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Student loan refinancing rates are ridiculously cheap, and that’s good news for student loan borrowers.
Here’s what you need to know.
Student Loans
If you want to refinance student loans, now may be a good time. Rates for student loan refinancing have dropped to as low as 1.9% for variable rates and 2.6% for fixed rates. Why are these rates so low? The Federal Reserve has cut interest rates multiple times over the past several years and have continued to keep rates low.
Here’s how to refinance your student loans.
Student Loan Refinancing: Should I Refinance Student Loans?
Many borrowers ask: Should I refinance student loans? There are many reasons to refinance student loans, including:
- get a lower interest rate
- get a lower monthly payment
- save money
- pay off student loans faster
- improve your credit score
- make one monthly payment
- get a new student loan servicer
When you refinance student loans, you exchange your current student loans for a new, single student loan with a lower interest rate. You can refinance private or federal student loans, or both. With student loan refinancing, you can also choose a fixed interest rate or variable interest rate, and you can choose a student loan repayment term from 5 to 20 years. There are no application fees to apply.
Student Loan Refinance: Here’s How To Apply
If you want to know how to refinance student loans, here’s what to do:
There are three easy steps:
Step 1: Compare rates for student loan refinancing
Compare low interest rates with multiple online lenders to find the best match for you. This includes not only interest rates, but also loan terms too. Most lenders will let you check your new interest rate online for free with no impact to your credit score. The process takes about two or three minutes. If you like your new interest rate, you can complete the application. If you don’t, there’s no obligation to do anything else.
Step 2: Use a student loan refinance calculator
This student loan refinance calculator shows you how much money you can save when you refinance student loans.
It’s important to understand how much you can save when you refinance student loans. For example, let’s assume you have $80,000 of student loans at an 8.0% interest rate and 10-year repayment term. If you refinance your student loan with a 2.75% interest rate and 10-year repayment term, your monthly payment would be $207 lower and you would save $24,880 in total student loan payments.
Step 3: Apply online to refinance student loans
You can apply online to refinance student loans in about 10-15 minutes. To maximize your chances of approval, apply to multiple lenders at once. This way, you can also choose the best rate and loan terms. Each lender makes it own separate underwriting decision, so getting rejected from one lender doesn’t directly impact your chances with another lender. For the application, you may be asked to upload pay stubs, a copy of your driver’s license, or other supporting documentation.
Refinance Student Loans: Q&A
1. What are the requirements for student loan refinancing?
Student loan refinancing is not everyone. To qualify for student loan refinancing, you typically have:
- A credit score of 65o or higher
- Current employment or a written job offer
- Stable, recurring monthly income
- A low debt-to-income ratio
- No recent history of student loan default or bankruptcy
Student loan refinancing is especially beneficial for borrowers with large balances who meet these requirements such as doctors, lawyers, dentists, and veterinarians. What if you have bad credit? If you have bad credit or don’t have stable income, for example, it may be harder to get approved for student loan refinancing. That said, you can apply with a cosigner with good credit and income who meets these requirements. Your cosigner will be equally responsible for your student loans, and can also help you get approved and get a lower interest rate. Some lenders can release your cosigner from your student loan after you make a certain number of monthly student loan payments to demonstrate financial responsibility.
2. Which student loans should I refinance?
Borrowers often wonder if they should refinance their private or federal student loans, or both. The answer depends on your financial goals and unique situation. Most borrowers who qualify for student loan refinancing refinance both private and federal student loans to get a lower interest rate and save the most money. However, you should not refinance federal student loans if you are unemployed, plan to pursue public service loan forgiveness, think you’ll need an income-driven repayment plan, or want the options of forbearance or deferment from the federal government. Once you refinance federal student loans, they become private student loans so they won’t be eligible for these programs. The good news is that even if you keep your federal student loans outstanding, you can still refinance private student loans only. If you refinance federal student loans, many lenders still allow you to pause your student payments if you lose your job or face other economic hardship. Check with your lender for details.
3. Can Parent PLUS Loans be refinanced?
Yes, Parent PLUS Loans can be refinanced. Parent PLUS Loans have relatively high interest rates and limited options for student loan repayment through income-driven repayment plans. Therefore, if you meet the requirements, refinancing Parent PLUS Loans could be a helpful option to save money and get a lower interest rate.
4. What’s the latest on student loan cancellation?
There are several proposals to cancel student loans. President Joe Biden wants Congress to cancel $10,000 of student loans immediately. Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) want Biden to cancel up to $50,000 per borrower through an executive order. Neither proposal would cancel everyone’s student loans or cancel all student loan debt. Neither proposal would cancel any private student loans. Rather, the proposals could include student loan cancellation for federal student loans owned by the U.S. Department of Education, which could exclude some FFELP Loans and Perkins Loans. Further, based on current proposals, if you have annual income over $125,000, you would not qualify for student loan cancellation. Biden says he is unlikely to cancel student loans through executive order, and based on current strategy, it’s unclear if Democrats can pass legislation with student loan cancellation. If student loans are cancelled, it’s more likely there will be limitations on who qualifies and how much student loan forgiveness there would be.
5. How often can you refinance student loans?
Many borrowers who already refinanced their student loans ask: “How often can you refinance student loans?” The answer is as often as you can save money. Student loan refinancing has no application fees or prepayment penalties. There is no limit to how often you can refinance student loans. If you refinanced last week, last month or last year, for example, and you can find a lower interest rate today, you can refinance student loans again.
