How to Refinance Student Loans in 4 Simple Steps

By Elaine Rubin

Updated on October 27, 2020

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So you want to combine your student loans to make repayment a little easier. You have two options, either consolidate or refinance your loans. You may not be sure which choice is best for you, so let’s go over how the two options differ.

Student Loan Consolidation vs Refinancing

Student loan consolidation allows you to combine (usually) two or more of your federal student loans into a new federal loan, known as a Direct Consolidation Loan. A Direct Consolidation loan will allow you to extend your repayment term (up to 30 years), but your overall interest rate will not be reduced. The new loan’s interest rate is determined by calculating the weighted average of the loans you are consolidating (rounded up to the nearest one-eighth of a percent). Your lender will remain the U.S. Department of Education.

In contrast, student loan refinancing allows you to combine private and/or federal student loans into a new loan, or just refinance one student loan, depending on your needs.

Refinancing may reduce your interest rate, monthly payment, or allow you to remove a cosigner. You have the option to choose your lender based on the loan which has the most beneficial terms for you.

Another important distinction between consolidation and refinancing pertains to Parent PLUS Loans. If you are parent with a Direct Parent PLUS loan, you may be able to consolidate that loan with other federal loans in your name, but if you want to transfer responsibility of the loan to your child, you’ll need to refinance with a private lender. This will require your child to apply for the refinance loan in his/her name—and on the merits of their own creditworthiness—with a lender such as PenFed Credit Union, CommonBond or Sofi.

4 Steps to Student Loan Refinance and Federal Student Loan Consolidation

Now that you’ve decided which option is best for you, it’s time to get started.

It takes a little bit of effort but the relief you feel may be well worth it. Keep it simple by following these four easy steps detailed below.

STEP 1: Locate My Student Loans

For each student loan you have, you'll need to have this information handy:

• loan type (e.g., Direct Subsidized, Direct Unsubsidized, PLUS, Perkins, private)
• loan balance
• loan payoff amounts
• loan statement from your lender or servicer
• name, address, and phone number of lender or servicer
• proof of citizenship
• driver’s license or passport number
• proof of income

You may need to contact your loan servicer(s) to find this information. Here’s how to find your loan servicers.

How to locate federal student loans

Log into your My Federal Student Aid account with the U.S. Department of Education. Or call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).

How to locate private student loans

Request your free annual credit report (yes, it's really free, and it's legit) at AnnualCreditReport.com. The balances and lender information for your private student loans should be listed in your report.

STEP 2: Decide which loans you want to refinance or consolidate

Should You Refinance Federal Student Loans?

You have an option to consolidate federal loans with a Direct Consolidation Loan. This can simplify your life by changing your loan term and combining multiple separate payments into one.

You also have the option to refinance your federal student loans with a private lender. A private refinance lender may offer you a competitive interest rate based on current market trends and the strength of your credit. You will still have the opportunity to change your loan term and combine several loans into one. While there may be reasons why want to keep your loans federal (like qualifying for federal student loan forgiveness), if your goal is to reduce your interest rate, you will want to look into a private student loan refinance. If you don’t want to lose the benefits of the federal student loan program, you should not refinance your federal student loans.

Parent PLUS Loan Refinance or Consolidation

Your options don’t change just because you have a federal parent PLUS loan—you have the option to include these loans in a federal Direct Consolidation or refinance the loan with a private lender. But there are things you should keep in mind, especially if you want to repay with an income-driven repayment plan or qualify for Public Service Loan Forgiveness (PSLF).

Federal PLUS loans made to a parents are not eligible to be repaid under most income-driven repayment plans—and this also applies to Direct Consolidation Loans which include a PLUS loan made to a parent. There is one exception. You can repay a parent PLUS loan if it is consolidated and that Direct Consolidation Loan is then repaid under the income-contingent repayment plan. You may need to incorporate some strategy into your repayment. You can always pick and choose which loans you want to include (or not include) in a Direct Consolidation or private student loan refinance.

If you want your Parent PLUS Loans transferred from your name to your child’s name, your child will need to apply to refinance the PLUS Loan with a private lender in their own name.

Can I Consolidate Student Loans With My Spouse?

