February 06, 2020

5 Best Banks to Refinance Your Student Loans in 2020

Student Loans

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If you have student loans, you may have heard how you can refinance your loans with a new lender to potentially lower your payment and save thousands of dollars on interest.

It’s a great idea, but it can be difficult to know where to start.

So to help our readers, we looked at all the major student loan refinancing companies to come up with the ones that give borrowers the best rates and terms.

Variable APR Terms Eligible Degrees Eligible Loan Types Sign Up

1.89% to 6.38%

5 to 20

Undergrad and Graduate

Private and Federal

1.85% to 6.13%

5, 7, 10, 15, 20

Undergrad and Graduate

Private and Federal

2.62% to 6.12%

5 to 20

Undergrad and Graduate

Private and Federal

2.31% to 7.36%

5, 7, 10, 15, 20

Undergrad and Graduate

Private and Federal

1.99% to 7.06%

5 to 25

Undergrad and Graduate

Private and Federal

SoFi: Good for Getting Loans Refinanced Fast

  • SoFi: Good for a Quick Refi
    • Basics: With live online customer support available seven days a week, SoFi is there to help you process your loan application quickly. The online application only takes a few minutes to complete, and you can easily upload screenshots and documents online to complete the process.
    • Pros: SoFi's refinancing process is quick, which is great if you want to save money as quickly as possible. Also, you can refinance Parent PLUS loans with SoFi, allowing you to release your parents from their obligation to your educational debt.
    • Cons: There is no option for cosigner release, so you will need to refinance your loan again if you want to remove a cosigner from their obligation to your student debt.
    • Variable APR

      2.31% to 7.36%

    • Terms

      5, 7, 10, 15, 20

    • Eligible Degrees

      Undergrad and Graduate

Earnest: Good for Flexible Loans and Repayment

  • Earnest: Good for Flexibility
    • Basics: Paying off student loan debt can be arduous. Earnest tries to make it a bit easier by offering flexible loan terms and monthly payments. By refinancing your student loans through Earnest, you’ll have access to unique loan origination features. For instance, rather than setting a handful of loan terms, Earnest uses your desired monthly payment to calculate a unique loan term for you. This means if your budget allows for a $350 monthly payment, you could wind up with a loan term of five years and seven months — something you won’t find with other lenders.
    • Pros: In addition to the “choose your own term” option, you can a payment every 12 months without penalty, if expenses ever pile up or you hit a rough patch. You can also push your payment due date back up to seven days as needed, and you can set up automatic biweekly payments to save money on interest.
    • Cons: Earnest doesn’t allow for cosigners. Additionally, you’re limited to 12 months of forbearance, compared to the two years often allowed by other lenders. Also, if your parents took out PLUS loans for your education, you cannot assume responsibility for them by refinancing with Earnest into your name.
    • Variable APR

      1.89% to 6.38%

    • Terms

      5 to 20

    • Eligible Degrees

      Undergrad and Graduate

College Ave: Good for Confident Borrowers

  • College Ave: Good for Confident Borrowers
    • Basics: At College Ave, you only need a minimum credit score of 650 to qualify for a student loan refinance. While this score (or higher) won’t guarantee approval — there are many other factors involved — it’s nice to know that a low score won’t disqualify you.
    • Pros: You can build the refi loan that best suits you, with terms between five and 20 years long. College Ave’s online loan calculator lets you see exactly how much you’ll pay and what will save you the most in the end. As long as you have an income of at least $65,000 and a credit score of 650 or higher (with no bankruptcies or accounts in collections), you may be eligible for a loan.
    • Cons: College Ave has no formal forbearance policy. If you encounter a financial hardship and need help avoiding a loan default, you can request forbearance, and it will be considered on a case-by-case basis. Also, only the parent borrower can refinance Parent PLUS loans with College Ave. To release your parents from PLUS loans they took out for your education, you’ll need a different lender.
    • Variable APR

