How to Refinance Student Loans in 5 Easy Steps
The student loan refinance process is fairly simple: Shop around for rates and apply for the best deal. If you’re approved, the lender will pay off your old debt and issue a new, hopefully more affordable loan, ideally with a lower interest rate.
Fortunately, it’s easy to browse offers without impacting your credit score. Here’s a step-by-step guide on how to refinance student loans.
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1. Decide if a student loan refinance is right for you
There are benefits to refinancing your student loans, such as potentially saving money on interest and streamlining your monthly payments into one, easy-to-manage bill.
However, you’ll need a robust credit score and a steady source of income to qualify for the most competitive rates. If your credit history is less than ideal, you may need to refinance with a creditworthy cosigner or settle for a higher interest rate.
Although you can refinance both private and federal student loans, it’s best to avoid refinancing federal loans since you’ll lose eligibility for federal programs, such as income-driven repayment plans and student loan forgiveness programs. Usually, you should only consider a federal student loan refinance if you feel confident you can repay your loans relatively easily, without the need for these benefits.
Private student loans don’t typically offer such benefits, though some have special member perks and discounts when you refinance.
Either way, be sure to consider all of the pros and cons of refinancing before proceeding.
2. Check rates with multiple lenders
Many banks, online lenders and credit unions refinance student loans — try shopping around, starting with our list of favorite refinance lenders. You can browse multiple offers without any risk to your credit score or any pressure to proceed with the loan.
You can also search for refinance lenders based on a specific need, such as a parent PLUS loan consolidation or a perk like job loss protection.
Check your possible rates by visiting each lender’s website and entering some basic information. Most lenders typically ask for the following:
- Name, address and other basic information
- Degree type and university
- Total student loan debt
- Monthly housing payment
You might be prompted to create an account — which could save time if you decide to submit a full application down the road. With your basic info, the lender will generally run a soft credit check. Again, this check won’t impact your credit score, and you should see the results right away.
If your income and credit score meets the lender’s eligibility requirements, you’ll see a range of offers. A lot of lenders offer five-, seven-, 10-, 15- and 20-year repayment terms.
Student loan refinancing rates vary widely, with many lenders offering both variable and fixed interest rates. Variable rates can fluctuate with the market, while fixed rates stay the same over the life of your loan. If you plan to pay off your loan quickly, you can take your chances with a variable rate, but otherwise, it may be safer to go with a fixed rate.
3. Choose a lender and your loan terms
If you land some good offers, it’s time to choose a lender and a loan. Most borrowers pick whoever offers the lowest interest rate. Do the math with our student loan refinancing calculator to see how much you’ll save with a new interest rate.
You can also compare loan terms to help you choose a repayment term. A longer term can help lower your monthly student loan payments but will likely accrue more interest over the life of your loan. If you can manage higher payments, a shorter term will save on interest and help you get out of debt faster.
Besides interest rates, repayment protections might also factor into your choice. If you’re worried about your job, for example, you might prioritize lenders with unemployment protection or economic hardship forbearance programs.
Finally, customer service could sway your decision. Online reviews offer insight into how well a company treats its customers. If that’s an important element to you, do your homework before selecting your lender. Start by testing its customer service responsiveness online, over the phone or by reading customer reviews written by other borrowers.
4. Gather documents and fill out the application
Before locking in your new interest rate, you need to submit a complete application. You’ll upload documents, such as loan statements and proof of income. You’ll also need to consent to a hard credit check at this point.
Most lenders require the following documents for a student loan refinance application:
- Government-issued photo identification, such as a driver’s license or passport
- Social Security card or number
- Proof of income, such as pay stubs or a job offer letter
- Official statements for all your federal and private loans
If applying with a cosigner, you’ll also need to provide that person’s information. The lender will notify you if anything is missing. You can also call or chat with customer service if you have any questions.
Contact your current loan servicers if you can’t locate your full statements. Statements need to show your original balance, date of disbursement and the full repayment history.
5. Keep paying your loans as you wait for approval
Even though you can browse initial offers in an instant, a full refinance application can take some time. Although certain lenders aim to complete the process within two to five days, it can take up to three weeks to finalize.
In the meantime, make sure you continue paying your current loans until you’re notified that the transfer is complete.
Once your new lender approves the loan, consider setting up autopay to help you avoid a student loan default. Many lenders offer an additional 0.25% discount on your interest rate when you use autopay. You might also qualify for an extra loyalty discount if you refinance with a bank where you already have a bank account.
Frequently asked questions
Banks, credit unions and private lenders have different eligibility requirements for refinancing education debt.
Generally, you will need a FICO Score of at least 650 to qualify with most reputable lenders. A score in the 700s and above would help you access lenders’ lowest advertised rates. If your credit score isn’t high enough, you could find a cosigner who meets your preferred lender’s threshold.
The right time to refinance student loans is specific to your situation. If you have high-interest private student loans and the credit score to refinance at a lower rate, you should at least investigate refinancing. It could save you a significant sum in interest over your repayment — check out our refinancing calculator above to get an idea of how much.
But if you have federal student loans, it may not be so wise to refinance unless you’ve considered the potential downsides. See the next question for details.
Refinancing has potential negatives, particularly if your family finances aren’t secure. For example, refinancing federal loans might save you money or stress, but it would force you to give up your government-exclusive safeguards, as discussed above.
Think about whether refinancing your student loans is right for you before signing on the dotted line, as all refinancing decisions are irreversible.
Student loan refinancing is free and relatively easy to undertake. And as noted above, you could save a significant amount of money if you secure a lower interest rate. Or if you need an easier monthly payment, you could extend the term length of your loan in exchange for a smaller bill.
Yes, certain private lenders allow you to refinance your student loan in someone else’s name. For example, parents may choose to transfer their parent loan to the child once they’re well-established in the workforce.
To transfer your debt, the new borrower must submit an application and meet the lender’s income and credit score requirements. Keep in mind that the terms and rates will change based on the new borrower’s credit history.
There’s no limit to how many times you can refinance a student loan. You can even refinance with the same lender multiple times. However, be sure that every refinance comes with a benefit, such as securing a lower rate.
The refinance process varies from lender to lender. While some lenders can finalize your application as quickly as a day or two, others need a couple of weeks to get all paperwork in order. In general, it’s best to prepare for a three-week wait when refinancing your student loans.
If you’re looking for additional ways to reduce your student loan debt, consider the following approaches:
- Student loan forgiveness: If you meet the criteria, you can apply to have part or all of your student debt wiped clean, such as with Public Service Loan Forgiveness or military loan forgiveness.
- Direct Consolidation Loan: You can combine your federal student loans into a Direct Consolidation Loan while still retaining government-sponsored benefits, such as access to income-driven repayment plans and student loan forgiveness programs.
- Employers offering student loan repayment assistance: You can try to land a job with a company that helps pay off student loan debt. Check out our list of 20 companies offering student loan repayment assistance.