The best companies for student loan refinancing include creditors who are able to extend manageable terms, affordable interest rates, and other benefits to their borrowers. In other words, companies who are able to ease the financial burden on a borrower’s existing student loans.
Many American students finance their education through federal and private student loans, and as tuition rates continue to climb, it doesn’t seem like things will change any time soon. Those who find it hard to repay their student loan debt may be considering refinancing their student loans. But there are many loans and companies out there; how do you figure out which loan company is best for you?
If you feel like you are overwhelmed by your student loan debt, know you’re not alone. There are more than 43.2 million Americans who are currently in student loan debt.1 Continue reading to learn more about the different loan companies for student loan refinances and refinancing in general.
How Does Refinancing Work in General?
Refinancing is the process of taking out a new loan to pay off one or more existing loans. Ideally, with refinancing, you’ll be able to secure a loan that is more affordable and easier to manage. According to U.S. Money News, 67.3% of borrowers who have refinanced their student loans say their overall financial situation has improved since the refinancing!2
While your current lender might offer refinancing options in certain cases, you always have the choice to explore alternatives with different loan providers.
Some Potential Advantages to Refinance Student Loans
When done correctly, refinancing student loans can offer several advantages in terms of the new loan:
- Reduced interest rates — One of the primary motivations for refinancing is to benefit from lower interest rates. Many individuals opt to refinance their existing debt to take advantage of more favorable interest terms.
- Enhanced repayment terms — Refinancing can also provide the benefit of more manageable repayment terms. This may involve extending the repayment period, resulting in lower monthly payments and increased affordability.
- Decreased overall costs — The overall cost of borrowing funds is influenced by various factors such as interest rates, loan types, and the loan provider’s policies. Through refinancing, you may reduce the total cost of borrowing, thus saving money in the long run.
The best student loan refinance companies often include well-known financial institutions, fintech firms, and credit unions known for competitive rates and favorable terms. Some of the good student loan refinance companies can be found through online reviews, financial product comparison sites, and consumer finance forums. To compare student loan refinance options, you should look at factors such as interest rates, fees, loan terms, and customer service ratings. Lists of the best student loan refinance companies are available on financial advice websites, educational blogs, and through annual rankings by financial analysts. When choosing between fixed or variable interest rates, consider your financial stability, risk tolerance, and the current interest rate environment. For personalized advice on selecting the best student loan refinance company, consider consulting with a financial advisor or using online advisory services that can provide tailored recommendations based on your financial situation and goals.
Refinancing vs. Debt Consolidation
Refinancing is when you take out one loan to pay off another. While debt consolidation is the process of paying off multiple debts with a single loan.
Possible Drawbacks or Risks of Refinancing Student Loans
|Loss of Federal Loan Benefits
|Refinancing federal student loan funding with a private lender means losing federal benefits like income-driven repayment plans and potential loan forgiveness.
|Evaluate if federal benefits are crucial for your situation.
|Some companies may charge fees for paying off loans early.
|Check the fine print for prepayment terms.
|Longer Repayment Period
|Lower monthly payments might result in a longer repayment term, increasing the total interest paid.
|Assess the total cost over the life of the loan.
|Variable Interest Rates
|Rates may start low but can increase over time, affecting affordability.
|Consider if you can manage the risk of rate increases.
|Refinancing requires a hard credit inquiry, which can temporarily lower your credit.
|Plan the timing of your application if you need credit for other purposes.
|Loss of Grace Period
|Refinancing immediately can forfeit the grace period of some loans.
|Calculate if refinancing during the grace period is worth it.
|The new lender may have different terms and customer service quality.
|Research the new lender’s reputation and customer service.
Before making any decisions regarding refinancing your student loans, it is crucial to conduct thorough research and consider consulting with a financial advisor or loan specialist. The details and considerations listed in the charts should be verified with the respective financial institutions as they are subject to change without notice and may not reflect the most current offerings or policies.
Additionally, the impact of refinancing on your financial and tax situation should be carefully evaluated, and the information should not be used as the sole basis for making financial decisions. By using the information in these charts, you agree that the creators and distributors of the information are not liable for any financial losses or damages incurred as a result of your reliance on the information provided.