The federal student loan program will not allow you to consolidate your loans with your spouse. However, there are some private student loan lenders which will allow you to refinance your student loan debt with your spouse. It’s always important to remember that once you combine this debt together, the loan becomes a loan with co-borrowers, meaning you will both have a legal responsibility to repay the loan debt.

Federal Joint Spousal Consolidation Loans and Student Loan Refinance

Can You Refinance Private Student Loans?

Absolutely. You can refinance one or more loans for a potentially lower interest rate, to extend your repayment term, or to change lenders. Some people even use refinancing as a means of removing a cosigner from their loans. Private student loans cannot be included in a Direct Consolidation Loan.

When it comes to private student loan refinance, the process is similar to refinancing a car loan. Unfortunately, you can’t just call your lender and ask them to adjust the terms of your loan, you will need to apply and qualify for a new loan. If you have a short credit or employment history, you may need a cosigner for the loan. The cosigner can be anyone like a spouse, parent, or trusted friend or family member.

View My Student Loan Refinancing Options

Can You Refinance More than Once?

If you’ve already been through the refinance process, there’s nothing that will prohibit you from refinancing again. Some common reasons you may want to refinance again:

• You borrowed more loans
• You’ve noticed a drop in interest rates
• You are in a better financial position and you want to improve your loan terms
• You want to change your repayment term (make it longer or shorter)

You will want to check if there are any prepayment penalties or fees with your existing refinance loan (because refinancing again will pay off your current loan). If the answer is yes, you may want to do a cost-benefit analysis to make sure what you pay in penalties doesn’t negate the savings you expect to see from your new refi loan.

Another good idea is to estimate what your new monthly payment will be using our Student Loan Refinancing and Consolidation Calculator. This can help you test different rates and terms as you weigh your options.

Step 3: Apply for Private Student Loan Refinance or Federal Student Loan Consolidation

How to Refinance Student Loans

1. Compare student loan refinance lenders.

   You have the ability to choose a student loan refinance lender with the most beneficial terms for you. What do you want to achieve by refinancing?

   • Lower your interest rate
   • Lower your monthly payment amount
   • Remove a cosigner
   • Reduce the number of loans and servicers you have
   • For Parent PLUS borrowers, have your child assume your loan(s) and refinance into their name. Lenders like PenFed Credit Union, CommonBond and Sofi offer this solution.

   In general, lenders will require you to have a minimum credit score of around 660 or 680, two years of employment history, and an appropriate debt-to-income ratio, among other eligibility criteria specific to each lender. If you have a lower credit score or your income is lower than desired, you do have the option to apply with a creditworthy cosigner to help you qualify for the loan. A cosigner can be anyone, but for many borrowers, a spouse is a logical choice.

2. Choose a lender and loan terms.

   After comparing lenders, it’s time to submit your application. Most lenders offer a pre-approval process where you can learn which rate you may qualify for.

   Depending on the options available, your lender may allow you to:

   • Choose your repayment term (usually five-years or longer)
     • Depending on the type of degree you earned, you may be able to extend your repayment term for up to 20 years
   • Choose a fixed or variable interest rate
3. Complete your student loan refinance application

   Your lender will now ask you to complete their application process, including submitting verification documents for the underlying loans you are refinancing (essentially, you are asking your new lender to pay off your current loans, and issue you a new loan). If you still need to gather your loan documents, refer to Step 1.

   You lender will be in contact with you to let you know if they require any clarification or additional documentation. But make sure to submit the requested information as soon as possible to avoid delays.

   Make sure you read all the documentation your lender provides you carefully—these items detail the promise you’re making to repay.

   Then sign your application. Many lenders have an online eSignature process, but you may need to mail signed paper applications to the lender.

How to Consolidate Student Loans

This process is managed by the U.S. Department of Education. Remember, you can only consolidate federal student loans into a Direct Consolidation Loan.

1. Complete your Federal Direct Consolidation Loan application

   You will need to go to StudentAid.gov to complete your loan application. Once you log into the site (with your FSA ID), it will ask you to choose which loans you want to include in the new consolidation loan.

   You will notice that you are allowed to “choose” private student loans, however these will not be included in the consolidation loan. The loan balances will only be used to determine your repayment term (up to 30 years).

2. Make sure you read all the documentation presented to you carefully—these items detail the promise you’re making to repay.


