of existing loans) and a new student loan with a lower interest rate. A private lender can give you a new student loan, pay off your existing student loan, allow you to refinance both federal student loans and private student loans into a single student loan. Plus, your new student loan interest rate will be based several factors, which may include your credit score, track record of financial responsibility, income, and ability to manage debt payments.

Since the federal government does not refinance student loans, you can think of student loan refinancing as a form of private student loan consolidation – meaning that you refinance with a private student loan company, rather than the federal government, with the primary goal to save money and lower your monthly payments. Many private student loan companies will refinance, though, both your federal and private student loans. When you refinance your student loan, your new lender pays off your existing student loan and issues you a new private student loan. The goal is to lower your overall interest rate so you can save money on student loan interest costs.

Unlike a federal government loan in which each and every borrower receives the same interest rate, private student loans are credit-based, which means that your credit history, income, and/or credit score may impact the interest rate on your new loan. Private student loan companies use different underwriting models to determine qualifications and interest rates.

But you can expect that the stronger your financial profile and demonstrated financial responsibility, the lower your interest rate will be. The good news is that some private student loan companies enable you to have a co-signer (such as a family member), who will assume financial responsibility for your student loan and can help you obtain approval for your student loan application based on their financial profile.

Why Refinance Student Loans?

The primary reason to refinance student loans is the potential to receive a lower interest rate than your existing student loan. Federal student loans may have interest rates as high as 6.8% on an undergraduate student loan, and even higher for a graduate PLUS loan. You may have other private student loans at even higher interest rates that you borrowed while you were a student. Now that you have graduated and have an income and established work history, private student loan lenders are likely to offer you a lower interest rate than these types of student loans.

One downside of refinancing student loans is that you lose federal student loan protections such as income-driven repayment options, Perkins Loan cancellation, and public service loan forgiveness, and teacher student loan forgiveness, student loan deferment and student forbearance programs, among others. So if you think you will need these benefits, then you should check for eligibility to see if you qualify before refinancing student loans. However, if saving money on your student loans is your top priority, then student loan refinance may be your best option.

Income-Driven Repayment Plans

Federal student loans offer benefits that are not offered by private student loan companies such as income-driven repayment plans, which allow the borrower to make student loan payments based on income. For example, a graduated student loan repayment plan enables the borrower to make low monthly payments at the beginning of the student loan repayment period and increase the student loan payments over time as the borrower’s income increases. Other income-driven repayment programs for borrowers with high debt-to-income ratios allow the borrower to make small monthly student loan payments, and then any remaining principal can be forgiveness after 20 or 25 years.

These income-driven repayment plans can be beneficial to lower your monthly student loan payments and provide flexibility, particularly if you have a lower income in the beginning of your career. The downside is that with a lower student loan payment, interest still accrues, or accumulates, on the principal balance. So, even though the monthly student loan payment is lower, you actually end up paying more for your student loans because of the interest costs.

Student Loan Forgiveness

While this student loan refinance guide focuses on student loan refinancing, federal student loans can offer student loan forgiveness benefits as Public Service Loan Forgiveness and Teacher Student Loan Forgiveness for borrowers who work in qualifying roles in these professions. If you work in either of these professions, you may want to check whether these benefits apply to you before your refinance student loans.

Student Loan Deferment and Student Loan Forbearance

Most federal student loans allow you to postpone making student loan payments due to financial hardship. The most common benefits are student loan deferment (during which student loan interest does not accrue) and student loan forbearance (during which student loan interest does accrue). Most private student loan companies do not offer student loan forbearance but do offer some form of student loan deferment, including monthly payment postponement and help finding a new job if you lose your current job. You can check out our student loan company reviews to learn more.

Where Can I Refinance Student Loans?

You can learn more about student loan companies who can offer fixed and variable student loan interest rates. You can compare student loan rates, loan terms, qualification criteria and more.

You can also use this student loan refinancing calculator to calculate how much money you can save when you refinance student loans.

Plus, if you sign up for autopay, you can earn a 0.25% discount on your student loan interest rate, which adds up to big savings over the course of your student loan.

Flexible Student Loan Repayment Terms

Private lenders offer borrowers multiple options for student loan repayment, with terms ranging typically from 5 to 20 years. You also will have an opportunity to choose between fixed and variable interest rates. If you want to pay off student loans and get out of debt as quickly as possible, then you will want to choose a shorter-term option (such as 5 years or 10 years).

While you will save on student loan interest costs (compared with a 20-year student loan, for example), your monthly interest costs will be relatively higher than with a longer term student loan option. However, you may be able to save money depending on how much money you save with your new student loan interest rate.

Summary Comparison: Direct Consolidation Loan vs. Student Loan Refinance

We often get the question: Which is better – direct federal student loan consolidation or student loan refinancing? Each have their benefits…

Private lenders offer borrowers multiple options for student loan repayment, with terms ranging typically from 5 to 20 years. You also will have an opportunity to choose between fixed and variable interest rates. If you want to pay off student loans and get out of debt as quickly as possible, then you will want to choose a shorter-term option (such as 5 years or 10 years).

While you will save on student loan interest costs (compared with a 20-year student loan, for example), your monthly interest costs will be relatively higher than with a longer term student loan option. However, you may be able to save money depending on how much money you save with your new student loan interest rate.

Am I A Good Candidate To Refinance My Student Loans?

When you first borrowed your student loans, you may have had both a federal student loan and a private student loan. Your federal student loan is likely at the same high rate as everyone else’s, since the federal government offers the same fixed rate to all borrowers. If you have a private student loan, it likely is a variable rate loan with a high interest rate. This is because when you borrowed that loan, you were in school and you may have had a limited credit history, which meant that your student loan company deemed you a higher credit risk.

Now, you may have graduated, become employed, and developed a stronger credit history. As a result, you may be able to qualify to consolidate and refinance your existing federal student loans and private student loans into a new private loan with a lower interest rate.

If your goal is to obtain a lower interest rate, lower your monthly payments, switch from a variable interest rate to a fixed interest rate (or vice versa), or change the loan term to a longer to shorter number of years to repay your loan, then you may be a good candidate to refinance student loans.

Do Federal Student Loans Offer the Lowest Interest Rates?

This is a major misconception. Particularly for graduate school and professional school such as business school, medical school, dental school, law school, pharmacy school and other programs, you can get a much lower interest rate by refinancing student loans with a private student loan company.

Why? Interest rates are near an all-time low, so private student loan companies are able to offer lower student loan interest rates than the federal government. Most graduate school loans through the federal government, for example, are comprised of Federal Direct Unsubsidized Loans and Direct PLUS Loans. could have an interest rate with the federal government. These loans can cost almost 6% and 7%, respectively. In addition, a PLUS loan borrower will have to pay a 4.292% origination fee. Even as interest rates have declined (e.g., the 10 Year Treasury Rate has declined from 5% to less than 2% over the last 10 years, Graduate PLUS Student Loans have stayed relatively constant at 6.8%. That’s great news for the federal government as the lender, but not so great for you as the borrower.

Further, the federal government does not “underwrite” student loans based on the individual borrower. Rather, each borrower gets the same interest rate – regardless of your income, financial profile, or credit score. If you score high in these categories, then you are essentially overpaying for your student loan and may be able to obtain a lower student loan interest rate through a private student loan company. This is why student loan refinance with private student loan companies has become such a popular solution for student loan debt payment.

Can I Combine My Federal Student Loans and Private Student Loans When I Refinance?

Yes, you can combine federal and private student loans with certain student loan companies when you refinance student loans. You also may be able to refinance student loans that you previously consolidated with the federal government through the U.S. Department of Education (e.g., Direct or FFEL) or a private student loan company.

Double check with your lender when you refinance your student loans to make sure. Also, when you refinance your federal student loans, you lose most flexible student loan repayment plans and other protections connected with a federal student loan. That said, some student loan companies offer flexible student loan repayment plans, including student loan deferment and student loan forbearance.

Again, you should check with your new prospective student loan company and be sure to ask the new student loan company the differences between your new, refinanced student loan and your existing federal student loan.

What Will My Monthly Payments Look Like?

Hopefully lower than what you are currently paying! You are in the driver seat – so you should consider a student loan that fits your personal and financial needs. Your monthly payment is primarily a feature of your interest rate, loan term and loan amount.

• Fixed Interest Rate. If you have a fixed interest rate, your monthly student loan payment will remain constant each month for the duration of your loan.
• Variable Interest Rate. If you have a variable student loan payment, your monthly loan payment may change each month based on the underlying benchmark such as 1 Month LIBOR.
• Shorter-Term Loan. If you have a shorter-term student loan (e.g., 10 years or less), your monthly payments may be higher than if you have a longer-term loan (more than 10 years) because you have a shorter period to pay off the loan.
• Longer-Term Loan. The longer the term of your loan (e.g., the number of years to pay back your loan), the more interest that will accrue over time and the more interest you will owe.

So, you should decide how much you can afford to pay now versus over time and find the loan product that works best for your personal and financial needs. And remember – most student loan companies offer up to 0.25% discount off your interest rate if you sign up for auto pay. The autopay savings can really add up.

What Happens To Your Student Loan Interest Rate With Student Loan Consolidation?

This is the biggest different between student loan consolidation and student loan refinancing. When you refinance student loans you are hoping to get a lower interest rate or better overall terms for your student loan repayment. However, with a Federal Direct Loan consolidation, your interest rate will be calculated based on the weighted average of the interest rates on the loans being consolidated.

While most federal student loans are eligible for student loan consolidation – private loans are not. Also worth remembering – if you’re a parent with Parent PLUS loan, you cannot transfer that Parent PLUS loan to the student (now graduate) when he or she consolidates.

Do I Qualify For Student Loan Refinance?

To qualify for student loan refinancing, you usually need to show a few things. First you need to have graduated from a qualified degree program or university, which is typically a Title IV accredited school. Second, you need to have a steady stream of income and third, you need a history of making timely payments. There are many different lenders and student loan companies in the market place offering student loan refinancing. Each student loan company has different criteria for eligibility.

Typically, eligibility criteria to refinance student loans include:

• Strong monthly cash flow
• Healthy credit
• Demonstrated financial responsibility
• Currently employed or have written job offer
• Degree from Title IV accredited university or degree program

Of course, eligibility criteria vary by student loan company, but this should give you a general framework. The stronger your financial metrics – for example, credit score, income, historical financial responsibility, current outstanding debt – the lower student loan interest rate you may be able to obtain.