Exploring Different Loan Companies For Student Loan Refinancing
You can choose several different loan companies for refinancing a loan, and you can easily find basic information on them. However, what is more important than knowing what lender to find, may be to figure out what qualities you should look for with a new loan.
Here are some things that the best student loan refinance companies offer with their loans:
Competitive Interest Rates When You Refinance Student Loans
Interest is likely going to be your highest cost with a loan, so it is important to pay attention to this, especially with student loan refinancing. If your student loans are for hundreds of thousands of dollars, even a small percentage of an increase can mean paying hundreds or thousands more overall.
If you don’t have the best credit score, instead of focusing on the lowest rates in the market, focus more on the lowest rate that is personalized to your credit score. As interest rates will typically be higher for bad credit borrowers vs. good credit borrowers.
Another thing to pay attention to with interest rates is whether you have fixed or variable-rate loans. Some loans are variable rate loans, meaning the interest rates can change. While fixed interest loans don’t have fluctuating rates. If you initially took out variable-rate loans and the interest rates have increased exponentially, or if you simply want the predictability that comes with fixed interest rates, you may be able to get that through student loan refinancing.
Student loan refinancing companies typically offer both fixed and variable interest rates, allowing borrowers to choose based on their preference for stability or potential savings. Interest rates can vary significantly among different refinance companies, with some offering lower rates for borrowers with excellent credit histories. To find the lowest interest rates, it’s essential to compare offers from top refinancing companies, which often advertise their rates on their websites. Lowering your student loan interest rate may involve improving your credit score, choosing a shorter loan term, or looking for rate discounts, such as those for automatic payments. The amount of money you can save by refinancing depends on your current loan terms, the new rate you can secure, and the remaining balance and term of your loans. To find the best rates, use online comparison tools, visit lender websites directly, or consult with financial advisors for the most current rates and savings calculations.
The Best Student Loan Refinance Companies Offer A Low or Competitive APR
Many people need clarification on APR for interest as they seem pretty similar but are different. APR stands for the annual percentage rate and is the total cost of a loan with included interest, which is just the amount charged on the principal/outstanding balance.
Although different from interest, APR is just as important to pay attention to when consolidating debt! The goal of refinancing is usually to save money, and you’ll want to make sure that you are doing so when refinancing, or the effort may not be worthwhile.
Flexible Repayment Terms With Student Loan Refinancing
Repayment terms are incredibly important when dealing with student loans because student loans tend to be extremely long-term, similar to a mortgage. And so, you’ll want to find a lender that offers flexibility with repayment. This will help if your finances change, you want to repay your student loans early, or if other financial emergencies come up in your life.
Most people can spend ten to twenty years repaying the total balance on their student loans, so it is crucial to consider what repayment terms your lender offers.
A Monthly Payment That Fits With Your Lifestyle
Everyone’s budget and spending habits are different, so what they can afford for their monthly payment may change. It is crucial to take into consideration what kind of monthly payment your potential new loan will have.
Ideally, you will want a new payment plan that fits better with your lifestyle than your previous loan. The best student loan refinancing companies offer manageable repayment plans.
Potential Fees With a Student Loan Refinance
Depending on the new type of loan that you are looking at, there may be balance transfer fees. On top of that, you should pay attention to the general fees that any loan can come with. These fees can be based on your actions (like late fees), or sometimes they may just be a part of the loan (like origination fees).
The Lender You are Working With for Student Loan Refinance
And finally, the lender that you are working with is important to pay attention to with your student loan refinance. Be sure to check out past reviews to get a better idea of how they treat their customers.
And so, as you can see, there are many factors that you should focus on when finding the best student loan refinancing option for your debt! Paying close attention to these factors may help you more than just filtering through student loan refinance companies.
Refinance Federal Student Loans vs. Private Student Loans
When looking at student debt, there are private and federal student loans. These two options are pretty straightforward:
Private student loans are student loans that come from private or traditional lenders. This can be banks, credit unions, or online lenders. For example, using a personal loan for student loans will be considered a private student loan option. While federal student loans are student loans that come from the U.S. Department of Education. These are usually the first and best choices for student loan funding.
