How To Refinance Student Loans (A Complete Guide!)

How To Refinance Student Loans? Top Companies List + FAQs

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by Micah James — 3 months ago in Finance 9 min. read
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Updated on 27 December, 2023

How to refinance student loans? I’ve mentioned six simple steps…so, read this blog till the end.

Refinance is a term used in money-related matters like financing or refinancing in case. And many parents think of refinancing student loans for various reasons.

Refinancing gives students freedom from paying high-interest-rate loans with low-interest-rate loans. It is a way to get more affordable payments and lower rates.

In the U.S. refinance student loans are preferred over federal student loans as monthly payment is extremely high. However, there are various student loan forgiveness programs to rescue.

Refinancing student loans is not easy and in particular not similar to student loan consolidation, so there is a difference in both contexts.

In case you tie yourself around a refinancing situation and are confused about which refinance company is better for student loans.

You get all the necessary information in this blog.

  • Learn how to refinance student loans without hindering here and there.
  • Top companies that provide less-paper work and fast refinance student loans.
  • Things to know before finalizing refinance student loans.

Let’s get into the details quickly!

What Is Student Loan Refinancing?

Student loan refinancing simply means reestablishing a new loan at a lower interest rate and with lower interest payments.

In layman’s terms, refinancing student loans slay off your old loan with a new one, ideally at a lower interest rate and with a lower payment.

This is done by the company that provides refinancing services like Citizens Bank or Mefa after checking the requirements for student loan refinance.

In this manner, the company that provides a refinancing service pays off the client’s existing loan amount in full. Later, the client pays the lender until he/she repays the balance of the loan.

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How To Refinance Your Student Loans

Refinancing requires careful planning and knowledge of the context. Before you begin selecting the application, take some time to think about your requirements.

1. Consider if your loans are worth refinancing

Consider if your loans are worth refinancing

First, you need to be sure that your loan can be refinanced completely without any issues. Scoop for any vulnerabilities such as bad credit score or credit history.

Refinancing can indeed result in savings but wait to refinance until rates change or your credit score improves. Maybe your good credit score saves you money at a lower rate.

To be sure about this thing you may contact the support service to genuinely ask about your interest rate fluctuation occurrence for the future.

You can think of refinancing if:

  • You have a credit score of 650 or higher.
  • You have multiple student loans.
  • You want a lower monthly payment.

All kinds of loans can be refinanced by the company including loans provided by credit unions, private lenders, or the federal government.

2. Know your current financial situation

Know your current financial situation

When you are informed that your loan can be refinanced, now take a good pick of your financial situation and your financial goals.

What is the current interest rate you are paying? How much debt do you currently have? And when are you expected to pay it off? Also, if you planned for personal financial goals, consider them all in this.

At this moment, you’ll be clear about your financial situation. You can decide between yes and no, whether to opt for refinance or not, etc.

Just remember, the better your current financial situation, the better you feel confident about refinance a student loan.

The important aspect to concern is your credit score. If you do not know your credit score, you can use online tools for credit score checking like Credit Karma and Experian and from some credit card companies.

If you have a good credit score (ranging between 650 to 690) you can think about refinance student loan from the lenders. Your credit score impact on finance-related matters!

3. Select refinancing companies

Select refinancing companies

In a time when you know your credit score and it’s a good one, ideally, you can shop for lenders.

But be careful in selecting the refinance companies as you have them in hundreds. Particularly you have to figure out a reliable and transparent one.

To do so, here are some questions you can ask to identify good lender providers.

  • What type of loans do you offer?
  • What kind of refinances are there?
  • What documents are required for refinancing?
  • Do you offer rate locks?
  • Will I get professional support in time?

Out of all, loan terms play an important role in refinance, ask them about loan mode and terms they provide along with the policies and conditions of the company.

Do your research and feel confident. If you are a newbie, it is advisable to seek a professional financial consultant who that help you choose the right lenders.