      2.62% to 6.12%

    • Terms

      5 to 20

    • Eligible Degrees

      Undergrad and Graduate

CommonBond: Good for Big Balances

  • CommonBond: Good for Large Balances
    • Basics: With CommonBond, you can refinance as much as $500,000 in student loan debt, allowing you to save money and time on your repayment, no matter the balance.
    • Pros: If you ever encounter a financial hardship, CommonBond offers a generous, 24-month forbearance policy. Italso offers a 10-year hybrid loan option, which is designed to optimize your repayment. The first five years come with a fixed interest rate, and the last five years (after your balance has dropped significantly) have a variable rate.
    • Cons: CommonBond only offers five loan terms: five, seven, 10, 15, or 20 years. While this might be more than enough for some borrowers, you may need additional options to find the loan that works for you.
    • Variable APR

      1.85% to 6.13%

    • Terms

      5, 7, 10, 15, 20

    • Eligible Degrees

      Undergrad and Graduate

Laurel Road: Good for Cosigners

  • Laurel Road: Good for Cosigners
    • Basics: With many lenders, releasing a cosigner from your debt would require refinancing into yet another loan. Laurel Road, however, offers cosigner release after 36 consecutive on-time payments, as long as your credit score is enough to qualify you on your own.
    • Pros: Laurel Road has no maximum limit for student loan refinancing, and the minimum is only $5,000.
    • Cons: While there is no maximum, Laurel Road will break your debt into two loans if you refinance more than $300,000. This could have an additional impact on your credit score.
    • Variable APR

      1.99% to 6.65%

    • Terms

      5, 7, 10, 15, 20

    • Eligible Degrees

      Undergrad and Graduate

Student Loan Refinancing Basics

What Is Refinancing?

Refinancing means you simply take out a new loan as a replacement for an existing loan or loans. Your new refinance loan will be used to pay off the old account(s), and future monthly payments will be directed toward the new lender until the debt is repaid.

While refinancing can sound a lot like borrowing from Peter to pay Paul, it’s actually a useful financial strategy. The new loan could get you a lower interest rate, lower monthly payment, and more favorable loan terms.

Why You Should Refinance Your Student Loans

When paying for your education with student loans, you are likely to accumulate a number of accounts. Each year you’re in school, you might receive a mix of federal and private student loans. Some parents may even borrow for their children in the form of PLUS or other parent loans.

After leaving school, you may find that repaying and dealing with those loans is far from easy. They can cost you interest over time, and juggling different payment amounts and due dates can be confusing.
With a student loan refinance, or “refi,” your new loan is the only payment you need to worry about each month. You’ll have one due date, one payment, and one balance to track over time.

With refinancing, you can find the loan that works best for you, versus simply accepting whatever terms you were given back when you were in school. This means you can use the refi loan to:

  • Lower your overall interest rate, saving you thousands in the end.
  • Shorten your loan term, getting you out of debt faster.
  • Adjust your monthly payment to better fit your budget.
  • If you took out your student loans along with a parent or other cosigner, you can also use a refinance loan to remove them from their obligation to the debt. Even if your cosigner never planned to actually contribute toward your student loans, removing them as a cosigner can have a significant effect on their credit and peace of mind.

Downsides to Refinancing Your Student Loans

Before refinancing, consider the negatives to refinancing your student loan debt.

Federal student loans offer safety nets such as loan forbearance and deferment. If you are struggling to make your full monthly payments at any time, you could call on these options to avoid default.

You will also lose access to the income-driven repayment (IDR) and student loan forgiveness options that come along with federal student loans.

When you refinance into a private student refinance loan, however, you often lose these options. Some lenders offer forbearance or deferment, but many do not have formal policies, so it’s tough to know whether you’d be approved.

While these options might not matter to some borrowers, you may find that having them available is important enough to warrant not refinancing your federal student loan debt.

How to Refinance Student Loans

Refinancing your student loan debt is a fairly simple process. Plus, any effort you put into your refi could help you save money, get out of debt faster, and create a repayment plan for your budget.