Refinancing private loans usually is a little more straightforward than federal options. With a private loan, all you have to do is take out a new loan that takes over. With federal options, you have a few different choices. You can use a different federal student loan to consolidate existing student loans. If you have a single federal student loan that you want to change repayment with, you may be able to apply for a different repayment plan or simply negotiate. Or you can refinance a federal student loan with a private one. Although you can refinance your federal student loan options with private loans, it may not be the best idea, as federal options usually have a ton more flexibility, and interest rates are likely lower than private lenders, especially if you don’t have the best credit.
Can You Refinance Federal Student Debt?
If you have federal student debt, you may be curious about whether you can refinance federal student loans, And yes, you can do so; here are the few avenues you may have (some of them are technically not refinancing but will work similarly):
Student Loan Debt Consolidation
Student debt consolidation is available for student loans. This loan option is called a Direct Consolidation Loan. With this type of loan, borrowers can consolidate multiple federal student loans into a single federal student loan option with a fixed interest rate.
Public Service Loan Forgiveness
A Direct Consolidation Loan may help you qualify for Public Service Loan Forgiveness (PSLF) with federal loans that may otherwise not have qualified for this. PSLF is a program that allows loan forgiveness for borrowers who meet the criteria. There are some student loan options, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan), that on their own do not qualify for the PSLF program, but once they are consolidated, they might be.
Along with that potential, if you have a qualifying job with one of these loans, your student loans can be forgiven after 120 qualifying payments and a repayment plan.
Potential for Different Repayment Plans
Another reason some people may want to refinance student loans this way is that it can allow them to change up their current repayment plan. And if that new repayment plan fits better with their budget, then it can be worthwhile to pursue federal student loan consolidation.
Getting a Single Payment
Just like any other type of debt consolidation, with one of these loans, you won’t have to worry about juggling several different monthly payments with your student loans. Instead, your federal funding will only have a single payment to make every month. This can make it easier to keep track of your loan payments and may reduce the amount due each month.
Direct Consolidation Can Allow Your Federal Student Loans To Be Removed from Default
Default occurs when borrowers miss multiple payments or break the loan agreement. If you have any federal student loans in default, a Direct Consolidation Loan can take those out. You’ll get a new repayment plan and can make payments on those past loans, and they won’t be in default which can be good for your credit score.
Although there are a handful of benefits with Direct Consolidation Loans, they may not be the right choice for everyone! Talk to your loan servicer and do some research before you decide to go this route to refinance student loans.
Am I Eligible?
To qualify for a student loan refinance with most companies, you typically need to have a stable income, a good credit score, and a history of on-time loan payments. Specific eligibility criteria can often be found on the lenders’ websites or by contacting their customer service. The application process generally involves submitting financial information, undergoing a credit check, and providing details about your existing loans. The length of the application process can vary, but it often takes a few weeks to complete, from initial application to final approval and disbursement of funds. To apply, you’ll need to fill out an application—usually available online—where you’ll consent to a credit inquiry and provide the necessary documentation. For detailed guidance on the application process, it’s best to consult directly with the refinancing company or a financial advisor.
Consolidate or Refinance Federal Loans With Private Student Loans
Another option you can pursue to refinance your student loans is doing so through private student loans. There are several ways you can go about this; you can look at specifically private student loan options or turn to other loans, such as personal loans. In order to do this, however, you will likely need to have a good credit score or have a cosigner or co-borrower if you don’t have the best credit score. One thing to keep in mind is that federal loan benefits usually outweigh private student loan options, and so if you are looking to refinance student loans, federal loans may be the better choice over alternatives.
Altering Your Current Repayment Plan With Federal Student Loans
And finally, the last potential option you may have when looking to refinance your federal student loans is to talk to your loan servicer to change up the repayment plan. This is one of the most flexible parts of using federal student loan options; they are flexible with repayment and pauses. And this way, you don’t have to go through the process of finding another loan to refinance or consolidate with. Here are some of the different options you may have when you need to change your federal loan’s repayment:
Standard Repayment Plan
With a standard repayment plan, you will likely pay less over time than other repayment plans. These ensure that your loans will be repaid in 10 years, which may work for some, but that monthly payment may be too much to afford for others. Direct Subsidized and Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans, all PLUS loans, and all Consolidation Loans (Direct or FFEL) may be eligible for this repayment plan. This plan has no specific eligibility requirements; all student borrowers can qualify.