Student Loan Refinance Process

Now that you have made the decision to refinance your student loans, it is time to understand the student loan refinancing process. Over the past five years, the process to refinance student loans has been simplified considerably. Gone are the days of piles of paperwork, long wait times, and bureaucracy.

So, what does the student loan refinance process look like?

1. Easy Application Process

• All the student loan refinance applications are online and you receive a student loan interest rate offer typically within 2 minutes
• The total student loan refinance application may take less than 15 minutes to complete
• Co-signers and parents can also apply online as well

2. Select Your Loan

• You can choose a fixed or variable student loan interest rate
• You can choose your loan term and decide how fast you want to pay off your student loan

3. Submit Your Loan Documentation

• You can submit your documentation online
• Some lenders will allow you to take a photo of your documents, or even submit via text
• Key documents include your:
  • Driver’s license or passport (or government issued ID)
  • Transcripts / Diploma to verify your degree
  • Payoff statement from your current lender (if refinancing)
  • Monthly rent amount or mortgage payments
  • Two most recent pay stubs or tax returns (or offer letter of employment)

4. Lender Underwriting Review

• The lender will review your submitted documents and credit report
• The lender will apply its proprietary credit model to ensure that you meet all its underwriting criteria

5. You’re Approved!

6. Review Disclosures & Sign Loan Documentation

• Review truth in lending and other disclosure statements
• Sign your student loan documentation

7. Your Student Loan Is Disbursed

• If you refinance, your lender will issue you a new student loan and directly pay off your existing student loan from your existing lender
• If you borrow a new student loan, your lender will send the funds directly to your school

Top 10 Must Haves From Your Student Loan Company When You Refinance Student Loans

When you refinance student loans, here are the Top 10 must haves you should look for:

1. Lower interest rate
2. Flexible loan terms
3. Significant savings compared to existing student loans
4. Fixed and variable interest rates
5. Dedicated and available customer service
6. Ability to refinance federal and private student loans
7. Online application
8. Forbearance options in case of economic hardship
9. Autopay discount
10. Other benefits

I Am Interested In Student Loan Refinance – How Do I Sign Up?​

While it used to be a cumbersome process that involved mountains of paperwork and hours of your time, now in just two minutes, you could learn what your new student loan interest rate could be. To learn more about student loan refinance options, you can read our student loan reviews and check out The Best Lenders To Refinance and Consolidate Student Loans.

Compare rates and pay off student loans faster​

While it used to be a cumbersome process that involved mountains of paperwork and hours of your time, now in just two minutes, you could learn what your new student loan interest rate could be. To learn more about student loan refinance options, you can read our student loan reviews and check out The Best Lenders To Refinance and Consolidate Student Loans.

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When it comes to student loan refinancing, you may be wondering which companies are the top lenders to refinance student loans. We evaluated lenders based on multiple factors, including reputation, customer service, interest rates, fees, repayment options, flexibility, and other considerations.

With student loan refinancing, you can refinance federal student loans, private student loans or both. When you refinance student loans, you exchange your current student loans for a new, single student loan with a lower interest rate. The goal of student loan refinancing is to save money and pay off student loans faster.

What are the best student loan refinance options?

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Here are our picks for the top lenders to refinance student loans:

• SoFi
• Earnest
• ISL
• LendKey
• Laurel Road
• ELFI
• Splash
• Student Loan Refinancing: FAQ

SoFi

SoFi is one of the top lenders to refinance student loans.

As one of the best student loan consolidation companies, SoFi has some of the lowest student loan refinance rates in the industry. With SoFi, you can refinance both federal and private student loans.

In addition, parents with Parent PLUS Loans can also refinance Parent PLUS Loans with SoFi.

Earnest

Earnest is one of the best companies to refinance student loans. As one of the best student loan consolidation companies, Earnest differentiates itself by allowing you to choose your own student loan interest rate and student loan repayment term. This lender also offers industry-leading repayment flexibility on your student loans. For example, you can skip a student loan payment and make it up later. With Earnest, you can choose your exact minimum monthly payment and increase your payment anytime to pay off student loans faster.

Earnest has no application fees or origination fees. You can refinance and consolidate multiple federal and private student loans into a new, single student loan.

Earnest looks beyond credit score to approve you for student loan refinancing, and will incorporate savings, education and earnings potential. Parents can also refinance Parent PLUS Loans with Earnest.

ISL

ISL is a non-profit lender and was formerly known as Iowa Student Loans. This lender refinances student loans, Parent PLUS Loans, medical student loans, dental student loans, and other undergraduate and graduate student loans. Founded in 1979, ISL also refinances student loans for medical residents and dental residents. ISL also refinances student loans while you’re in school.

Medical residents and dental residents can pay $75 a month if they refinance student loans during residency. Based in Iowa, ISL is also one of the few lenders that will refinance your student loans while you’re in school. That means that you can get a lower interest rate while you’re a student or if you left school and didn’t earn a degree.

The good news is that ISL doesn’t require you to be employed to qualify for student loan refinancing and there is no minimum income. With this lender, you can also get a cosigner release after 24 months as well as forbearance and deferment.

LendKey

LendKey compares offers from nearly 300 community banks and credit unions to find you the best student loan refinance rates. This lender has no fees and enables you to refinance both federal and private student loans, including both undergraduate and graduate student loans.

One benefit of LendKey is that the company offers one of the longest unemployment protection periods of all student loan refinance companies. LendKey enables you to pause payments for up to 18 months if you become unemployed.

Here’s another benefit when you refinance with LendKey. If you repay 10% of your student loan by the time your loan enters the full repayment period, LendKey will drop 1.0% APR from your current interest rate.

Laurel Road

Laurel Road is a bank that offers student loan refinancing and Parent PLUS Loan refinancing, including for both undergraduate and graduate school loans.

The benefit of Laurel Road is no fees and the opportunity to refinance both federal and private student loans. If you are a parent and want to refinance student loans that you borrowed for your child’s college, this lender permits parents to refinance Parent PLUS Loans in their child’s name.

With this lender, you may be able to pause their student loan payments for one or more three-month periods (up to 12 months) through a forbearance if they face economic hardship.

ELFI

ELFI is one of the top lenders to refinance student loans, and it’s backed by the SouthEast Bank. Based in Tennessee, ELFI has no fees and enables you to refinance and consolidate both federal and private student loans, including both undergraduate graduate student loans. If you are a parent and want to refinance student loans that you borrowed for your child’s college, ELFI offers Parent PLUS Loan refinancing and refinancing for private loans.

ELFI allows you to pause your loan payments for up to 12 months if you face financial hardship or permanent disability. ELFI is a transparent lender who lists all rates, terms and monthly payments prominently on its website so you know exactly what you would pay with ELFI student loan refinancing.

Splash

Splash is a new lender that works with banks and credit unions to refinance student loans. This lender has competitive rates and offers free student loan refinancing for federal and private student loans, including both undergraduate and graduate student loans. Parents with Parent PLUS Loans can also refinance Parent PLUS Loans with Splash.

Student loan refinancing is the process of lowering the interest rate on your student loans. You can exchange your existing federal student loans, private student loans or both to receive a new student loan with a lower interest rate. There are many potential benefits when you refinance student loans, including saving money by having a lower interest rate. With student loan refinancing, you have flexibility to decide your student loan repayment term. You can pay off student loans in a shorter time period with a higher monthly payment, or you can choose a lower monthly payment and pay off student loans over a longer time period.

Student loan refinancing is empowering because it helps you take control of your student loans and decide your financial future. You can choose a new lender, choose a repayment term, select a fixed or variable interest rate, consolidate your federal student loans and private loan debt into one monthly payment, and simplify your student loan repayment with only one student loan servicer.

This student loan refinancing calculator can help calculate how much money you can save when you refinance student loans.

How do you get approved for student loan refinancing? Lenders prefer borrowers with a strong credit score (at least in the mid 600’s and preferably in the 700’s), stable and recurring income and a low debt-to-income ratio. If you don’t meet these requirements, you can always apply with a qualified co-signer, who can help you get approved and even get a lower interest rate.

One benefit of student loan refinancing is the ability to check your interest rate for free within minutes before you apply. This is called a soft credit check. You can do this with multiple lenders to determine which lender offers the lowest interest rate. The lender will do a soft credit check to determine your interest rate, and this has no impact on your credit score.

Remember, when you refinance student loans, your new student loan will be a private student loan. This means that you no longer will have federal student loan if you choose to refinance federal student loans. When you refinance student loans, you won’t have access to income-driven repayment plans or federal programs such as public service loan forgiveness or teacher loan forgiveness.

If you think these programs are beneficial to you, you could refinance private student loan debt and keep your federal student loans outstanding. You could consolidate federal student loans into a Direct Consolidation Loan. The benefit is to organize all your federal student loans into a single student loan. The downside is that a Direct Consolidation does not lower your interest rate, so you won’t save any money. The choice is yours, but if you want to lower your interest rate and save money, then student loan refinancing may be your best option.

Student Loan Refinancing: FAQ

What is student loan refinancing?

Student loan refinancing is the process of receiving a lower interest rate on a new student loan and using your new loan to pay off your existing student loans. When you refinance student loans, a lender will both refinance and consolidate your student loans into a new, single student loan. This new loan will have one monthly payment, one student loan servicer and one interest rate. Not only can you save money with student loan refinancing, but also student loan refinancing helps you manage your debt with one monthly payment.

Student loan refinancing has many advantages:

• Lower your interest rate
• Save money
• Pay off student loans faster
• Change your loan terms
• Combine multiple student loans into a single student loan
• Change lenders and student loan servicers for better customer service
• Remove a co-signer from your student loans

You can check and compare the latest student loan refinancing rates to determine how much money you can save.

When should I refinance my student loans?

When to refinance student loans depends on several factors. For example, you should refinance whenever you can get a lower interest rate compared to your current interest rate.

Here’s an example of how student loan refinancing can help save you money. For example, let’s assume you have $50,000 of student loans at an 8% interest rate and a 10-year repayment term. If you can refinance your student loans and receive a 3% interest rate and a 10-year repayment term, you would save $124 per month and $14,860 total.

This student loan refinancing calculator shows you how much money you can save when you refinance student loans.

