Best Student Loans Refinance
Refinancing student loans can help you lower your payments by consolidating your private or federal student debt into a new loan with a lower rate and better terms. Learn how to compare student loan refinancing options.
Common Questions
What does it mean to refinance?
Let’s start with a simple definition before diving into the details. When you refinance a student loan, a private lender pays off your current loan then issues you a new loan with a new interest rate.
A lower interest rate means lower monthly payments. It can also mean paying less overall because you won’t be paying as much in interest. Interest, of course, increases the total amount of your loan. So the lower your interest rate, the less you end up having to pay overall. And a lower rate makes it easier to keep up with your monthly payments and avoid defaulting on your loan.
What are the eligibility requirements?
Wondering if you will be able to qualify for student loan refinancing? Below are some of the standard requirements:
- Must be a U.S. citizen or permanent resident.
- A minimum amount of student loan debt ($5,000–$10,000).
- Responsible financial history.
- Cosigner (in some cases).
- A degree from a qualifying college (Title IV accredited university or graduate program).
- Proof of employment or a job offer that begins in 90 days.
- Strong monthly cash flow.
Eligibility requirements vary from one lender to the next, so you will have to check with those you are interested in. If you can’t qualify alone, many lenders allow for joint applications with cosigners.
We’ll return to the question of eligibility and what lenders are looking for in more detail later. Before that, let’s see how you can find just the right loan refinancing option for your situation.
What are the student loan refinancing rates?
Student loan refinancing rates vary widely by lender. If your priority is to save money, you will want to choose the lender with the lowest rates. However, you will only qualify for the lowest rates if you have a high income and a great credit score.
What loan rate types do they offer?
Most lenders offer loans with both fixed and variable rates. Initial rates are usually lower for loans with variable rates. But these rates can change with time depending on the market rate. Fixed rates are typically higher, but they don’t change for the duration of the loan. This makes it easier to budget.
Consider how much you can afford in monthly payments and how much risk you can tolerate regarding future rates. Figuring out in advance whether you prefer fixed or variable rates can speed up your search for the right loan.
So, how do you decide what interest rate type you prefer when it comes to refinancing your student loan? Should you go with a variable or fixed interest rate? To help you decide which rate type you prefer, here are lists of the pros and cons of each type.