Graduated Repayment Plan
Graduate payment plans also ensure that your loans will be repaid in 10 years and have open eligibility to all borrowers. However, the payments will start low and then gradually increase later on. With these payment plans, you may pay more over time than the standard repayment option. Direct Subsidized and Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans, all PLUS loans, and all Consolidation Loans (Direct or FFEL) may qualify for this repayment plan. Keep in mind that with a Graduate Repayment Plan that federal loans being repaid through this plan will generally not qualify for Public Loan Forgiveness (PLS).
Extended Repayment Plan
The Extended Repayment Plan is available to borrowers with a Direct Loan balance of more than $30,000. Borrowers who have Direct Subsidized and Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans, all PLUS loans, and all Consolidation Loans (Direct or FFEL) may be eligible for an extended repayment plan. This plan gives borrowers more time to repay their student loans and lower monthly student loan payments. However, it can mean having to pay more money on your federal loans altogether.
Income-Based Repayment Plan (IBR)
The income-based repayment plan helps borrowers whose current federal payments are difficult to repay because they don’t make enough. With IBR, the monthly payments will reflect income and family size. Whatever the time period for repayment, any balance left over will be discharged. There are a few different kinds of income-based repayment plans:
Pay as You Earn Repayment Plan (PAYE)
The Paye Plan offers borrowers the ability to have monthly payments usually equal to 10% of their discretionary income divided by 12, but it will never be more than the monthly payments of the standard repayment plan.
Income-contingent Repayment Plan (ICR)
With this repayment plan, you will pay either 20% of your discretionary income or pay over the course of 12 years based on your income—whichever option is the lesser.
Income-sensitive Repayment Plan
With this plan, the monthly payments on the loans can change depending on how high or low your annual income gets during repayment.
All of these plans have specific requirements and different payment options, so do your research to find the best option for you.
Can You Refinance or Consolidate Private Student Loan Debt?
Yes, as mentioned earlier, you may be able to refinance or consolidate your private student loans. You can do this a few different ways; although you will not be able to do so with federal student loan options, but you can do so with private loans. In order to qualify for refinancing, you may need to have good credit or an income source. And if you don’t, then you may be able to find a cosigner or co-borrower. Here are some loan options that you can look into when trying to refinance private student loans:
Student Loans From Private Companies
There are private student loan companies that many borrowers turn to when they need to finance their educational expenses outside of federal student loan funding. Some examples of these types of student loan lenders are Sallie Mae, College Ave, Sofi, etc. Usually, with private student loans, you may be able to wait until graduation to begin repayment for loans. Talk to a lender about specifics when it comes to student loan refinancing, as not all lenders may allow for refinancing options.
Personal Loans to Refinance Student Loans
A personal loan is one of the most versatile loan options out there. These loan options are flexible in almost every aspect. For example, even with bad credit, you may be able to find a lender to work with. Some personal loans are for lower amounts, while others are for higher. Interest rates, annual percentage rate (APR), and loan amounts will depend on your credit score, income, ability to repay your loan, and the lender that you work with. Personal loans are installment loans, which means that you’ll have steady monthly payments if you decide to refinance student loans with these options.
Home Equity Loans
A home equity loan can also be used to refinance student loans. With these options, borrowers can use the equity they have in their homes to get funding. If you have a high student loan balance, or multiple high balances, a home equity loan may provide enough funding.
401k loans are company-sponsored retirement accounts that an individual can contribute to get things started. In most cases, a company will add or match to that account as long as you work for them. Whether you have a standard 401k or an after-tax dollars 401k account, you should be able to borrow to refinance student loans. However, keep in mind that there may be tax penalties with an early 401k withdrawal along with a required income tax payment.
Other loan options may be used for student loan financing, but the loans from above are usually the most common.
Is There a Minimum Credit Score or Income Requirement With Student Loan Refinance Companies?
One of the first questions you may be asking if you are seeking to refinance your student loans is whether there is a minimum credit score requirement or an income requirement with student loan refinance companies. Regarding federal student loans, they don’t factor that in for eligibility—there are no minimum credit score requirements for federal loans. There is also no minimum income requirement for these student loans.
If you are refinancing student loans with private options, there will likely be minimum credit score and income requirements. And so, if you have bad credit, your options may be limited. However, finding a loan may be possible, although depending on how low your income and credit score are, it may not be worthwhile if it doesn’t help you repay or save money on your student loans.
