Which Student Loans Should I Refinance?

By Mentor Staff | Edited By Mentor Staff

Updated On November 2, 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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Should I refinance my student loans?

The decision to refinance student loans can help you get a lower interest rate, save money and pay off student loan debt faster. Before you refinance student loans, it’s important to understand which student loans you should refinance. A good place to start is to ask these 10 questions before you refinance student loans. You should also evaluate your own unique circumstances to decide whether to refinance private student loans, federal student loans or both:

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%

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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%

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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

Should you refinance private student loans?

Many borrowers ask: “Should I refinance private student loans?” With student loan refinancing, private student loans are a good place to start. Private student loans are issued by private lenders, not the federal government. Private student loans do not include any programs through the federal government such as income-driven repayment or student loan forgiveness. Therefore, if you can refinance private student loans and get a lower interest rate, then it’s a smart move. Why? You can save money with a lower interest rate, save on your monthly payment and get out of student loan debt. For example, if you have an 8% private student loan and you can refinance with a 3% student loan, then that can amount to a significant cost savings.

Should you refinance federal student loans?

Many borrowers ask: “Should I refinance federal student loans?” The decision to refinance federal student loans is different than the decision to refinance private student loans. Why? If you have federal student loans, there are certain student loan benefits that come with federal student loans:

  • Income-driven repayment plans
  • Public service loan forgiveness
  • Forbearance
  • Deferment

Let’s discuss each one of these options.

Income-driven repayment plans: These are student loan repayment plans intended for borrowers who are struggling to repay student loans. There are four main types of income-driven repayment plansIncome-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR). After 20 (undergraduate student loans) or 25 years (graduate student loans) of federal student loan payments, you can receive federal student loan forgiveness.

Public Service Loan Forgiveness:The Public Service Loan Forgiveness program is a program to forgive federal student loans for borrowers who work full-time for a qualified public service or non-profit employer.

ForbearanceStudent loan forbearance enables you to stop making student loan payments temporarily. However, even if you’re not making student loan payments, it’s possible that interest still accrues on your student loan balance.

Deferment: When you have a deferment for your federal student loans, you can stop making student loan payments. However, interest may still accrue. How do you know if interest will accrue? If you have Direct Subsidized Loans, Subsidized Federal Stafford Loans or Federal Perkins Loans, for example, then you are generally not responsible to pay the interest that accrues. However, if you have Direct Unsubsidized Loans, Unsubsidized Federal Stafford Loans or Direct PLUS Loans, then you are responsible for paying the interest that accrues.

If you think that you may want to pursue of any of these federal student loans benefits, then you may not want to refinance your federal student loans. For example, if you plan to pursue an income-driven repayment plan or public service loan forgiveness, then student loan refinancing may not be for you. Why? When you refinance federal student loans, you will receive a private student loan in exchange, and that new private student loan will be used to pay off your existing federal student loan.

How much money can I save with student loan refinancing?

Most people refinance both their federal student loans and private student loans. Why? The reason to refinance student loans is to save money and pay off your student loan debt faster. How much money can you save when you refinance student loans?

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

For example, let’s assume you have $75,000 of student loans with an 8% interest rate and a 10-year repayment term. If you refinance your student loans with a 3% interest rate and a 10-year repayment term, you could save $186 each month and $22,290 total.

Student Loan Refinancing: Bottom Line

If you have good to excellent credit, a stable monthly income and a low debt-to-income ratio, then you could be a good candidate for student loan refinancing. If you don’t need an income-driven repayment plan or work in the public sector, then you likely can refinance your federal student loans. Conversely, if you are struggling to pay off student loans or work in the public sector, then you may want to keep your federal student loans outstanding and only refinance your private student loans.

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