Here are some examples when to refinance student loans. You should refinance student loans if you have:

• student loans have high interest rates
• good credit and recurring monthly income
• private student loans
• an interest in changing your student loan terms
• a need to change your lender or student loan servicer
• a variable interest rate
• the opportunity to save money

You may not want to refinance student loans if you:

• expect to apply for student loan forgiveness
• are unemployed or underemployed
• plan to enroll in an income-driven repayment plan
• defaulted on your student loans

How Do I Refinance My Student Loans?

You can refinancefederal stud ent loans, private student loans or both. There is no limit to the number of times that you can refinance student loans so you can refinance each time you find a lower rate.

You can apply online to refinance student loans with banks, online lenders and credit unions. You should compare the best rates for student loan refinancing, and you can check your interest rate for free with as many lenders as possible. The process takes about two minutes and there is no impact to credit score. When you are ready to apply, lenders will check your credit with a hard credit pull. The application takes about 10-15 minutes, and you can apply to multiple lenders at once to increase your chances of approval. The good news is that there are no fees to refinance student loans, and when you apply to multiple lenders in a short time period (such as a week), credit bureaus only count it as one credit inquiry.

How Do I Get Approved For Student Loan Refinancing?

When lenders refinance student loans, they want borrowers who have:

You can apply online to refinance student loans with banks, online lenders and credit unions. Make sure to compare the best rates for student loan refinancing. You can check your interest rate for free with as many lenders as possible. The process takes about two minutes and there is no impact to credit score.

• Good Credit: Lenders prefer to refinance student loans for borrowers who have at least a 650 credit score. Preferably, your credit score is in the 700’s or higher.

• Good Income: Most lenders may require that you graduated and earned a degree before you refinance student loans. Most lenders expect that you are currently employed or have a written job offer. You will also need stable and recurring income.

• Low Debt-To-Income: Lenders want to ensure you can repay your refinanced student loan, living expenses and other debt payments.

If you have bad credit, lower income or don’t meet these qualifications, you can apply with a creditworthy cosigner.

What’s the Difference Between Student Loan Refinancing and Student Loan Consolidation?

Student loan refinancing. Student loan refinancing is done with a private lender, while federal student loan consolidation is done with the federal government. The federal government does not refinance student loans. So, the best choice for student loan refinancing is to refinance with a private lender.

Student loan refinancing is the process of receiving a new student loan with a lower interest rate. The goal is to save money, pay off student loans faster and get out of debt more quickly. You can refinance federal student loans, private student loans or both.

Federal student loan consolidation. Federal student loan consolidation is the process of combining all your federal student loans into a Direct Consolidation Loan. With student loan consolidation, you will have one federal student loan, one interest rate and a lower monthly payment. You can still refinance private student loans if you choose to consolidate federal student loans into a Direct Consolidation Loan. The downside of a Direct Consolidation Loan is that you won’t receive a lower interest rate. To receive a lower interest rate, student loan refinancing is your best option.

This consolidation vs. refinancing calculator shows you how much money you can save with student loan refinancing.

How Often Can You Refinance Student Loans?

There is no limit to how often you can refinance student loans. Student loans do not have any origination fees or a prepayment penalty. Why is this important? Without a prepayment penalty, you can pay off your student loans any time with no fees. Any time you find a lower interest rate, you could refinance student loans to save money without paying any fees.

There are many reasons why you should refinance student loans again:

• Get a lower interest rate
• Change your loan terms
• Change lenders and student loan servicers
• Release a co-signer

Why Should I Refinance My Student Loans?

The main reason to refinance student loans is to get a lower interest rate. A lower interest rate means you can save money on your student loans. Why? This means you can pay off student loans faster and get out of debt more quickly.

There are several reasons why you should refinance student loans:

1. Get a lower interest rate
2. Save money
3. Pay off student loans faster
4. Change loan terms
5. Simplify student loan repayment
6. Change lender or student loan servicer

How Much Does It Cost to Refinance Student Loans?

There are no fees to refinance student loans. That means that there are no application fees, origination fees or prepayment fees. Some lenders may charge late fees if you make a late student loan payment.

Compare top lenders to refinance student loans

• Student loan refinancing
• Law school student loan refinancing
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• Medical resident student loan refinancing
• Pharmacy school student loan refinancing
• MBA student loan refinancing
• Nursing school student loan refinancing

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If you want to know how to refinance student loans, then you could save money, pay off your student loans faster, and become debt-free. With student loan refinancing, you combine your existing federal student loans, private student loans or both into a new, single student loan with a lower interest rate.

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How To Refinance Student Loans

1. Compare lenders
2. Get interest rate estimates
3. Choose a lender and select loan terms
4. Apply
5. Sign documents
6. Loan gets disbursed

Compare Lenders

When you compare lenders, you can look at various features, including interest rates and other loan terms. You can explore variable and fixed interest rates, payoff terms, residency requirements (if any), minimum credit score and other terms. Most borrowers select the lender who approves them for the lowest interest rate. This helps you save the most money.

Get Interest Rate Estimates

Here’s a great part about student loan refinancing. Most lenders allow you to check your new interest rate for free before applying. These are interest rate estimates based on some basic information that you submit, and you can pre-qualify online in only a few minutes. You can check your estimated interest rate with multiple lenders with no impact to your credit score. This is called a soft credit check.

Choose a Lender and Select Loan Terms

Once you choose the best lender for you, it’s time to decide if you want a fixed interest rate or variable interest rate. A fixed interest rate means you will always have the same interest rate for the remainder of your repayment period. A variable interest rate means that your interest rate can change during your repayment period. Typically, variable interest rates are lower than fixed interest rates. If you plan to pay off your loan fast, a variable interest rate may be the best choice.

Next, you can decide your student loan repayment term, which typically ranges from 5 to 20 years. If you want to pay off your student loans faster, you can choose a repayment term closer to 5 years. While your monthly payment may be higher, you can save more money on interest and pay off student loans faster. If you want a lower monthly payment or need more time to pay off student loans, then you could choose a payment term closer to 20 years. However, a longer repayment term may result in more interest payments.

This student loan refinancing calculator shows you how much money you can save with student loan refinancing.

Apply

You’re now ready to apply. You can apply to refinance student loans with lenders directly online. The process takes only about 10-15 minutes, and you can upload your supporting documentation. Your lender may request the following:

• Proof of citizenship or residency (government ID or social security number)
• Valid ID (drivers license or passport)
• Proof of income (pay stubs or job offer letter)
• Transcripts or proof of graduation
• Student loan statements (from your current federal and private student loans)

At this stage, your lender will do a hard credit pull to confirm your credit background. Lenders may evaluate your credit score, other debt obligations and your debt-to-income ratio. Your lender wants to ensure that you can repay your student loans in full and also pay your living expenses and any other debt.

You can also add a co-signer when you apply. If you’re applying with a co-signer, your co-signer will also submit their documentation. Co-signers who have a strong credit and income profile can help you get approved and could help you get a lower interest rate.

Sign Documents

If you’re approved, it’s time to sign the final loan documents, including disclosures. Once you sign the final loan documents, you have a three-day rescission period if you decide to cancel your student loan.

If you’re not approved, you should ask your lender why. You may be able to add a co-signer with strong credit and income who can help get you approved. You may need more monthly cash flow, which you can do my earning more, cutting expenses or both. Or, you may need to improve your debt-to-income ratio, which you can do by earning more income, paying down existing debt, or both. Also, if you’re not approved by one lender, you can still apply to multiple other student loan refinancing lenders.

Loan Gets Disbursed

Congratulations! You’re all done. Your new lender will pay off your existing student loans. You should keep making monthly payments to your previous lender until you receive confirmation that your old student loan has been paid off by your new lender. If you overpay your old lender during this transition period, you will be refunded the difference. Going forward, you’ll make your monthly student loan payment to your new lender. Remember to sign-up for automatic withdrawals from your bank account so you never miss a student loan payment. Most lenders will discount your interest rate 0.25% when you set up autopay.

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If you’re looking for lower student loan payments, then an income-driven repayment plan may help. Student loan payments can be expensive. If you have high student loan payments, it may be challenging to save for retirement, buy a home or pay other living expenses. So, how can you lower your student loan payments?

The U.S. Department of Education offers income-driven repayment plans for your federal student loans, and they can lower your monthly student loan payment to as little as $0. There are four income-driven repayment plans, so it’s important to choose the income-driven payment that is best for you. Before you enroll, it’s important to understand the advantages and disadvantages of income-driven repayment plans.

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In this guide, we will address everything you need to know about income-driven repayment plans, including:

• What is an income-driven repayment plan?
• How does an income-driven repayment plan work?
• Who qualifies for income-based repayment?
• How do I enroll in an income-driven repayment plan?
• What is the best income-driven repayment plan?
• Is income based repayment a good idea?
• Can you really get student loan forgiveness?
• Does income driven repayment affect my credit score?

What Is an Income-Driven Repayment Plan?

An income-driven repayment plan is a student loan repayment plan for your federal student loans that is offered by the U.S. Department of Education. The federal government does not offer any income-driven repayment plans for private student loans.

There are four types of income-driven repayment plans for federal student loans:

• Income-Based Repayment (IBR)
• Pay As You Earn (PAYE)
• Revised Pay As You Earn (REPAYE)
• Income-Contingent Repayment (ICR)

For example, each income-driven repayment plan will cap your monthly federal student loan payment at 10-20% of your monthly discretionary income and will forgive your remaining student loan balance after you make 20-25 years of student loan payments.

Let’s explore each income-driven repayment plan in detail.

Income-Based Repayment (IBR)

Income-Based Repayment (IBR) is an income-driven repayment plan that caps your monthly federal student loan payment at either 10% or 15% of your monthly discretionary income. After 20 to 25 years, you can get student loan forgiveness on your remaining federal student loan balance.

If you are a new federal student loan borrower after July 1, 2014, then your:

• monthly student loan payment is capped at 10% of your monthly discretionary income
• student loan payment will never be more than the 10-Year Standard Repayment Plan amount.
• eligibility to receive student loan forgiveness on your remaining balance after 20 years of payments becomes effective.

To qualify as a new borrower, you must (a) have Direct Loans, and (b) have no outstanding balance on a William D. Ford Federal Direct Loan (Direct Loan) Program loan or Federal Family Education Loan (FFEL) Program loan when you received a Direct Loan on or after July 1, 2014.

If you are not a new federal student loan borrower after July 1, 2014, then your:

• monthly federal student loan payment is capped at 15% of your monthly discretionary income.
• federal student loan payment will never be more than the 10-Year Standard Repayment Plan amount.
• eligibility to receive student loan forgiveness on your remaining balance after 25 years of payments becomes effective.