How to Improve Your Credit Score and Credit History
Getting credit approval/loan approval with a private student loan refinancing lender may be challenging with a bad credit history; however, improving your credit score is possible. With a better credit score, you may be able to find the best student loan refinancing options and get better loan terms.
Here are some tips to improve your credit score:
Make Your Payments on Time
One of the best ways to improve or build your credit is to make your bill/loan payments on time. This is because payment history is the single largest factor that impacts credit scores. And so, making your credit account payments on time is essential.
Keep Your Credit Balances Low
Your credit utilization is an important part of your credit score—it measures the amount of debt a person has against the amount of available credit available. When your credit balances are high, then it can increase your credit utilization which can hurt your score. This is especially true with revolving accounts such as credit cards, which impact both factors of your credit utilization ratio.
Keep Your Credit Accounts Open Even After They Are Paid Off
Another thing you can do to potentially help your credit scores is to keep your credit accounts open even after paying them off. Again, this is really important when working with revolving accounts! Closing accounts will lower the amount of open credit you have, which can hurt your credit.
Pay Off Debt if You Can
Paying off debt can also help your credit score. There are several strategies you can use for debt repayment. You can approach it simply by making more than the minimum payment due on your debts, or you can look into a more aggressive approach, such as the avalanche or snowball method.
Avoid Several Credit Inquiries
Hard credit inquiries can sometimes bring down your credit score by a few points. And so multiple credit inquiries in a short period of time can hurt your credit. If you are trying to build or improve your credit, you should avoid multiple hard credit inquiries in a short period of time.
Diversify Your Credit History
Having a diverse credit portfolio helps your credit. Having different kinds of credit accounts on your credit report can show lenders you have experience handling different accounts.
By using these strategies together, you will likely see improvement in your credit score over time!
Key Takeaways for Student Loan Refinancing
Student loan refinancing can be helpful for a variety of reasons; when done correctly, it can help lower borrowing costs and make a loan more manageable. There are several student loan companies out there, and it can be confusing to find the best option.
The good news is that there are specific factors of a loan you can look at to help you figure out your best choice! A few things to note is that federal student loan options are usually best, so if you have that option try and go for it first. Secondly, you cannot refinance private loans with federal student loan options. And lastly, with private loans, your credit score and income will be a huge determiner in what kind of refinancing or student loan consolidation option you may get.
FAQ: Student Loan Refinances
Yes, most refinancing companies allow you to consolidate and refinance multiple student loans into one loan.
Many refinancing companies offer benefits such as cash-back bonuses, lower interest rates for automatic payments, and sometimes even career coaching or financial advisory services.
Additional perks can include forbearance options in case of financial hardship, flexible repayment terms, and no penalties for early repayment.
Most top student loan refinancing companies offer options to refinance both federal and private loans.
Flexible repayment options are a feature of many student loan refinancing companies, and details can usually be found on their official websites or through customer service inquiries.
Customer reviews and ratings can typically be found on financial product review sites, company websites, and forums dedicated to student finance.
The best customer service is often reported in reviews on independent sites and through the Better Business Bureau.
Companies with high approval rates may advertise this on their websites, or it may be reflected in customer reviews and testimonials.
Companies that prioritize user experience will often have reviews praising their online platform’s ease of use, which can be found on tech or consumer finance review sites.
Some refinancing companies specifically target graduate students for refinancing options, and they will typically highlight this specialization on their websites.
Certain refinancing companies provide options for parents to refinance loans they have taken for their children’s education, which is usually mentioned in their product offerings.
Fees vary by company; some may charge origination, application, or late fees, while others may not charge any fees at all. This information is generally available on the lender’s website or in the loan agreement.
Refinancing can initially impact your credit due to the credit inquiry; however, consistently making on-time payments on the new loan can improve your credit over time.
A Word From CreditNinja on Finding the Best Student Loan Refinance Companies
CreditNinja knows nobody wants to be in debt. But, before committing to a single lender for refinancing student loans, it’s important to do thorough research, so you make the best financial decision for yourself.
Looking for more information about refinancing online loans, handling your own finances, and more? Check out the CreditNinja dojo for tons of free resources!