Student loan refinancing rates have dropped even lower.
Here’s why and what you need to know.
Student Loan Refinancing: Rates Drop Even Further
Student loan refinance rates now have dropped to as low as 2.01%.
Why? The Federal Reserve cut interest rates, and lenders have reduced student loan refinancing rates to a near-term low. That’s great news for student loan borrowers who want to refinance student loans, get a lower interest rate and save money.
Here’s how to refinance your student loans.
Student Loan Refinancing: Should I Refinance Student Loans?
Many people ask: Should I refinance student loans?
If you want to save money and pay off student loans faster, student loan refinance is an effective tool. When you refinance student loans, you exchange your current student loans for a new, single student loan with a lower interest rate.
Student loan refinancing has several advantages, including:
- lower interest rate
- single monthly payment
- fixed or variable interest rate
- flexible 5-20 year loan repayment term
- one student loan servicer
- pay off your student loans faster
- save money
Student Loan Refinancing: How To Apply
If you want to know how to refinance student loans, it’s important to understand how to apply. The good news: the process is simple.
Step 1: Find the best interest rate
There are multiple trusted, online lenders that can refinance student loans with low interest rates and easy, online applications. Compare the best interest rates and loan terms. Most borrowers will refinance student loans with the lender who gives them the lowest interest rate. Most lenders allow you to check your preliminary interest rate online for free within two to three minutes without any impact to your credit score.
Step 2: Use a student loan refinancing calculator
This free student loan refinance calculator shows you how much money you can save when you refinance student loans.
For example, let’s assume you have a $100,000 student loan at an 8% interest rate and 10-year repayment term. If you refinance that student loan with a 3.0% interest rate and 10-year repayment term, you would lower your monthly payment by $248 and save $29,720 in total payments. If you are a doctor, dentist or pharmacist with a large student loan balance, your savings may be even higher.
Step 3: Apply online
You can apply online for student loan refinancing. Most applications take 10-15 minutes to complete. You can also upload any supporting documents, which may include a copy of your driver’s license, transcripts, recent paystubs or job offer letter.
Student Loan Refinance: Key Questions
1. Do I qualify for student loan refinance?
While each lender has its own underwriting criteria, the best candidates for student loan refinancing typically have the following:
- 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 defaults on their student loans
What if you don’t satisfy these requirements? You should apply with a co-signer with strong credit and income. Your co-signer can help you get approved for student loan refinancing and help you receive a lower interest rate. Your co-signer will be equally financially responsible for the student loan. However, some lenders allow the co-signer to be released from any financial obligations after meeting certain requirements.
You can maximize your chances of getting approved to refinance student loans by applying to multiple lenders. Each lender makes a separate decision, so getting rejected from one lender does not negatively impact your chances with another lender.
2. Can you refinance Parent PLUS Loans?
Yes. Parent PLUS Loans carry relatively high interest rates, so refinancing Parent PLUS Loans is a smart way to lower your interest rate and save money.
3. What are the fees to refinance student loans?
There are no fees to refinance your student loans. If any lender tries to charge you a fee to refinance student loans, find another lender. There are also no prepayment penalties, so you can pay off student loans anytime with no charge.
4. Should I refinance my federal student loans?
You should not refinance federal student loans if:
- you plan to pursue public service loan forgiveness or an income-driven repayment plan
- you want access to deferral or forbearance options
You can still refinance your private student loans and leave your federal student loans outstanding. Most lenders today offer employment protection if you lose your job and want to pause your monthly payments.
5. When should I refinance student loans? How often can I refinance student loans?
When should you refinance student loans? The answer: you should refinance student loans whenever you qualify for a lower interest rate. If you can get a lower interest rate and save more money, then it may be a smart financial move.
How often can you refinance student loans? There are no fees to apply, no fees to refinance, and no limit to how often you can refinance student loans.
Zack Friedman is the bestselling author of the highly-anticipated, blockbuster book, The Lemonade Life: How To Fuel Success, Create Happiness, and Conquer Anything. Zack is the founder and chief executive officer of Make Lemonade, a leading personal finance company that empowers you to live a better financial life. He is an in-demand speaker and has inspired millions through his powerful insights. Previously, he was chief financial officer of an international energy company, a hedge fund investor, and worked at Blackstone, Morgan Stanley, and the White House. Zack holds degrees from Harvard, Wharton, Columbia, and Johns Hopkins.