Pay As You Earn (PAYE)

Pay As You Earn (PAYE) is an income-driven repayment plan that caps your monthly federal student loan payment at 10% of your monthly discretionary income and forgives your remaining federal student loan balance after 20 years. Under PAYE, you will not pay more than the 10-Year Standard Repayment Plan amount.

Most borrowers who qualify for PAYE can’t afford their student loan payments and started college after 2007. If you enrolled before 2007, you may still qualify for PAYE if you:

• borrowed federal student loans after October 1, 2007;
• didn’t have a federal student loan balance when you borrowed federal student loans after October 1, 2007; and
• received a Direct Loan on or after October 1, 2011.

Revised Pay As You Earn (REPAYE)

Revised Pay As You Earn (PAYE) is an income-driven repayment plan that caps your monthly federal student loan payment at 10% of your monthly discretionary income and forgives your remaining federal student loan balance after 20 years (undergraduate student loans) or 25 years (graduate student loans).

Income-Contingent Repayment (ICR)

Income-Contingent Repayment (ICR) is an income-driven repayment plan that caps your monthly federal student loan payment at the lesser of the following:

• 20% of your discretionary income; and
• What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income

Since monthly payments are capped at 20% of discretionary income, ICR is considered to be more expensive than other income-driven repayment plans. After 25 years of payments, you can receive student loan forgiveness on your remaining federal student loan balance.

How Does an Income-Driven Repayment Plan Work?

There are four income-driven repayment plans: IBR, PAYE, REPAYE and ICR. Each income-driven repayment plan has the same purpose: to allow you to repay federal student loans based on your discretionary income and still have enough money for living expenses. Your discretionary income is the amount of money you have remaining after you pay for essential living costs such as food and housing.

Each year, you provide your annual income to the U.S. Department of Education. Based on your income, family size and state of residence, as well as federal poverty guidelines, your discretionary income and student loan payment is calculated.

Who Qualifies for Income-Based Repayment?

Each income-driven repayment plan has its own qualifications:

Income-Based Repayment (IBR)

To qualify for IBR:

• You must demonstrate financial need based on your income and family size; and
• The student loan payment you would be required to make under IBR (based on your income and family size) must be lower than what you would pay under the Standard Repayment Plan.

Here is a simple test to know if you qualify for IBR: if your federal student loan debt is higher than all or most of your discretionary income, you likely qualify.

For IBR, only certain types of federal loans are eligible:

• Subsidized and Unsubsidized Direct Loans
• Federal Stafford Loans (subsidized and unsubsidized)
• Direct PLUS Loans made to graduate or professional students
• Direct Consolidation Loans that did not repay any PLUS loans made to parents
• FFEL PLUS Loans made to graduate or professional students (but not made to parents)
• FFEL Consolidation Loans that did not repay any PLUS loans made to parents
• Federal Perkins Loans (if consolidated)

Payment Amount: 10% – 15% of your discretionary income.

Your discretionary income is equal to the difference between your adjusted gross income and 150% of the federal poverty guidelines based on your family size and state of residence.

You will pay 10% of discretionary income if you first borrowed federal student loans starting July 1, 2014 and previously did not borrow a Direct Loan or FFEL loan. Your monthly payment will be 15% of your discretionary income if you borrowed federal student loans prior to July 1, 2014.

This income-based repayment calculator can determine what your monthly payment and student loan forgiveness would be under income-based repayment.

Repayment period: 20-25 years.

If you borrowed federal student loans for the first time after July 1, 2014, then your student loan repayment term is 20 years. All other borrowers have a student loan repayment term of 25 years.

Advantages:

• Get lower monthly payments based on your income
• Receive student loan forgiveness

Disadvantages:

• Pay more student loan interest
• Repay your student loans before you receive student loan forgiveness
• Any student loan forgiveness you receive may be taxable

Pay As You Earn (PAYE)

To qualify for PAYE:

• Demonstrate financial need based on your income and family size;
• The student loan payment you would be required to make under PAYE (based on your income and family size) must be lower than what you would pay under the Standard Repayment Plan;
• Borrowed federal student loans after October 1, 2007;
• Didn’t have an outstanding federal student loan balance when borrowing these student loans; and
• Must have received a Direct Loan on or after October 1, 2011.

Eligible Student Loans:

• Subsidized and Unsubsidized Direct Loans
• Direct PLUS Loans made to graduate or professional students (but not made to parents)
• Direct Consolidation Loans that did not repay any PLUS loans made to parents

Eligible Student Loans, if consolidated:

• Federal Stafford Loans (subsidized and unsubsidized)
• FFEL PLUS Loans made to graduate or professional students (but not made to parents)
• FFEL Consolidation Loans that did not repay any PLUS loans made to parents
• Federal Perkins Loans

Payment Amount: 10% of your discretionary income.

Your discretionary income is equal to the difference between your adjusted gross income and 150% of the federal poverty guidelines based on your family size and state of residence.

You can use this Pay As You Earn (PAYE) calculator to determine what your monthly payment and student loan forgiveness would be under PAYE.

Repayment period: 20years.

Advantages:

• Receive lower monthly payments based on what you earn
• PAYE offers one of the lowest monthly payments of any income-driven repayment plan
• Get student loan forgiveness

Disadvantages:

• You may pay more student loan interest
• You may pay off your student loans before you receive student loan forgiveness
• Any student loan forgiveness you receive may be taxable

REPAYE

To qualify for REPAYE, you don’t have to demonstrate financial need nor does it matter when you borrowed federal student loans.

Eligible Student Loans:

• Subsidized and unsubsidized Direct Loans
• Direct PLUS Loans made to graduate or professional students (but not made to parents)
• Direct Consolidation Loans that did not repay any PLUS loans made to parents

Eligible Student Loans, if consolidated:

• Federal Stafford Loans (subsidized and unsubsidized)
• FFEL PLUS Loans made to graduate or professional students (but not made to parents)
• FFEL Consolidation Loans that did not repay any PLUS loans made to parents
• Federal Perkins Loans

Payment Amount: 10% of your discretionary income.

Your discretionary income is equal to the difference between your adjusted gross income and 150% of the federal poverty guidelines based on your family size and state of residence.

You can use this Revised Pay As You Earn (PAYE) calculator to determine what your monthly payment and student loan forgiveness would be under REPAYE.

Repayment period: 20 – 25 years.

The repayment period for undergraduate student loans is 20 years. The repayment period for graduate student loans is 25 years.

Advantages:

• Receive lower monthly payments based on what you earn
• REPAYE offers one of the lowest monthly payments of any income-driven repayment plan
• Get student loan forgiveness after 20 or 25 years

Disadvantages:

• You may pay more student loan interest
• You may pay off your student loans before you receive student loan forgiveness
• Any student loan forgiveness you receive may be taxable

Income-Contingent Repayment (ICR)

To qualify for ICR:

• You must have an eligible federal student loan.
• There are no income requirements
• This is the only income-driven repayment plan for borrowers with Parent PLUS Loans

Eligible Student Loans:

• Subsidized and unsubsidized Direct Loans
• Direct PLUS Loans made to graduate or professional student
• Direct Consolidation Loans

Eligible Student Loans, if consolidated:

• Parent PLUS Loans
• Federal Stafford Loans (subsidized and unsubsidized)
• FFEL PLUS Loans
• FFEL Consolidation Loans
• Federal Perkins Loans

Payment Amount: The lesser of:

• 20% of your discretionary income, and
• Your monthly payment on a 12-year fixed repayment plan, adjusted based on your income

Your discretionary income is equal to the difference between your adjusted gross income and 100% of the federal poverty guidelines based on your family size and state of residence.

You can use this Income-Contingent Repayment (ICR) calculator to determine what your monthly payment and student loan forgiveness would be under ICR.

Repayment period: 25 years.

Advantages:

• There are no income requirements, which means it’s easy to qualify
• Parents with Parent PLUS Loans can enroll in ICR once they consolidate federal student loans into a Direct Consolidation Loan
• Get student loan forgiveness

Disadvantages:

• You may pay the highest monthly payment under ICR than any other income-driven repayment plan
• Your monthly payment under ICR may be higher than your monthly payment under the Standard Repayment Plan
• Any student loan forgiveness you receive may be taxable

How Do I Enroll in an Income-Driven Repayment Plan?

If you have federal student loans, you can enroll in an income-driven repayment plan at StudentLoans.gov. You can enroll in an income-driven repayment plan at any time. Alternatively, you can complete a paper form through your student loan servicer.

How do you know if you have federal student loans? Follow these steps:

1. Check the National Student Loan Data System.
2. You will need for Federal Student Aid ID, which you created when you applied for the Free Application For Federal Student Aid (FAFSA®).
3. All your federal student loans will be listed in the National Student Loan Data System.
4. If there are no student loans listed, then your student loans are likely private student loans.

Alternatively, you can contact your student loan servicer, who can tell you whether you have federal student loans, private student loans or both. If you only have private student loans, you won’t qualify for an income-driven repayment plan. However, you can lower your interest rate and lower your monthly payment through student loan refinancing.

Once you verify that you have federal student loans, it’s time to enroll in an income-driven repayment plan. You will need the following:

• Your Federal Student Aid ID
• Your social security number
• If you are married, your spouse’s social security number
• Recent pay stubs or a signed letter on company letterhead from within the last 90 days showing dates and hours worked
• Your spouse’s income and whether you spouse has student loan

Once you have this information, you will be asked several questions. Make sure to follow these steps:

1. Enter Personal Information

You will be asked to enter basic personal information.

2. Choose an income-driven repayment plan

You can either choose an income-driven repayment plan, or you can have your student loan lender help choose the income-driven repayment plan that qualifies you for the lowest monthly payment.You will be asked whether you want to enroll in a new income-driven repayment plan, switch to a different income-driven repayment plan or resubmit the same information. Each year, you will need to re-certify your personal information, income and financial information.

3. Enter information about your spouse and family

First, you will provide information about your family, including your children and dependents. Then, you will provide information about your spouse, including your spouse’s social security number, date of birth, income, whether your spouse has student loans and tax filing status. If you are not married, you will provide your income information.

4. Provide your income information

Next, you will provide your income information, which is supported by either a pay stub or letter from your employer. You can verify your adjusted gross income from your most recent federal tax returns. Alternatively, you can use the IRS Data Retrieval Tool, which will add your income information directly to your income-driven repayment planapplication. If you did not file an income tax return, you can provide a paystub. If you are unemployed, you can provide documentation that shows your unemployment benefits.

