Looking to refinance student loans?
I put together a short guide to help you refinance student loans quickly and with the best terms available. I’ve also tried to answer many of the questions I had when I refinanced my student loan debt. Enjoy!
What is student loan refinance?
Refinancing student loans is a new concept many student loan borrowers. Everyone knows that you can refinance a mortgage or car loan. But not everyone knows that you can refinance federal and private student loans too! I’m guessing if you found my blog you are somewhat familiar with the concept of student loan refinance.
Student loan refinancing is process of consolidating and refinancing multiple student loans with a new private student loan lender. Student loan refinance rates start at 1.90% for very qualified borrowers. Most student loan refinance borrowers fall somewhere into the 3% to 5% depending on the options selected. You can choose from variable, fixed, and mixed rates when you refinance.
You also have the option of selecting a new term length. Student loan refinance term lengths are generally 5 year, 10 year, 15 year, 20 year, and 25 year terms. When you refinance, your old loans are repaid by your new student loan lender. At this point, you will begin repayment of your student loan debt with your new lender.
To get approved to refinance student loans you will need to be creditworthy. Creditworthiness means you will need to have a good credit score, low debt-to-income ratio, and a history of on-time student loan payments.
Student Loan Refinance Benefits
Refinancing student loans is an excellent decision if you currently have high interest rate student loan debt. Lower interest rates are the single biggest benefit of refinancing student loans. Some federal student loans have interest rates above 7% and when it comes to private student loans it is even worse! Many private student loan borrowers are stuck paying interest in excess of 10% a year. When you refinance student loans you can refinance to rates as low as 1.90%. Saving even 1% on your student loan debt can add up to thousands of dollars in savings over the life of the loan.
The second biggest benefit of student loan refinance is the fact that you can customize the repayment of your student loans. What do I mean by customize? I mean you can select a new term length when you refinance. No longer will you be stuck with the out of the box 10 and 15 year repayment terms. When you refinance student loans you can select from 5, 10, 15, 20, and 25 year term lengths. By choosing a shorter term length, you can pay off your loans quickly and even get a lower interest rate. If you decide to refinance with a longer term length, you can add some much needed breathing room in your monthly budget. A 25 year term length will cut your current student loan payment in fractions.
The third biggest benefit of refinancing student loans is the fact that you can pick your interest rate. Most private student loan refinance lenders offers variable, fixed, and mixed options. Locking into a fixed rate could be a great option if you are looking to pay off your loans over a long period of time. Fixed rates equate to fixed monthly payments and total loan cost.
Or if you are looking to pay off your loans quickly, a variable rate could add up to a lot of savings. Variable rates start about 1.5% lower than fixed rates. If you are looking to get that 1.90% rate, a variable rate will help you get there. Just know that variable rates do change with market interest rates. If market rates increase, the variable rate you pay will also increase.
Student Loan Refinance Rates
If you are anything like me, you probably want to refinance student loans to get a lower interest rate. Before I refinanced my student loans, I was paying over 8% on the armful of student loans to my name. But after refinancing my student loans, I was able to lock myself into a 4% fixed rate loan.
Refinancing rates start at 1.90%. Many lenders offer this 1.90% teaser rate. I call it a teaser rate because only the very credit worthy will qualify. Most student loan refinance borrowers should expect a 3% to 5% offer. Depending on the options you choose, the rate you receive will change.
The longer term length you select, the higher the rate. Moreover, variable rates are about 1.5% lower than fixed rates. For example, if you choose a 20 year fixed rate you will pay much more than someone selecting a 5 year variable rate.
Most lenders offer a 0.25% discount if you pay with auto-pay or electronic payments. You should make sure that you shop around before accepting a refinance loan. I’ve found that there is a lot of discrepancy between the interest rates offered by student loan refinance lenders.
If you can save yourself 1% through refinancing, on average you will save yourself a few thousand dollars.
Student Loan Refinance Lenders
Over the last couple years there has been an influx of student loan refinance lenders. When I first started looking a refinancing student loans there were only a couple lenders in the market. Today, there are at least 10 major student loan refinance lenders on the market. Finding the right student loan refinance lender can be a difficult task. I strong recommend considering all of the different lenders on the market before you refinance student loans. Some lenders may have better rates and unique benefits for you. The most popular student loan refinance lenders are SoFi, Darien Rowayton Bank, CommonBond, LendKey, iHelp, U-fi Student Loans, CordiaGrad, and Education Success Loans.
SoFi is the largest and most popular student loan refinance lender. SoFi offers rates as low as 1.90% and lets you refinance both federal and private student loans. Term lengths range from 5/10/15/20 years. Both variable and fixed rates are available. There are no origination or pre-payment fees. SoFi is the #1 student loan refinance company. The application takes about 15 minutes. It then takes about 10 days to finish the refinancing process.
