How to Refinance Discover Student Loans
Updated On October 5, 2022
Editorial Note: This content is based solely on the author's opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.
If you want to know how to refinance Discover student loans, this ultimate guide to student loan refinancing will help you learn everything you need to know.
Discover student loans are available through Discover® Bank, which is a leading financial institution for more than 100 years. While some student loan borrowers keep their student loans with Discover until they pay off student loan debt, others choose to refinance their Discover student loans. Which option is best for you?
Top Picks For Student Loan Refinancing
In this complete guide to refinance Discover student loans, you will learn:
- How to refinance Discover student loans
- Why you should refinance Discover student loans
- When student loan refinancing isn’t right for you
- Should you refinance your Discover loans?
How To Refinance Discover Student Loans
Student loan refinancing is the process of getting a lower rate, lower student loan payment or both for your student loans. With student loan refinancing, you can refinance federal student loans from the U.S. Department of Education or refinance private student loans from Discover. If you have Discover student loans, you can refinance student loans with a private lender. For example, you could refinance with top private lenders, such as SoFi. When you refinance student loans, you combine your existing student loans into a single student loan with one monthly payment and student loan servicer.
Student loan refinancing also simplifies your student loan repayment, since you only have to make one payment each month. The top reason to refinance student loans is to lower your interest rate, save money and pay off student loans faster.
If you want to know about refinancing Discover student loans, the process is simple and can be completed online. Lenders will evaluate your credit profile, income, debt-to-income ratio and other factors to ensure that you are a responsible borrower. Typically, lenders prefer to refinance student loans for borrowers who have at least a credit score of 650, current employment or a written job offer, stable and recurring income, and a low debt-to-income ratio, among other factors. If you do not meet these qualifications, you can apply with a qualified co-signer.
Why You Should Refinance Discover Student Loans
There are several reasons why you should refinance. The main reasons are to:
The main reason to refinance Discover student loans is to save money. With a lower interest rate, you can save money on your student loans and pay off student loans fast. You can compare the best student loan refinancing rates online.
You can use this student loan refinancing calculator to determine how much money you can save when you refinance student loans.
For example, let’s assume you have $100,000 of student loans at a 7% interest rate and a 10-year repayment term. Now, let’s assume you can refinance student loans at a 3% interest rate and a 10-year repayment term. With student loan refinancing, you could save $195 each month and save $23,457 total.
Change your student loan terms
Student loan refinancing also helps you change your student loan terms. If you refinance Discover student loans, you can choose either a new fixed interest rate or variable interest rate.
You should only refinance Discover student loans if you can get a lower interest rate. You can keep refinancing your student loans because there is no limit to how often you refinance student loans. Since there are no origination fees or prepayment penalties, you can refinance student loans each time you find a lower interest rate.
When you refinance student loans, you can also choose a new student loan repayment term, which typically ranges from 5 to 20 years. For example, a shorter repayment period (such as 5 years) has a higher monthly payment, but it will save you money since you will pay less interest.
In contrast, a longer repayment period (such as 20 years) will have a lower monthly payment, but ultimately cost you more in interest payments. You should choose the student loan repayment period that best fits your personal financial situation and goals.
Change your lender or student loan servicer
When you refinance student loans, you can change your student loan servicer. For example, if you’re unhappy with your current student loan servicer, student loan refinancing helps you get a new student loan servicer that can deliver better customer service.
When Student Loan Refinancing Isn't Right For You
Whether you should refinance Discover student loans depends if you have federal student loans or private student loans.
If you have private student loans, and can find a lower interest rate, student loan refinancing is a good way to save money and simplify student loan repayment. When you refinance private student loans, there is no impact to student loan forgiveness or income-driven repayment plans, for example, because those are benefits for federal student loans only.
If you have federal student loans, you should balance the potential cost savings from student loan refinancing with the loss of federal benefits such as income-driven repayment plans and student loan forgiveness programs.
However, you can still refinance private student loans. If you feel confident in your earning potential and ability to repay student loans, then student loan refinancing for both federal and private student loans is a smart tool. That said, if you plan to use income-driven repayment or certain federal student loan forgiveness programs, refinancing private student loans only may be a better option.
Should You Refinance Your Discover Loans?
You may wonder, “Should you refinance your private student loans?”
When it comes to whether you should refinance Discover student loans, make sure you understand your options. For example, with student loan refinancing, you can lower your interest rate, save money and pay off student loans more quickly.
Remember, there are at least three good reasons to refinance student loans:
- you can get a lower interest rate,
- you can get a lower monthly payment, or
- you can change loan terms.
If you choose to refinance Discover student loans, make sure you have at least one of these good reasons.