5. Certify your request to enroll in an income-driven repayment plan

Certify whether you are requesting a specific income-driven repayment plan, or you can ask your lender to place you in an income-driven repayment plan with the lowest monthly payment.

What Is the Best Income-Driven Repayment Plan?

The best income-driven repayment plan depends on your unique financial situation, circumstances and goals. The best income-driven repayment plan is typically the repayment plan with the lowest monthly payment. Rather than choose your own income-driven repayment plan, you can let your student loan servicer enroll you in the plan you qualify for with the lowest monthly payment. You can select this option when directly on the income-driven repayment plan application.

Income-Based Repayment (IBR)

Income-Based Repayment (IBR) is the best income-driven repayment plan when you:

• Don’t qualify for Pay As You Earn (PAYE)
• Have FFELP loans
• Expect your income to remain steady or decline over time
• Have student loan debt from graduate school
• Are married and both you and your spouse generate income

Pay As You Earn (PAYE)

Pay As You Earn (PAYE) is the best income-driven repayment plan when you:

• Have graduate school student loans
• Don’t expect your income to increase over time
• Are married and both you and your spouse generate income

Revised Pay As You Earn (REPAYE)

Revised Pay As You Earn (REPAYE) is the best income-driven repayment plan when you:

• Are not married
• Expect your income to increase over time
• Do not have graduate school student loans
• Want to minimize interest accrual on your student loans

Income-Contingent Repayment (ICR)

Income-Contingent Repayment (ICR) is the best income-driven repayment plan when:

• You have Parent PLUS Loans

What are the advantages of income-driven repayment plans?

There are two main advantages of income-driven repayment plans:

• Make a lower monthly student loan payment
• Get student loan forgiveness

Make a lower monthly student loan payment

Income-driven repayment plans help you lower your monthly payment for your federal student loans. Income-driven repayment plans typically have lower than monthly payments than the Standard Repayment Plan. Your new monthly payment will be capped as a percentage of your adjusted gross income. For example, PAYE and REPAYE cap your monthly student loan payment at 10% of your discretionary income. IBR caps your monthly student loan payment at either 10% or 15% of your discretionary income. ICR caps your monthly student loan payment at 20% of your discretionary income or your monthly payment on a 12-year fixed repayment plan, adjusted based on your income, whichever is lower. With a lower student loan payment, you have more money to spend for living expenses, to save for retirement or invest in your future. You also keep all your benefits that come with federal student loans such as forbearance and deferment.

Get student loan forgiveness

All four income-driven repayment plans offer student loan forgiveness for your federal student loans at the end of a required payment period, which is 20 to 25 years, depending on which plan you choose.If you plan to enroll in the Public Service Loan Forgiveness program, you must make the majority of your 120 student loan payments while enrolled in an income-driven repayment plan. Which income-driven repayment plan is best for public service loan forgiveness? This public service loan forgiveness calculator compares all the income-driven repayment plan and shows you which income-driven repayment plan maximizes student loan forgiveness for you based on your personal financial situation.

Is Income-Based Repayment A Good Idea?

You may ask: “What are the disadvantages of income-driven repayment plans?”

There are several disadvantages of income-driven repayment plans:

• Pay more for your student loans
• May not receive student loan forgiveness
• Recertify income each year
• Student loan payments can increase
• Could owe income tax

Pay more for your student loans

Income-driven repayment plans lower your monthly payment, which can provide flexibility and extra money for living expenses, savings and investments. However, an income-driven repayment plan does not lower your interest rate. While an income-driven repayment plan saves money in the short-term, it can be more expensive in the long run. While you pay less each month, interest will accrue on your federal student loans. Therefore, you could pay more in total interest with an income-driven repayment plan than you would under the Standard Repayment Plan. If you want to lower your interest rate, then consider student loan refinancing.

For example, let’s assume you have $50,000 of student loans at a 7% interest rate. On a 10-year Standard Repayment Plan, you would pay $581 each month, and total interest over 10 years of $19,665. On a 20-year repayment plan, you would pay $388 each month, and total interest over 10 years of $43,036. Therefore, while your monthly payment decreased $193, your total interest payment increased $23,371.

May not receive student loan forgiveness

Income-driven repayment plans offer you federal student loan forgiveness after 20 or 25 years. However, you may pay off your student loans before you receive any student loan forgiveness. Understand which income-driven repayment plan option provides you with the maximum student loan forgiveness. These student loan calculators can help:

• IBR Calculator
• PAYE Calculator
• REPAYE Calculator
• ICR Calculator

Recertify income each year

When you enroll in an income-driven repayment plan, you provide income information for you, and if applicable, for your spouse. Each year, you must recertify your income to determine your monthly payment and to ensure that you qualify for the same income-driven repayment plan. If your income increases, your payment can change and you may not qualify for the same income-driven repayment plan. Therefore, an income-driven repayment plan takes more time and energy given the annual recertification.

Student loan payments can increase

If you have a Standard Repayment Plan, you will pay the same, fixed monthly student loan payment. With an income-driven repayment plan, however, your payments may increase over time if your income increases. When you recertify your income each year, you may receive a new monthly payment amount. This amount may be higher or lower than your current payment. Generally, if your income increases from one year to the next, your student loan payments can increase. If you’re enrolled in Income-Based Repayment (IBR) or Pay As You Earn (PAYE), the good news is that you will never pay more than you would have under the 10-Year Standard Repayment plan. However, Income-Contingent Repayment (ICR) or Revised Pay As You Earn (REPAYE) do not cap how much your monthly student loan payment can increase.Therefore, ICR and REPAYE could become more expensive than the Standard Repayment Plan.

Could owe income tax

All income-driven repayment plans offer some form of student loan forgiveness. After 20 or 25 years of on-time payments, if you have a remaining balance on your federal student loans, you won’t have to pay any more. However, you may be liable for income tax on the amount of student loan forgiveness that you receive. The federal government views any forgiven student loan debt as taxable income. Therefore, you may owe thousands of dollars in income tax when you receive student loan forgiveness through an income-driven repayment plan.

Can You Really Get Student Loan Forgiveness?

You may be wondering whether you can really get student loan forgiveness. If you have federal student loans, you must be enrolled in an income-driven repayment plan to receive student loan forgiveness. Income-driven repayment plans offer student loan forgiveness after 20 or 25 years, depending which income-driven repayment plan you choose. To qualify for student loan forgiveness, you must make on-time payments for 20 to 25 years, and then you can receive student loan forgiveness on any remaining balance. Remember, the federal government treats any student loan debt balance that is forgiven as taxable income. Therefore, you may owe income tax on the amount of federal student loan forgiveness that you receive. Student loan forgiveness through income-driven repayment plans apply only to federal student loans, not private student loans.

It is possible to receive federal student loan forgiveness earlier than 20 or 25 years. For example, the Teacher Loan Forgiveness Program offers partial student loan forgiveness after five complete and consecutive academic years of full-time teaching in a low-income school.

The Public Service Loan Forgiveness Program offers complete student loan forgiveness if you work in public service and make 120 on-time monthly payments. The majority of your monthly student loan payments must be while enrolled in an income-driven repayment plan. The good news with public service loan forgiveness is that you will not owe income taxes on the amount of student loan forgiveness you receive.

Does Income Driven Repayment Affect My Credit Score?

The most popular income-driven repayment plans are Income-Based Repayment (IBR), Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). If you enroll in an income-driven repayment plan, you may wonder how it will impact your credit score.

Will signing up for income-driven repayment hurt my credit score?

When you enroll in an income-driven repayment plan, there is minimal impact to your credit score. An income-driven repayment plan does not signify to lenders that you are delinquent on your student loan payments, nor does it signify late payments or skipped payments. Rather, income-driven repayment plans help you manage your student loan payments relative to your income.

How income-driven repayment can help your credit score

When you sign up for an income-driven repayment plan, there is little impact to your credit score. The good news is that you can take proactive steps to increase your credit score when you enroll in an income-driven repayment plan.

Pay off other debt: Since your monthly student loan payment will be lower, you have more money available each month. You can use that extra money to pay off other debt, such as credit card debt. When you pay off debt, you can increase your debt-to-income ratio. A higher debt-to-income ratio can increase your credit score.

Avoid missing payments: An income-driven repayment plan can also remove the burden of high monthly student loan payments. This can mean you are less likely to skip a payment or make a late payment for your student loans. Making a late payment or missing a payment are two major ways to lower your credit score. With more income each month, you have more money and flexibility to pay off your student loans and avoid bad financial decisions.

While enrolling in an income-driven repayment plan may not directly impact your credit score, you can increase your credit score by paying off debt and improving your debt-to-income ratio.

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Are you paying too much for your student loans?

Student loan payments can be expensive. If you have high student loan payments, it may be challenging to save for retirement, buy a home or pay other living expenses. So, how can you lower your student loan payments?

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Here are 11 ways to lower your student loan payments:

1. Enroll in an income-driven repayment plan
2. Sign up for a Graduated Repayment Plan
3. Sign up for an Extended Repayment Plan
4. Consolidate student loans
5. Enroll in automatic payments
6. Apply for student loan forgiveness
7. Move to a new state
8. Ask your employer for help
9. Choose a longer student loan repayment term
10. Increase your credit score
11. Refinance student loans

Enroll in an Income-Driven Repayment Plan

If you have federal student loans and want to lower your student loan payment, you can apply for an income-driven repayment plan. An income-driven repayment plan extends your Direct student loan repayment term to 20 years or 25 years, and your monthly payment is based on your discretionary income, family size and other factors. Some borrowers pay as little as $0 per month.

There are four types of income-driven repayment plans:

• Revised Pay As You Earn (REPAYE)
• Pay As You Earn (PAYE)
• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)

While your monthly payment may be lower, interest still accrues on your student loans. So, you may pay higher total interest on your federal student loans with an income-driven plan. You also may qualify for student loan forgiveness after 20 years (undergraduate student loans) or 25 years (graduate student loans), if you meet certain requirements.

Sign up for a Graduated Repayment Plan

A Graduate Repayment Plan is an alternative to the standard 10-year repayment term for your federal student loans.If you don’t qualify for an income-driven repayment plan, consider a Graduate Repayment Plan. A Graduate Repayment Plan means that your monthly federal student loan payment starts out low, regardless of income. Your payment increases every two years. After 10 years, your federal student loans are paid off.