Darien Rowayton Bank is a smaller bank but a big player in the student loan refinance space. The company offers both variable and fixed rates. Term lengths range from 5,10,15, to 20 years. There are no origination fees or pre-payment fees. Rates
start as low as 1.90%! DRB usually takes a bit longer to refinance with in comparison to SoFi. The application takes about 20 minutes. You will need your current loan information on hand.
U-fi Student Loans is a newer player in the student loan refinance space, but I like them a lot. U-fi was created through a partnership of NelNet and Union Bank and Trust Company. They offer rates as low as 3.29% APR. Term lengths range from 5/10/15/20/25 years. Both variable and fixed rates are available. There are no origination or pre-payment fees. I really like U-fi because they offer some unique benefits. They offer 1.5% cash back after 1 year of on-time payments. They also offer cosigner release.
I refinanced through LendKey. LendKey is a network of over 175 not for profit credit unions. LendKey works as a matchmaker between local credit unions and student loan borrowers. Term lengths range from 5/10/15 years with variable rates. There are no origination or pre-payment fees. You will need to become a member of a credit union to refinance with LendKey’s partner credit unions. It is a fairly easy process and LendKey will walk you through it.
How long does it take to refinance student loans?
The application process for student loan refinancing is pretty short. It usually takes about 15 to 25 minutes to complete an application for student loan refinance. Upon submission, many lenders offer immediate credit decisions. Meaning, you will know if you qualify immediately and you will be provided an array of quotes and options.
At this point you will need to agree to and read a series of disclosures and agreements. You will also need to upload a few documents such as a copy of your driver’s license, diploma, and pay stubs.
After you’ve uploaded all necessary documentation and read the lender disclosures, your application will go into final review. After a few days, expect to hear back from the lender.
After you’ve been fully approved, you can choose to accept the student loan refinance offer. Upon acceptance, your new lender will pay off your old loans and your new student loan refinance loan will be created. Depending on the lender, it can take anywhere from 7 days to 60 days to complete the refinancing process. The timing also depends on the type of loans being refinanced.
You should know that you need to continue making payment on your old student loans up until the refinancing process is complete.
How much does it cost to refinance student loans?
You can refinance student loans without paying a single fee. Student loan refinance lenders do not charge application, origination, or pre-payment fees. The industry has become very competitive, and the vast majority of student loan refinance lenders charge no fees to refinance.
That being said, once you refinance student loans you will need to make on-time monthly payments. Late payments usually result in late fees and negative marks on your credit.
Student Loan Refinance Risks
You should always consider the risks when making any big financial decision. The decision to refinance student loans is a big decision. You should know that some borrowers may not benefit from student loan refinancing.
The Department of Education’s federal student loans come with a number of built in benefits. If you run into financial trouble, federal student loans have income based protection. Federal student loan payments can be adjusted with income. If you are currently using income based repayment, student loan refinancing would not be a good option. When you refinance student loans you lose your federal student loan benefits.
Furthermore, when you refinance student loans you are no longer eligible for Public Service Loan Forgiveness offered by the Department of Education. In short, if you are public service employee you may qualify for forgiveness of your federal student loan debt after 120 on-time monthly payments. If you are a public service employee, you should consider your forgiveness options before refinancing. Just note, private student loans cannot be forgiven.
Can I refinance student loans on a mobile device?
Yes and no. Some lenders allow you to complete the initial portion of the student loan refinancing application on a smartphone or tablet. Some lenders only support desktop or laptop submissions.
Once you submitted the initial portion of the application, you will need to upload a series of supporting documents. You will need to do this portion of the application on your computer.
If I were you, I would start the entire refinancing process on a desktop or laptop.
Can I refinance student loans with a cosigner?
Yes! In fact, I would recommend it if you have the option. Refinancing student loans with a cosigner is an excellent decision. Having a creditworthy cosigner can help the odds of your getting improved dramatically. Moreover, a creditworthy cosigner can result in a 1% discount with many lenders.
A couple lenders even offer cosigner release when you refinance student loans. My refinance lender, LendKey, offers cosigner release after 24 monthly of on-time payments.
You should know that a cosigner will be equally responsible for the repayment of the loan. A cosigner can be any creditworthy individual such as a spouse, parent, or grandparent. When you apply for student loan refinancing with a cosigner, your cosigner credit will also be pulled for review.
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My name is Dewey Trump. I am a 25 year old MBA student at the University of Pennsylvania. I am currently living in Philadelphia, PA.
Like most people my age, I have student loan debt. Last year I was stuck with 8 different student loans to my name. My average interest rate was somewhere around 8%! I started looking around for ways to lower my student loan interest.
I found that student loan refinancing was a new and up and coming loan product. Late last year I decided to bit the bullet and refinance my student loans.
Throughout the process I had a lot of questions I needed answers. I’ve kept all my research and I plan to share my research with you on this blog.
Student Loan Refinancing Information