Maybe you’ve thought about refinancing your student loans to try and save money, but you don’t know where to start. That’s understandable because there is a broad landscape of companies and lenders that refinance student loans. With the right information and guide, figuring out how to refinance student loans doesn’t have to be daunting. It’s important to compare lenders to find the best student loan refinance lenders.
*Rates accurate as of December 2, 2020, and exclude autopay discounts.
The 5 best student loan refinance companies of 2021
What is student loan refinancing?
Student loan refinancing is an option to change how and what you pay on your loans each month. Essentially, refinancing a student loan replaces your current loan with a new one, complete with a new payment amount, a new term length and hopefully a lower interest rate.
Refinancing may help you pay less in interest over the length of your loan term, have more manageable monthly payments or help you get a co-signer off of a loan.
How to refinance your student loans
Refinancing your student loans can be a smooth and straightforward process. Many lenders offer online applications, and processing can take just a few days. Here are the steps to follow if you want to refinance your student loans.
- Find at least lenders you are interested in refinancing with. It’s always a good idea to shop around to see what different lenders are able to offer you.
- Prepare the information you’ll need to apply. This includes checking your credit report for any errors and disputing them if so, knowing your credit score beforehand, knowing your total student loan balance and interest rates for each loan, and knowing your total monthly payment.
- Get estimates from the lenders you’ve chosen.You may have to fill out applications to get loan offers, or you may be able to get prequalified. Compare the offers and see which works best for you. A loan application generally asks for personal information like your address, income, current loan information, assets, and age of loans.
- Compare offers and choose one. When you’ve chosen the offer, you’ll sign a contract for the new terms of your debt. You’ll have to get the 10-day payoff amount from your original lender and submit it to your new lender. There is a three-day period called the recission period, where you or the lender can pull out of the agreement. Until this is completed and the loan officially approved, you need to continue to make payments to your original lender.
- You have successfully refinanced. The new lender pays off your debt to your original lender, and you start making payments on your new debt terms to this new lender.
What’s the difference between student loan refinancing and consolidation?
Student loan consolidation and student loan refinancing both streamline your debt repayment process by taking your original debt terms and offering you new ones. Either option can be a useful tactic in your debt payoff journey. However, there are key differences between the two processes.
Debt consolidation bases your new interest rate on your old interest rates. It takes the weighted average of your current interest rates to create your new interest rate.
Refinancing bases your new interest rate on your credit score and ability to repay the debt. This may be a higher or lower rate, depending on your credit score.
Keep in mind however, there are caveats in refinancing federal student loans:
- Some lenders will not refinance federal student loans at all.
- To consolidate federal loans, you must do so with the Department of Education’s federal loan program.
- You cannot refinance student loans through the Department of Education.
Refinancing through a private lender may require you to give up some of the protections that come from federal loans, such as loan forgiveness or income-based repayment options. Debt consolidation doesn’t require this.