Sign up for an Extended Repayment Plan

An Extended Repayment Plan helps you lower your monthly student loan payment for your federal student loans. With an Extended Repayment Plan, you can extend your student loan repayment term from 10 years to as long as 25 years. To qualify for an Extended Repayment Plan, you must have Direct or FFEL federal student loans with a balance of at least $30,000.

Remember, when you increase your student loan repayment term, your monthly payment decreases, but your total interest payment increases. Interest still accrues on your student loan balance even if your monthly payment is lower.

Consolidate Student Loans

You may have different federal student loans, each with different interest rates, balances and payment due dates. How can you organize and manage all these federal student loans? Student loan consolidation may be the answer.

When you consolidate student loans, you combine your existing federal student loans into a new Direct Consolidation Loan. This Direct Consolidation Loan will have one interest rate, one monthly payment and one payment due date. The interest rate on a Direct Consolidation Loan is equal to a weighted average of the interest rates on your existing federal student loans, rounded up to the nearest 1/8%. So, when you consolidate federal student loans, you don’t necessarily save money.

However, once you consolidate, you can enroll in an income-driven repayment plan. Then, you can lower your student loan payment.

Enroll in Automatic Payments

Most lenders offer an interest rate discount when you enroll in automatic payments for your student loans. For example, if you connect your bank account to your student loan account, you could receive a 0.25% interest rate discount.

For example, let’s assume you owe $50,000 of student loans and have an 8% interest rate payable over 10 years. That means you would pay $607 each month and $72,797 total. If you receive a 0.25% interest rate discount, your new interest rate would be 7.75%. With this new interest rate, you would pay $600 each month and 72,006 total. That is a savings of almost $800.

Apply for Student Loan Forgiveness

There are many types of federal and state programs that offer student loan forgiveness and student loan assistance. For example, the Public Service Loan Forgiveness and Teacher Loan Forgiveness programs are federal student loan forgiveness programs that help public servants and teachers, respectively, pay off student loans faster. To qualify, you must satisfy certain requirements. There are also scholarships and grants that may help you lower your student loan payment.

Move to a New State

Many states offer student loan payment assistance if you move there. These incentives are available to residents who live for a certain period in the state. For example, Maine offers student loan assistance to student loan borrowers who live and work in Maine.

You can visit your state’s department of education website for more details.

Ask Your Employer for Help

Some employers now help pay off student loans. According to the Society For Human Resource Management, 4% of employers offer student loan repayment assistance to their employees. You can contact your employer’s human resources department to determine if this student loan benefit is available at your employer.

Choose a Longer Student Loan Repayment Term

You can lower your student loan payment by choosing a longer student loan repayment term. Here’s how it works. The standard student loan repayment term is 10 years. If you choose a longer student loan repayment term, such as 20 years, you can lower your monthly student loan payment. This can save money each month to help pay for other living costs, save for retirement or pay off other debt.

The disadvantage to this strategy is that interest will still accrue on your student loans. Therefore, you may pay more total interest by the end of your student loan repayment term.

Increase Your Credit Score

Having a good credit score can help you get a lower interest rate. A lower interest rate lowers your monthly payment because you owe less interest each month. If you have good credit, lenders will reward you with a lower interest rate.

If you have bad credit and do not have a co-signer, you should focus on improving your credit score. Your FICO credit score ranges from 350 (low end) to 850 (high end). Generally, a credit score of less than 550 is considered bad credit.

How do you increase your credit score? Credit score is determined by these major factors:

• Payment history (35%)
• Credit Utilization (30%)
• Length of credit history (15%)
• New credit (10%)
• Credit mix (10%)

While you should focus on these five major factors, the best place to begin is payment history. Payment history is the largest component of your credit score. You can improve your credit score by paying bills on time. Also, don’t skip any payments. If you can develop a positive payment history, you can show lenders that you are financially responsible and a trustworthy borrower.

Refinance Student Loans

Student loan refinance is the best way to lower your student loan payment. When you refinance student loans, you combine your existing federal student loans, private student loans or both into a new, single student loan with a lower interest rate. With a lower interest rate, you can lower your monthly payment compare to your current student loans.

For example, let’s assume that you have $60,000 of student loans with a 7% interest rate and 10-year repayment term. You would pay $697 each month and $23,598 in total interest. If you refinance these student loans and receive a 3% interest rate and same repayment term, you would lower your student loan payment by $117 each month and save $14,074 overall.

This student loan refinance calculator shows you how much you can save with student loan refinancing.

You can increase your chances of approval for student loan refinancing by applying with a qualified co-signer. The co-signer can be a spouse or relative with strong credit and income. While your co-signer is also responsible for your student loan, they can help you get approved and even receive a lower interest rate. Remember, student loan refinance has some considerations if you have federal student loans.

If you feel refinancing student loans is right for you, you can compare lenders and check the latest student loan refinancing rates.

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“Should I refinance my student loans?” may be a question you have been asking. The decision to refinance student loans is an important one, and it could save you thousands of dollars. Here’s how to decide whether you should refinance student loans and if student loan refinancing is the right choice for you.

Student loan refinancing means you can exchange your current federal student loans, private student loans or both for a new student loan with a lower interest rate. When you refinance student loans, you can save money and pay off student loans faster. The decision to refinance student loans should be based on your personal financial situation and your financial goals.

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In this guide, we will discuss:

• When you should not refinance student loans
• When you should refinance student loans
• Why should I refinance my student loans?
• What will my interest rate be when I refinance student loans?
• Can I get a lower monthly payment if I refinance?
• Can I pay off my student loans faster if I refinance?
• Does refinancing student loans save money?
• Do I qualify for student loan refinancing?
• Do I need a co-signer to refinance student loans?
• What credit score do I need to refinance student loans?

When You Should Not Refinance Student Loans

Let’s begin with when you should not refinance student loans. You should not refinance student loans if:

• You want access to federal student loan forgiveness programs
• You have bad credit
• You want an income-driven repayment plan

You want access to federal student loan forgiveness programs

If you have federal student loans, you have access to certain federal benefits, including the ability to qualify for certain federal student loan forgiveness programs. These student loan forgiveness programs include, for example, public service loan forgiveness and teacher loan forgiveness. If you plan to apply for either of these programs, you should keep your federal student loans outstanding because student loan forgiveness only applies to federal student loans. Of course, even if you work in public service, you can still refinance private student loans, even if you decide to keep federal student loans outstanding.

When you refinance student loans, your current student loans will be paid off and you will be issued a new student loan. This new student loan is from a private lender, since the federal government does not refinance student loans.

You have bad credit

If you have bad credit or no credit, and you want to refinance your student loans, the process can be challenging. Why? The best student loan lenders want to refinance borrowers with strong credit. They prefer borrowers who have a demonstrated history of financial responsibility. When lenders refinance your student loans, they are lending you money in the form of a new student loan. To minimize their risk, student loan lenders prefer borrowers with a high credit score of at least 650.

If you want to know how to refinance student loans with bad credit, you have several options. Among others, you can apply with a co-signer. If you don’t meet the qualifications, a qualified co-signer with strong credit and stable income can help you get approved for student loan refinancing and potentially receive a lower interest rate.

You want an income-driven repayment plan

If you think that you cannot afford your student loan payments – even after you refinance student loans – then student loan refinancing may not be for you. If you have federal student loans, you could enroll in an income-driven repayment plan, which bases your monthly student loan payment on your income, family size and other factors. If you refinance federal student loans, you would not have access to income-driven repayment plans. Why? Since the federal government does not refinance student loans, student loan refinancing is available only with private lenders. When you refinance student loans, you will only have a private student loan (and no longer will have any federal student loans).

When You Should Refinance Student Loans

Now, let’s address when you should refinance. If you want to know when to refinance student loans, you should refinance if:

• You qualify for a lower interest rate
• You have good credit
• You have stable income
• You have private student loans
• You want new loan terms
• You want a new lender or student loan servicer

You qualify for a lower interest rate

The main reason to refinance student loans is to get a lower interest rate and save money. If you can qualify for a lower interest, that is a good reason for when you should refinance student loans. Plus, there is no limit to how often you can refinance student loans. Student loan refinancing also has no origination fees or prepayment penalties, which means there are no fees to apply to refinance student loans or pay off student loans early.

You have good credit

Lenders want to refinance student loans for borrowers who have good to strong credit. That means a minimum credit score of at least 650 and preferably higher. When you have good credit, it shows lenders that you have a history of financial responsibility. If you have bad credit, you can always apply with a qualified co-signer who has good credit. If you or your co-signer have a credit score higher than the minimum, that can help increase your chance of being approved for student loan refinancing and could help you qualify for a lower interest rate.

You have stable income

In addition to good credit, lenders want borrowers who have stable and recurring monthly income. This gives lenders confidence that you can pay off your student loan debt consistently each month. You can also show a written job offer as proof of recurring income. Lenders also want to ensure you make enough income to pay your student loan debt, living expenses and other debt each month. A low debt-to-income ratio, which is a ratio of your monthly debt payments as a percentage of income, shows lenders that you have sufficient monthly cash flow. If you don’t have stable and recurring income, you can always apply with a co-signer who does.

You have private student loans

When you refinance student loans, you no longer will have federal student loans. That means you won’t have access to certain federal student loan benefits, such as public service loan forgiveness or income-driven repayment plans. Private student loans, however, do not have these benefits, so when you refinance private student loans, you don’t have to worry about losing these benefits. If you can receive a lower interest rate on your private student loans, then it’s a smart financial move.

You want new loan terms

Student loan refinancing helps you choose new loan terms. When you refinance student loans, you can choose a fixed interest or variable interest rate. In contrast, federal student loans only have fixed interest rates. Typically, variable interest rates are lower than fixed interest rates. However, variable interest rates can change over time, while fixed interest rates stay the same.

When you refinance student loans, you can also choose a new student loan repayment term. This new student loan repayment term can be from 5 to 20 years.A shorter loan term such as 5 years means higher monthly payments, but you can pay off student loans faster with less total interest. A longer student loan repayment term, such as 20 years, means lower monthly payments, but higher total interest because you would take more time to pay off student loans.

You want a new lender or student loan servicer

Student loan refinancing is a good opportunity to switch your lender or student loan servicer and receive better customer service.

Why Should I Refinance My Student Loans?