Here is a look at the steps you’ll take to refinance your student loans.

1. Shop Around for Rates

For almost every borrower, the most important factor in refinancing is the interest rate. This rate will impact your monthly payment and dictate how much interest you’ll pay over the life of your loan.

On a $20,000, 10-year student loan refinance, for example, the difference between a 5.5% interest rate and a 4.5% rate is $1,173.09. Those are significant savings for only one percentage point difference.

Shop around with several lenders to find the lowest interest rate available for your loan. You can also use aggregator platforms, such as Credible, to compare multiple lenders at once.

If you’re still working with your original student loan lenders, you’ll likely save more than one percentage point in interest. My private student loans had interest rates ranging from 9% to 15.4% when I began making payments.

By refinancing, I locked in a rate of 4.3% for all of my debt. This wound up saving me nearly $40,000 over the life of my repayment, as well as getting me out of debt much sooner.

2. Compare Terms With Your Budget and Timeline

How much can you allocate to student loan payments each month? When do you want to be out of debt for good?

These questions can help you determine which loan terms are right for you. Refinance lenders will let you see exactly how much you’ll pay in interest, when you’ll make that final payment, and how much your monthly contribution will be long before you finalize your loan. This allows you to tailor your refi to your needs.

If your needs change down the line, you can consider refinancing again to adjust your terms, interest rate, or monthly payment.

3. Get Prequalified

Applying for a new refinance loan almost always involves a hard inquiry on your credit report. This can drop your credit score slightly and will also stay on your report for a full two years, so it’s important to limit them where you can.

Most lenders allow you to get prequalified, for your refinance loan before you formally apply. Pre-qualifications are essentially tentative loan offers that don’t show up on your credit report.

Lenders will use soft credit inquiries to determine whether they’re likely to offer you a loan and at what rate. You can use this information to compare lenders and cross off the ones that aren’t ideal for you.

This process is not foolproof; interest rates aren’t guaranteed, and you can sometimes be denied for the loan when you formally apply, due to things like your income and debt. However, it does give you an idea of the rates, loan terms, and lenders available to you.

4. Choose Which Loans to Refinance

You can refinance as much or as little of your student loan debt as you would like. This gives you the flexibility to customize your debt repayment with terms that best match your needs.

For instance, you may want to refinance your private student loans to snag a lower interest rate but keep the benefits offered by your federal student loans. In that case, you would simply refinance the private debt and continue paying the federal loan debt as usual.

You may also have some loans that offer interest rates a refi loan can’t beat. If this is the case, you can refinance the higher-interest debt into one loan, but leave the lower-rate debt alone.

In my case, my parents offered to pay off my Parent PLUS loans after college, and I was left responsible for the remaining federal and private loans. I refinanced my debt but left out the loans they offered to repay, and saved myself a ton of money.

5. Apply for a Refinance Loan

Each lender has its own requirements and loan application process. Typically, though, applying will look something like this:

  • Shop around for rates by getting prequalified.
  • Find the loan that best meets your needs.
  • Apply for that loan through the lender.
  • Provide required documentation, including pay stubs or W-2s, existing loan payoff quotes or statements, proof of graduation, and tax returns.
  • Get approved for your new loan.
  • Wait for your new lender to pay off your refinanced loans.
  • Begin making payments to your new lender as scheduled.

You may need to provide additional documentation, such as bank statements or a copy of your ID, and the underwriting process could last anywhere from 15 minutes to multiple weeks.

Typically, to qualify for a refinance loan, you’ll need:

  • A healthy credit score. The exact definition of this varies among lenders; some won’t approve borrowers with less than a 700 credit score while others may accept 650 and above.
  • Proof of stable income. Some lenders may have limits regarding your debt-to-income ratio.
  • A cosigner, if you have trouble qualifying for a loan on your own — either due to your income, credit score, debt ratio, or work history. Or, simply wait six months or so, and try applying again once your situation has improved.