3. Then sign your application. Your new loan servicer will be your point of contact from this point on.

STEP 4: Keep making your loan payments!

Once you submit your application, your new lender or servicer will process the refinance or consolidation loan, and that takes some time. You need to continue sending loan payments to your previous lenders until you receive confirmation that your consolidation or refinancing process is complete. Don’t worry, if you make any payments that occur after the new refinance or consolidation loan is complete, you will be refunded.

You should be on the lookout for final disclosures from your lender which contain the new loan terms you are ultimately agreeing to. This is something that needs to be signed and it signals the end of the road for this entire process.

And then – congratulations!

Best Student Loan Refinance Lenders

Lender

Recommendation

Best for Student Loan Refinancing

Repayment Terms

5, 10, or 15 years²

Interest Rates

Variable as low as: 5.99% APR¹

Fixed as low as: 5.99% APR¹

Apply Now More Info

×

College Ave Student Loans

• Variable rate range: 5.99% – 11.99% APR¹
• Fixed rate range: 5.99% – 11.99% APR¹
• No application or prepayment fees
• Apply in 3 minutes or less for instant credit decision

College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

¹The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.

²This informational repayment example uses typical loan terms for a refi borrower who selects the Full Principal & Interest Repayment Option with a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

³$5,000 is the minimum requirement to refinance. The maximum loan amount is $250,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

Information advertised valid as of 03/01/2023. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

Lender

Recommendation

Best for Student Loan Refinancing

Repayment Terms

5 - 20 years²

Interest Rates

Variable as low as: 5.28% APR¹

Fixed as low as: 5.08% APR¹

Apply Now More Info

×

ELFI Student Loan Refinance

• Our customers have reported that they are saving an average of $278 every month or will see an average of $20,774 in total savings after refinancing their student loans with Education Loan Finance.¹
• Variable and fixed rates starting from 5.28% APR and 5.08% APR²
• Prequalify in as little as two minutes
• Award winning customer service from your dedicated Student Loan Advisor who is matched to you from the moment you sign up

¹Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 01/03/23 and 03/01/23. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.

²Rates accurate as of 08/25/23. The interest rate and monthly payment for variable rate loans may increase after closing. Your actual interest rate may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10 year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. To qualify for refinancing or student loan consolidation through Education Loan Finance, you must have at least $10,000 in qualified student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary Education Loan Finance institution. Education Loan Finance Parent Loans are limited to a maximum of the 10-year term.

Lender

Recommendation

Best for Student Loan Refinancing

Repayment Terms

5, 7, 10, 15, 20 years

Interest Rates

Variable as low as: 5.09% APR¹

Fixed as low as: 4.49% APR¹

Apply Now More Info

×

SoFi Student Loans

• Rates as low as 5.09% variable and 4.49% fixed¹
• No fees or prepayment penalties
• Unemployment protection

¹Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

Lender

Recommendation

Best for Student Loan Refinancing

Repayment Terms

5, 10, or 15, 20 years

Interest Rates

Variable as low as: 4.74% APR¹

Fixed as low as: 4.96% APR¹

Apply Now More Info

×

Splash Financial Refinance Loan

• Rates as low as 4.74%¹ Variable APR and 4.96%¹ Fixed APR
• No pre-payment penalties, origination, or application fees
• See rates in 3 minutes without affecting your credit score²

¹The rates displayed may include a 0.25% autopay discount.

²To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Lender

Recommendation

Best for Student Loan Refinancing

Repayment Terms

5, 10, 15, or 20 years

Interest Rates

Variable as low as: 5.49% APR (with Autopay)^*

Fixed as low as: 4.96% APR (with Autopay)^*

Apply Now More Info

×

Earnest Student Loan Refinancing

• Variable rates starting at 5.49% APR (including 0.25% Auto Pay discount)^*
• Fixed rates starting at 4.96% APR (including 0.25% Auto Pay discount)^*
• Choose your own monthly payment
• No fees of any kind and exceptional customer service for the life of your loan
• Check your rate in under 2 minutes

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.21% APR to 10.04% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.74% APR to 9.99% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

^*Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. Not all borrowers will qualify for our lowest rates, and your rate will be based on creditworthiness at time of application.

The information provided on this page is updated as of 08/10/2023. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.

Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.

 

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