You may be asking, “Why should I refinance my student loans?” It’s important to understand why you should refinance your student loans. There are many reasons why to refinance student loans. Here are some popular reasons:

• Get a lower interest rate
• Consolidate student loans
• Pay off student loans faster
• Lower your monthly payment

Get a lower interest rate

Student loan refinancing is a great tool to get a lower interest rate.

Consolidate student loans

If you have multiple student loans, interest rates, lenders and monthly payment dates, student loan refinancing can combine your existing student loans into one student loan with a single interest rate and monthly payment.

Pay off student loans faster

When you refinance student loans, a lower interest rate means you can save money and pay off student loans faster. You can also choose a shorter student loan repayment term, which also can help pay off student loans faster.

Lower your monthly payment

If you have a high monthly student loan payment, student loan refinancing can help you lower your monthly payment in at least two ways. The first is with a lower interest rate, and the second is you can extend your student loan repayment term.

What Will My Interest Rate Be When I Refinance Student Loans?

When you refinance student loans, the goal is to get a lower interest rate. While a lower interest rate is not guaranteed, you can receive a lower interest based on several factors. For example, when it comes to student loan refinancing, lenders prefer borrowers who have:

• Good credit
• Stable and recurring monthly income (or a written job offer)
• Strong monthly cash flow
• Low debt-to-income ratio

Overall, lenders prefer borrowers who are creditworthy and demonstrate a history of financial responsibility.

Can I Get a Lower Monthly Payment if I Refinance?

Yes, refinancing student loans is one way to lower your monthly payment. If you feel your monthly student loan payment is too high, you can refinance student loans and receive a lower monthly payment. There are several ways to lower your monthly student loan payment.

First, you can save money when you get a lower interest rate, which will reduce the amount of interest you owe each month. Second, you could choose a longer repayment period. When you choose a longer repayment period, such as 15 or 20 years, you can pay a lower amount each month. However, when you choose a longer student loan repayment period, you will owe more in total interest, even if your monthly payment is lower.

Can I Pay Off My Student Loans Faster if I Refinance?

Student loan refinancing can help you pay off student loans faster. If you want to pay off student loans faster, you can focus on two ways. First, you can get a lower interest rate. This will help reduce the amount of interest each month, which lower your monthly payment. Second, you could choose a shorter student loan repayment period, such as five years. The advantage of a shorter repayment period is you pay less total interest and your pay off student loans faster. The disadvantage is that your monthly student loan payment can be higher. However, if your goal is to pay off student loans faster, it may be worth having a higher monthly payment to save money on interest.

Does Refinancing Student Loans Save Money?

When you refinance student loans, you can potentially save thousands of dollars.Why? Student loan refinancing helps you save money by giving you a lower interest rate.

This student loan refinance calculator shows you how much money you can save when you refinance student loans.

Do I Qualify for Student Loan Refinancing?

Each lender has its own qualifications for student loan refinancing. Lenders want to refinance student loans for creditworthy borrowers who have a history of financial responsibility. You can qualify for student loan refinancing if you have:

• A good or strong credit score
• Stable and recurring monthly income (or a written job offer)
• Strong monthly cash flow
• Low debt-to-income ratio

You can check your new interest rate for free in about two minutes with no impact to your credit score.

A good or strong credit score

Lenders evaluate your credit profile to ensure that you have good credit. Good credit comes from having a history of financial responsibility, including borrowing and repaying credit on-time and in full.If you have bad credit, you can always apply with a co-signer who has good credit to help you get approved.

Stable and recurring monthly income (or a written job offer)

Lenders want to ensure that you can pay off your student loans. Therefore, they require that you have stable and recurring monthly income. That means you are employed and receive a regular and consistent paycheck. What if you are graduating school and haven’t started work yet? You may be able to submit a written job offer as proof of recurring income.If you are unemployed or underemployed, it may be difficult to refinance student loans. However, you can apply with a co-signer who has stable income.

Strong monthly cash flow

If you have strong monthly cash flow, you generate enough income to pay your living expenses, student loan payment and other debt obligations. Lenders prefer to refinance student loans for borrowers who have strong monthly cash flow because it shows you are a less risky borrower.

Low debt-to-income ratio

A debt-to-income ratio measures your monthly debt payments as a percentage of your monthly income. Lenders will consider all your debt payments, which may include your student loans, mortgage, credit card debt, personal loans and auto loans, for example. Lenders prefer borrowers with low debt-to-income ratios to ensure they can be pay off student loans on-time and in-full. For example, a debt-to-income ratio less than 30% is preferred.

Do I Need a Co-Signer to Refinance Student Loans?

A co-signer is not required to refinance student loans. If you satisfy the qualifications to refinance student loans, then you can be approved for student loan refinancing without a co-signer. If you don’t meet the qualifications, you can apply with a co-signer who does. You can choose a co-signer such as a parent, spouse or other family member. A qualified co-signer can help you get approved for student loan refinancing and help you to receive a lower interest rate.

A co-signer has equal financial responsibility with you to repay the student loan. Therefore, a co-signer’s credit score could be impacted, for example, if you skip a student loan payment. However, some lenders offer a co-signer release option, which allows you to remove your co-signer from any financial responsibility so long as you meet certain requirements.

What Credit Score Do I Need to Refinance Student Loans?

Each lender has its own underwriting requirements, including credit score, to refinance student loans. Most lenders require a minimum score in the mid-600’s, such as a 650 credit score. Many borrowers who are approved to refinance student loans have a credit score higher than 700. Overall, lenders want to ensure that you are a creditworthy borrower who is financially responsible and will repay your student loan on time and in full.If you want to know how to refinance student loans with bad credit, you can apply with a co-signer who has a high credit score.

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Refinancing student loans is an excellent option to lower your interest rate, save money and pay off student loans faster. Student loan refinancing lenders prefer borrowers with good credit. What if you have bad credit? Can you refinance student loans with bad credit? If you want to know how to refinance student loans with bad credit, this guide can help. In this guide, we will discuss how to refinance student loans with bad credit and some helpful alternatives:

If you want to know how to refinance student loans with bad credit, you have options. Apply with a co-signer. Raise your credit score. Consolidate student loans—and much more.

• Refinance student loans with a co-signer
• Raise your credit score
• Improve your debt-to-income ratio
• Consolidate student loans
• Enroll in an income-driven repayment plan

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How to Refinance Student Loans With a Co-Signer

Generally, it is difficult to refinance student loans with bad credit. Student loan refinancing lenders prefer borrowers who have good to strong credit, with a minimum score of 650. Many borrowers who are approved for student loan refinancing have at a credit score of at least 700.

If you have bad credit, the best solution is to apply with a co-signer. A co-signer can be a family member or relative, for example, who can help you get approved for student loan refinancing and even help you get a lower interest rate. To qualify, your co-signer must meet the qualifications for student loan refinancing, which may include, among others:

• A credit score of at least 650
• Stable and recurring monthly income
• Low debt-to-income ratio
• Strong monthly cash flow
• History of financial responsibility

Once you refinance student loans, a co-signer has equal financial responsibility for your student loan. The good news is that many lenders offer a co-signer release option. A co-signer release enables you to remove your co-signer once you meet certain requirements, which may include a minimum number of monthly student loan payments, improved credit and other requirements.

Raise Your Credit Score

A strong credit score is one factor that can help increase your chances of being approved for student loan refinancing. If you do not have a co-signer, you can focus on improving your credit score. Your FICO credit score can range from 350 (low end) to 850 (high end). Generally, a credit score of less than 550 is considered bad credit. To get approved for student loan refinancing, you need a minimum credit score of 650. Many borrowers who refinance student loans have credit scores of 700 or higher. If you want to raise your credit score, focus on the underlying components of credit.

Credit score is determined by these major factors:

• Payment history (35%)
• Credit Utilization (30%)
• Length of credit history (15%)
• New credit (10%)
• Credit mix (10%)

Payment History

Pay your bills on-time. Don’t skip payments. If you can do these two things well, you can develop a strong payment history and demonstrate strong financial responsibility.

Credit Utilization

Credit utilization is how much money you have borrowed as a percentage of your available credit. For example, if your credit card limit is $10,000 and you have charged $9,000 on your credit card, your credit utilization would be $9,0000 divided by $10,000, or 90%. Generally, you want to maintain a low credit utilization.

Length of credit history

A long credit history shows that you have been a responsible borrower and have a history of financial responsibility. Lenders prefer that borrowers have more information about their credit history.One way to raise your credit score is to have credit card accounts open for a long period of time so you can increase the average age of your credit accounts. If you don’t have a long credit history, you can still have a strong credit score by making on-time monthly payments and low credit utilization.

New credit

Lenders will evaluate how often you open new credit. You should only open a new credit account when you need one. When you open new credit, your average account age decreases, which can adversely impact your credit score if you don’t have a history on on-time payments.

Credit mix

Lenders prefer to work with borrowers who have a diverse credit mix. For example, you could have various types of credit, including installment loans such as a student loan and revolving credit such as a credit card. If you can demonstrate your ability to borrow different types of credit and repay responsibly, lenders view you with less risk.

Improve Your Debt-To-Income Ratio

To be approved for student loan refinancing, lenders will evaluate your total debt and income. This includes all your existing debt such as student loans, credit card debt, personal loans and a mortgage. Then, they will compare your monthly debt payments to your monthly income in the form of a ratio. This ratio is called a debt-to-income ratio, which is your total monthly debt payment as a percentage of your monthly income.

For example, if your monthly debt payment is $1,000 and your monthly income is $10,000, your debt-to-income is $1,000 divided by $10,000, or 10%. Ideally, lenders prefer a debt-to-income ratio below 30% so that you can repay your debt obligations and have money for living expenses.

How can you improve your debt-to-income ratio? The best way to improve your debt-to-income ratio is to increase your income, lower your debt or both. When you increase income, you have more resources to pay off debt, which can improve your monthly cash flow. Lenders like borrowers with higher monthly cash flow because these are lower risk borrowers who can repay debt and afford living expenses.

For example, you can lower debt expenses by paying off an outstanding credit card balance.You could also consolidate credit card debt with a person loan, which can lower your interest rate. You can increase your income with a side hustle, consulting or asking for a raise.

Consolidate Student Loans

If you are unable to qualify for student loan refinancing, one step to help you organize your student loans is federal student loan consolidation. When you consolidate student loans, you combine your existing federal student loans into a new Direct Consolidation Loan. Student loan consolidation is a helpful tool to organize your federal student loans into a single loan with one monthly payment, interest rate and student loan servicer. Unfortunately, private student loans not eligible for federal student loan consolidation. When you consolidate federal student loans, you do not receive a lower interest rate. Rather, your new interest rate is equal to a weighted average of the interest rates on your current federal student loans. Therefore, while federal student loan consolidation does not save you money, it can help you stay organized and better manage your monthly student loan payments.