Can You Refinance Student Loan Debt More Than Once?

You can refinance as many times as you’d like.

Keep a few things in mind when deciding whether a second, third, or 15th refi is a good idea:

Refinancing will impact your credit score in two ways: by lowering your average age of accounts and by adding a hard inquiry to your credit report. Both of these will have a short-term effect.

Only refinance if it’ll save you money. You may refinance once when rates are low, and then be unable to get anything better when you want to refinance again.

If you’re struggling to make monthly payments, a refinance might be the best option — even if that means a slightly higher rate. Rather than default on your debt or even accrue late fees, you could refinance to get the monthly payment you need.

It often pays to shop around when thinking about a refi, especially for subsequent refinances. Use a loan aggregator, to get prequalified quotes from several lenders.

How Much Does It Cost to Refinance?

When taking out any type of loan, you may come across a few fees. One of these, an origination fee, is charged at the beginning of your loan and covers the cost of processing your application and disbursing funds.

Luckily, however, it is incredibly rare for a refinance lender to charge an origination fee. In fact, I can’t think of a single company that charges one, so you shouldn’t go with a lender that does.

Look for These Refi Lender Features

Each student loan lender is a little bit different from the next. Some are known for lending to those with poor credit, while others specialize in the most competitive rates. Some have high-tech platform features, while others are as basic as the come.

Depending on why you’re refinancing and how you plan to pay back your student loan debt, there are a few key things you may want to look for in your search.

Flexible Payment Options

A few lenders will set your monthly payment for you, require auto-pay, and never give you a say in the matter. This isn’t a bad thing, but it might not be right for you.

Instead, you may want to look for a lender that allows more flexible repayment. This could include features like:

  • Adjustable due dates.
  • Automated bi-weekly payments.
  • Customized terms.s Some lenders let you choose terms like 12 years and four months, because it gives you the monthly payment you want.

Forbearance Policies

If you were to lose your job, go through a divorce, or encounter some other financial hardship that makes it difficult to make your full monthly payment, forbearance could keep you from defaulting on your student loans.

You’ll lose out on forbearance options from the U.S. Department of Education if you refinance federal student loans. However, some private lenders also offer formal forbearance policies, which may give you added peace of mind.

Penalty-Free Prepayment

Most student loan refinance lenders allow you to make additional payments toward your principal balance, or entirely pay off your debt ahead of schedule, without penalty. Look for lenders that offer penalty-free prepayment if this is your plan.

Will Refinancing Student Loans Affect Your Credit?

The process of refinancing your student loan debt will impact your credit report — and thus, your credit score — both positively and negatively. However, the negative impact is relatively minor and short-term.

In the beginning, you will see a negative impact due to both your lender’s hard inquiry (when they check your credit) and the reduced age of your accounts. As time goes on and you responsibly manage your debt, though, the impact should be positive.

Find the Right Repayment Options for You

These are a few of our favorite refinance lenders, but shop around before making a final decision to ensure the refinance loan you choose is the perfect one for your student loan debt.

When refinancing your student loan debt, you have so many options : endless lenders, a slew of loan repayment terms, and so many features that can make your educational debt payoff easier and cheaper.

Finding the right lender depends on what is most important to you. For some borrowers, the priority is getting the lowest interest rate possible to save the most money over the course of the repayment. For others, it’s finding a manageable monthly payment. And for others still, finding a lender that offers features like flexible due dates, penalty-free prepayment, and cosigner release is imperative.

Regardless of your priorities, you can probably find a lender with what you need. Refinancing your student loans could trim time and interest off of your balance, and simplify your repayment in the process.

Stephanie Colestock

Stephanie Colestock is a personal finance expert and writer who enjoys teaching people how to be financially independent and confident about their money choices, regardless of obstacles in their path (such as the crippling student loan debt she once held). Stephanie graduated from Baylor University, and is currently working toward her CFP certification. Her work can be seen on sites such as Forbes, Dough Roller, and Johnny Jet, among many others.

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