4. Choose your loan mode and terms

Choose your loan mode and terms

When picking a lender, two key factors can differ significantly between companies: interest rates and loan repayment terms.

You usually get to choose between:

Fixed-rate APR: The fixed rate remains constant throughout your loan term. Eliminates the stress of periodic fluctuation in interest and new payments.
Variable interest rate:
The variable rate may change with fluctuating interest rates, potentially causing your monthly interest payments to go up or down.

Opting for a fixed rate could be advantageous because you can avoid the risk of increasing rates in the future and you know how much you will be paying each month for the entire duration of your loan.

5. Complete your paperwork

Complete your paperwork

When you are done with selecting the lender for your refinance need, the next step is to visit the branch and complete the paperwork in action.

The process of refinance is eccentric and takes little time. You may have to provide information about your education, employment, and income including your social security number.

In addition to this, you may also required to submit a 10-day payoff letter as it is essential in refinance student loan. Ironically, this letter is important anyway for loan purposes whether it’s a home loan, auto loan, or personal loan.

Before signing the paper, check for charges and also read all the fine print. There is no hard rule to quickly proceed with processes, take your time and move carefully with confidence.

6. Pay your payment terms

Pay your payment terms

Your lender may take little time to settle your older loans to offer you refinance student loans. You will be asked for a 10-day payoff amount which acts as a settlement letter for your old loans and any interest that’s accrued since your previous payment.

Until your settlement is done, be sure to pay your older loan premium in time – don’t skip any payments as these will be taken into account in the 10-day payoff amount.

Paying your loan terms punctually helps in a credit score high that indicates private venture or financial institution that you don’t miss any payments and are a reliable consumer.

When your refinance is done and begins active, you enjoy a lower interest rate and lower monthly payment. This facilitates you to focus on other financial subject matters efficiently.

!

The Pros And Cons Of A Student Loan Refinance

Refinance student loans is considered a beneficial financial decision because of its potential number of advantages. In this section, you will learn its critical advantages and disadvantages.

Pros of student loan refinance:

  • You could save a substantial amount of money—potentially tens of thousands of dollars. A lower interest rate has the potential to significantly decrease the total amount you’ll pay over time, allowing you to keep more of your paycheck.
  • You might be able to escape debt more quickly, especially if you choose to refinance for a shorter loan term. This decision could shave off a few years from your original loan repayment schedule.
  • It’s possible to reduce your monthly payment. Depending on how you structure your loan, you may lower both your short-term expenses and long-term loan costs.
  • You could discover more favorable terms compared to your current private lender. Not all lenders provide flexibility, such as the option to skip a payment² during challenging times. Transitioning to a new company might offer you considerable peace of mind.

Cons of student loan refinance:

  • The inability to get federal loan benefits is a crucial drawback. You may lose important federal benefits, such as income-driven repayment plans, loan forgiveness options, and generous deferment or forbearance programs.
  • While refinancing is a good option it may involve fees and costs. You can expect origination fees or application fees at a glance. There is no point in considering refinancing if it ruins savings.
  • Before finalizing to refinance student loans, it’s crucial to do research and consider both the potential benefits and drawbacks based on your financial situation and goals.

Alternatives To A Student Loan Refinance

Refinancing student loans is indeed a good option but it isn’t the only way. There are other ways to minimize your student loan debt. Different ways include:

Income-Driven Repayment Plans: The program is offered by federal student aid which sets your monthly payment of your current student loan at an amount that seems affordable based on your income and family size.

Cosigned Refinancing: This is another good way to minimize your student debt. In particular, the process requires a cosigner to be an individual who agrees to take on shared responsibility for the loan with the primary borrower.

Forgiveness: The loan forgiveness is another good way to clear your student debt. You must ask your loan provider for the forgiveness process or eligibility. You can think of the PSLF forgiveness program.