Enroll in an Income-Driven Repayment Plan

If you have federal student loans and are unable to afford your monthly payments, you could consider enrolling in an income-driven repayment plan. Income-driven repayment plans allow you to lower your monthly student loan payment based on your income, family size and other factors. Unlike student loan refinancing, income-driven repayment plans do not lower your interest rate. While you can make lower monthly student loan payments, interest will still accrue on your federal student loans. However, you could be eligible for student loan forgiveness after 20 years for undergraduate federal student loans or 25 years for graduate federal student loans.

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The fees to refinance student loans are $0. Here’s what you need to know.

Is There a Fee to Refinance Student Loans?

There are no fees to refinance student loans. That means student loan refinancing has:

• No origination fees
• No third party fees
• No funding fees
• No prepayment fees

No origination fees

There are no applications fees to apply for student loan refinancing. You can even check your interest rate for free in about two minutes before you apply. Once you apply, the online application only takes about 10-15 minutes.

No third party fees

Unlike mortgages, there are no appraisals or broker commissions that you have to pay.

No funding fees

Once you are approved for student loan refinancing, there are no fees to disburse your student loans.

No prepayment fees

Unlike most mortgages, there is no prepayment fee if you choose to pay off student loans early.

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Is Student Loan Refinancing Free?

While there are no fees, you are still responsible to pay interest each month. Interest is added to the principal balance that you borrowed. You also may be charged a late fee if you make a late payment. There are many reasons why to refinance student loans. The main reason that borrowers refinance student loans is to lower their interest rate, which can potentially save thousands of dollars.

For example, let’s assume that you have $100,000 of student loans at an 8% interest rate and a 10-year repayment term. If you can refinance student loans at a 2.70% interest rate, you could lower your monthly payment by $261 and save $31,375 total.

This student loan refinancing calculator can show you how much money you can save when you refinance student loans.

With student loan refinancing, you can choose loan terms that best match your financial situation. For example, you can choose a fixed interest rate or variable interest rate. You can also choose a shorter student repayment period such as five years or a longer student loan repayment such as 20 years. If you choose a shorter repayment period, your monthly payment will be higher, but you will also pay less total interest and save money. If you choose a longer student loan repayment period, your monthly payment will be lower, but you will pay more interest over time, which can increase the cost of your student loans.

You can easily compare the latest student loan refinancing rates, loan terms and fees.

How Much Does It Cost to Refinance Student Loans?

Even though there are no fees to refinance student loans, make sure it’s the right decision for you. The advantages of student loan refinancing are clear:

• Lower interest rate
• Save money
• Pay off student loans faster
• Ability to change loan terms
• Flexible student loan repayment
• Change student loan servicer
• Better customer service

When you refinance student loans, you no longer have any federal student loans. If you plan to apply for public service loan forgiveness, for example, or expect to choose an income-driven repayment plan, then you may not want to refinance federal student loans. Therefore, you should weigh the potential benefits of saving money with the potential cost of giving up access to certain federal programs.

You can also refinance private student loans and keep your federal student loans outstanding, if you plan to participate in any federal programs. Student loan refinancing is available for federal student loans, private student loans or both, including for undergraduate and graduate student loans.

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Many student loan borrowers want to know how to refinance student loans after consolidation. Can you refinance student loans after consolidation?

If you want to know how to refinance student loans after consolidation, the good news is you can refinance after consolidation, whether you previously consolidated student loans with the federal government or a private lender.

Student loan consolidation and student loan refinancing are different processes, and it’s helpful to understand how each process works. In this guide, we will discuss the following:

• Difference between student loan consolidation and student loan refinancing
• How to refinance student loans after consolidation
• The advantages of student loan refinancing
• The disadvantages of student loan refinancing
• How often can you refinance student loans?
• Can I refinance student loans after consolidation

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Difference Between Student Loan Consolidation and Student Loan Refinancing

Student loan consolidation and student loan refinancing often are used interchangeably, but they are different processes.

Student loan consolidation: Student loan consolidation is the process of consolidating federal student loans into a new, Direct Consolidation Loan with the federal government.

Student loan refinancing:Student loan refinancing is the process of consolidating federal student loans, private student loans or both into a new, single student loan with a lower interest rate.

Student Loan Consolidation: An Overview

Student loan consolidation is the process of combining your existing federal student loans into a new single student loan called a Direct Consolidation Loan. When you consolidate federal student loans, you can organize all your federal student loan debt into a single student loan with one interest rate, one monthly payment and one student loan servicer. You can consolidate federal student loans directly with the U.S. Department of Education at studentloans.gov.

Student loan consolidation with the federal government allows you to keep you federal student loans, and you will have access to income-driven repayment plans, deferment and forbearance, among other benefits.If you have FFEL Loans, and plan to apply for public service loan forgiveness, you need to consolidate FFEL Loans into a Direct Consolidation Loan.

Many student loan borrowers want to know if federal student loan consolidation will lower your interest rate on your federal student loans. Unfortunately, student loan consolidation with the federal government does not lower your interest rate. With student loan consolidation, your new interest rate equals a weighted average of your current interest rates on your federal student loans, rounded up the nearest 1/8%. So, student loan consolidation may increase your interest rate slightly.

Student Loan Refinancing: An Overview

Student loan refinancing helps you to lower your interest rate on your federal student loans, private student loans or both. The federal government does not refinance student loans, so you can refinance with a private lender. When you refinance student loans with a private lender, you receive a new student loan with a lower interest rate, one monthly payment and one student loan servicer. The goal is to save money, pay off student loans faster and get out of debt more quickly.

When you refinance student loans, the student loan you receive is a private student loans. Therefore, you no longer will have federal student loans, including access to income-driven repayment plans or student loan forgiveness programs. However, student loan refinancing helps you choose new loan terms, so you can choose a fixed interest rate, variable interest rate and a new loan term (typically from 5-20 years), which best match your financial goals.

How To Refinance Student Loans After Consolidation

Let’s assume that you decided to consolidate federal student loans and now you want to refinance student loans. You can refinance student loans after consolidation with a private lender. The process is online and easy. Here’s how to refinance student loans after consolidation:

1. Compare lenders
2. Get interest rate estimates
3. Choose a lender and select loan terms
4. Apply
5. Sign documents
6. Loan gets disbursed

Compare lenders

When you compare the best student loan refinancing lenders, you can look at various features, including variable and fixed interest rates, loan payoff terms, minimum credit score and other terms. Most borrowers select the lender who approves them for the lowest interest rate so they can save the most money.

Check the latest student loan refinancing rates.

Get Interest Rate Estimates

Here’s a great part about student loan refinancing. Lenders allow you to check your new interest rate for free before applying. This is called a soft credit check and has no impact to your credit score. You can pre-qualify online in less than two minutes.

Choose a lender and select loan terms

Once you choose the best lender for you, it’s time to decide if you want a fixed interest rate or variable interest rate as well a shorter or longer repayment term. While a fixed interest rate will not change over time, a variable interest rate may change during your student loan repayment.

When you refinance student loans, you can choose a flexible loan repayment term, which typically ranges from 5-20 years. While a shorter repayment term has a higher monthly payment, you can save interest costs and pay off student loans faster. A longer repayment term has a lower monthly payment, but overall will cost you more money in higher total interest.

This student loan refinancing calculator shows you how much money you can save with student loan refinancing.

Apply

You can apply to refinance student loans with lenders directly online, and the process takes only about 10-15 minutes. Your lender may request various documents, which may include:

• Proof of citizenship or residency
• Valid identification
• Proof of income or written job offer
• Transcripts or proof of graduation
• Student loan statements

At this stage, your lender will do a hard credit pull to confirm your credit background. Lenders may evaluate your credit score, other debt obligations and your debt-to-income ratio. You can also add a co-signer when you apply to help you get approved and could help you get a lower interest rate.

Sign documents

Once you’re approved, it’s time to sign the final loan documents, including disclosures. You have a three-day rescission period if you decide to cancel your student loan after signing the loan documents.

Loan gets disbursed

Congratulations! You’re all done. Your new lender will pay off your existing student loans, and then you will start making payments on your new student loan.

The Advantages of Student Loan Refinancing

Why refinance student loans? There are several key advantages, including the ability to get a lower interest rate, save money and pay off student loans faster. Saving money is the top reason to refinance student loans. With student loan refinancing, you also have the flexibility to choose new loan terms. This includes your interest rate type, such as a fixed rate or variable rate, and your repayment period. The standard federal student loan repayment period is 10 years. Student loan refinancing allows you to choose a student loan repayment period between 5 and 20 years, which offers increase flexibility.

When you refinance student loans, you also simplify student loans because you consolidate all your student loans into a single student loan with one monthly payment. This can help save time, since you don’t have to manage multiple monthly payments to different student loan servicers. Student loan refinancing also helps you change student loan servicers. If you don’t like your current student loan servicer, student loan refinance can provide a student loan servicer with better customer service. With no origination fees, student loan refinancing is free. There are also no prepayment penalties, which means you can pay off student loans anytime with no fees. Finally, many lenders now allow you to pause student loan payments if you lose your job or are looking for a job.

The Disadvantages of Student Loan Refinancing

The disadvantages of student loan refinancing principally relate to giving up the benefits of federal student loans. This includes income-driven repayment plans and access to federal student loan forgiveness programs such as public service loan forgiveness. You should weigh these benefits with your potential cost savings from student loan refinancing to determine what is best for your financial situation and financial goals.

Private student loans typically do not come withspecial benefits associated with federal student loans. Therefore, you can refinance private student loans whenever you qualify for a lower interest rate.

How Often Can You Refinance Student Loans?

Many borrowers want to know how often they can refinance student loans. The answer is there is no limit to how often you can refinance student loans. You can refinance student loans after consolidation, and then refinance student loans again whenever you find a lower interest rate. Remember, there are no origination fees or prepayment penalties when you refinance.

Can I Refinance Student Loans After Consolidation?

The good news is that you can refinance student loans after consolidation. Student loan refinancing can be an effective way to lower your interest rate, save money and pay off student loans faster. Since there is no limit on how often you can refinance, you can refinance student loans each time you qualify for a lower interest rate.

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