Should You Refinance Private Student Loans?

By Mentor Staff | Edited By Mentor Staff

Updated On October 29, 2021

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.

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You should refinance private student loans if you can get a lower interest rate. Student loan refinancing helps you save money, pay off student loans faster and get out of debt more quickly. Student loan refinancing is the process of receiving a lower interest rate for your student loans. When you refinance private student loans, you can get one student loan with a lower interest rate and one monthly payment.

Top Picks For Student Loan Refinancing

January 2022

Variable APR ?APR, or Annual Percentage Rate, is the price you pay to borrow money. Variable APR means that your interest rate can fluctuate over time, which can increase or decrease your monthly student loan payment. Typically, a variable-rate loan has a lower introductory rate than a fixed-loan rate loan. Variable APR includes a 0.25% discount when you enroll in autopay.
Fixed APR ?APR, or Annual Percentage Rate, is the price you pay to borrow money. Fixed APR means that your interest rate will always stay the same. Even if interest rates change, your interest rate or monthly payment will not. Fixed APR includes a 0.25% discount when you enroll in autopay.
APR
1.74% - 7.24%
2.49% - 7.59%
1.74% - 7.59%

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on SoFi's website

Overview

Variable APR:
1.74% - 7.24%
Fixed APR:
2.49% - 7.59%
Minimum Credit Score:
650
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000 ($10,000 in CA)

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All states
Hardship Deferment:
Yes
Co-signer Option:
Yes
1.74% - 5.64%
2.44% - 5.79%
1.74% - 5.79%

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on Earnest's website

Overview

Variable APR:
1.74% - 5.64%
Fixed APR:
2.44% - 5.79%
Minimum Credit Score:
650
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5-20 years
Borrower Residency:
All States except KY or NV
Hardship Deferment:
Yes
Co-signer Option:
No
-
2.44% - 6.22%
2.44% - 6.22%

View Details

on ISL's website

Overview

Variable APR:
-
Fixed APR:
2.44% - 6.22%
Minimum Credit Score:
670
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000 ($10,000 in CA)

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All states, except OR and ME
Hardship Deferment:
Yes
Co-signer Option:
Yes
1.86% - 6.01%
2.47% - 5.99%
1.86% - 6.01%

View Details

on ELFI's website

Overview

Variable APR:
1.86% - 6.01%
Fixed APR:
2.47% - 5.99%
Minimum Credit Score:
680
Minimum Income:
$35,000
Fees:
None
Minimum Loan Amount:
$15,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All States
Hardship Deferment:
Yes
Co-signer Option:
Yes
1.74% - 7.49%
1.99% - 7.84%
1.74% - 7.84%

View Details

on Splash's website

Overview

Variable APR:
1.74% - 7.49%
Fixed APR:
1.99% - 7.84%
Minimum Credit Score:
660
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5 – 20 years
Borrower Residency:
All states
Hardship Deferment:
Varies
Co-signer Option:
Yes
1.89% - 5.90%
2.50% - 6.00%
1.89% - 6.00%

View Details

on Laurel Road's website

Overview

Variable APR:
1.89% - 5.90%
Fixed APR:
2.50% - 6.00%
Minimum Credit Score:
660
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All States
Hardship Deferment:
Yes
Co-signer Option:
Yes
1.90% - 5.25%
2.49% - 7.75%
1.90% - 7.75%

View Details

on LendKey's website

Overview

Variable APR:
1.90% - 5.25%
Fixed APR:
2.49% - 7.75%
Minimum Credit Score:
680
Minimum Income:
$24,000
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All states, except ME, ND, NV, RI, WV
Hardship Deferment:
Yes
Co-signer Option:
Yes

Reasons To Refinance Private Student Loans

There are many reasons to refinance private student loans. The three main reasons are to save money, change your loan terms or change your lender or student loan servicer.

1. Save Money

The most popular reason to refinance private student loans is to save money. You can save money with student loan refinancing by receiving a lower interest rate. With a lower interest rate, you will pay less money each month in interest costs, which helps you pay off student loans faster. There are no fees to refinance student loans and no prepayment penalties if you pay off student loans early. Therefore, you can refinance private student loans as often as possible if you qualify for a lower interest rate. Most borrowers choose the student loan lender who offers the lowest interest rate.

Here’s an example of how much you can save with student loan refinancing. For example, let’s assume you have $60,000 of student loans at an 8% interest rate and 10-year repayment term. Let’s assume you can refinance these student loans to a 3% interest rate and 10-year repayment term. With student loan refinancing, you would save $149 each month and $17,832 overall.

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

2. Change Loan Terms

When you refinance private student loans, you can change your student loan terms and student loan repayment. Here’s how:

  • Combine all your student loans. If you have more than one private student loan, you can consolidate private student loans into a single student loan. Private student loan consolidation, or student loan refinancing, is the process of combining your existing private student loans into a single student loan. When you consolidate private student loans, you can organize and simplify your student loan repayment.
  • Choose your type of interest rate.Unlike federal student loans, you can choose your interest rate type with private student loans. When you refinance private student loans, you can choose a fixed interest rate or a variable interest rate. A fixed interest rate means that your interest rate will never change during student loan repayment. A variable interest rate means that your interest may change during student loan repayment. Generally, in a rising interest rate environment, it’s typically better to choose a fixed interest rate. In a falling interest rate environment, it’s typically better to choose a variable interest rate.
  • Choose your repayment period. When you refinance private student loans, you can also choose your student loan repayment period. For federal student loans, the standard repayment period is 10 years. Student loan refinancing enables you to choose a repayment period, which typically ranges from 5 to 20 years. A shorter student loan repayment periodmeans a higher monthly payment, but you save interest and can pay off student loans faster. A longer repayment period means a lower monthly payment, but you pay moretotal interest over time.

3. Change lender or student loan servicer

Student loan refinancing is a good opportunity to change your lender or student loan servicer if you’re unhappy with the customer service. While most borrowers focus on the lowest rate, you may find a better lender who offers favorable loan terms, more repayment options and even better customer service.

When Not To Refinance Private Student Loans

There aren’t any compelling reasons when not to refinance private student loans. When you refinance private student loans, you receive a lower interest rate, can combine all your student loans into a single student loan, and you choose the loan terms that best meet your financial situation.

If you can find a lower interest rate with another lender, refinancing private student loans may be a good option. 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 want to keep federal student loan benefits, you could keep your higher interest rate federal student loans outstanding and refinance private student loans only.

How To Refinance Private Student Loans?

If you want to know how to refinance private student loans, the process is easy. You can compare the latest student loan refinancing rates and then check your interest rate for free online with each lender. Then, you can apply online to several lenders, and each application takes about 10-15 minutes. Once approved, your new lender will pay off your old student loans and issue you a new student loan. Since there are no fees to refinance private student loans, you can refinance as often as you like. You can refinance when interest rates drop, your income increases, your credit improves, you pay off other debt, or any other time you would like to save money.

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