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Things To Know When Refinance Student Loans [Infographic]

Things To Know When Refinance student loan infographic

Best Companies To Refinance Student Loans

Here I have picked some of the best companies that excel in refinancing a student loan up to $500K – have a look!

Company Fixed APR Variable APR Balance Range Term Length (Yr)
citizensbank-logo
7.00% – 10.99% 7.29% – 12.43% $10000 – $750000 5, 7, 10, 15, 20 years
RISLA-Logo
5.79% – 8.74% NA $7500 – $250000 5, 10, 15 years
mefa-logo
5.79% – 8.74% NA $10000 – Total Loan Balance 7, 10, 15 years
ElFi-Logo
5.48% – 8.94% 5.28% – 8.99% $10000 – $250000 5, 7, 10, 12, 15, 20 years
ISL logo
6.94% – 11.83% NA $5000 – $300000 5, 7, 10, 15, 20 years
EdvestinU logo
6.00% – 9.37% 8.05% – 9.80% $7500 – $200000 5, 10, 15, 20 years
Nelnet Bank Logo
7.12% – 11.19% 7.61% – 14.51% $5000 – $500000 5, 7, 10, 15, 20, 25 years
  • Citizens Bank is a financial institution that offers various banking and lending services, including student loan refinancing.
  • The Rhode Island Student Loan Authority (RISLA) is a state-based nonprofit organization that provides various student loan programs and services to help students and families in Rhode Island and beyond.
  • The Massachusetts Educational Financing Authority (MEFA) is a nonprofit organization that provides a variety of financial services to help Massachusetts students and families plan, save, and pay for higher education.
  • Education Loan Finance (ELFI) is a financial services company that specializes in providing student loan refinancing at manageable payments, affordable rates, and flexible terms.
  • Iowa Student Loan (ISL) is a non-profit organization and part of the Iowa Student Loan Liquidity Corporation. It offers refinancing services to medical and dental professionals, undergraduates, and graduate students.
  • EDvestinU is a nonprofit student loan program that provides education financing options to students and families. It is operated by the New Hampshire Higher Education Loan Corporation (NHHELCO).
  • Nelnet is known for its involvement in student loan servicing. It is one of the federal loan servicers contracted by the U.S. Department of Education to service federal student loans.

Final Words On Refinance Student Loans

Refinancing your student loan is a good financial decision but it should be done in the right time such as when you can get a lower interest rate.

The parameters mentioned in this blog will help you through refinancing process. With the companies mentioned too, you can contact best providers for your student debt requirement.

Before ending this blog, recall why student loan refinancing is good for option:

  • To secure a lower interest rate,
  • Simplifies the repayment process,
  • Reduce monthly loan payments, or
  • Change the terms of the loan such as switching from a variable to a fixed interest rate.

It is also important to look at your credit score and income before considering refinance student loans.

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Frequently Asked Questions

What happens when you refinance student loans?

When you refinance student loans, you essentially replace your existing loans with a new one, usually from a private lender.

What credit score do I need to refinance student loans?

A credit score of 650 or higher is often a minimum, and the higher your score, the better terms you may qualify for.

Is it a good idea to refinance a federal student loan?

Refinancing federal student loans is a decision that should be made carefully. It may result in losing federal loan protections and forgiveness programs.

Is refinancing student loans better than consolidation?

Refinancing is typically done with private lenders, while consolidation is a federal program. The choice depends on your financial goals and the types of loans you have.

Which is the best lender to refinance with?

The best lender to refinance with depends on your individual financial situation, credit score, and preferences.

More Resources:

How Refinancing Student Loans Saves Money?
5 Best Student Loan Refinance Companies In 2023
Requirements For Student Loan Refinancing
The Pros and Cons Of Consolidating Student Loans
Important Glossary! A 40 Term Student Loan

Micah James

Micah is SEO Manager of The Next Tech. When he is in office then love to his role and apart from this he loves to coffee when he gets free. He loves to play soccer and reading comics.

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