October 23, 2017

Best Student Loan Refinance: November 2017

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Refinancing your student loans is one of the best money moves you can make. But where should you start? Here are our top recommended student loan refinancing providers.

Graduating college with student loans is common. According to the New York Federal Reserve, 44.2 million graduates hold student loans. The average borrower has nearly $38,000 in student debt. On the Fed's standard repayment plan, this means around $382 per month for the next 10 years.

What if that's not affordable? Consider refinancing.

The great thing about refinancing your student loans is the thousands of dollars you could save. Finding the right lender can net you a lower interest rate. This means lower total payments overall. It also means a higher percentage of your payments tackling the principal.

Of course, this is dependent on your credit and employment. This is assuming you are in better financial shape today than the day you graduated. If so, you may be eligible to refinance.

What's not to love?

How to Find the Best Student Loan Refinance Option

There are many student loan refinance options. The best student loan refinances often have:

  1. Lower interest rate than what you pay now.

  2. Fixed interest rate so you don't have to worry about future interest rate adjustments.

  3. An affordable term that gets you out of debt faster.

What to Look for in a Student Refinance Loan

Before we divulge the top student refinance loan companies, learn what you should be on the lookout for:

  • Low interest rate: The whole point in refinancing is to save money. You want the lowest interest rate. Your personal rate varies based on your credit and income. Check the rates from several lenders within 14 days. This way it will only count as one credit inquiry on your credit report.

  • Type of interest rate: Lenders offer fixed and variable interest rates. A fixed rate can offer stability. But if you know you can pay your debt off quickly (in the next few years), a variable rate may be beneficial. They are often lower than the fixed rate option. This can save you more money in the end. If you aren't sure how long you'll need to pay off your debt, stick with the fixed rate.

  • Low fees: You don't have to pay an origination fee on a student loan refinance. Sometimes it opens the door to a lower rate, though. You'll have to determine where you see the greatest savings. Does the lower interest rate make up for the fee? Look at the big picture to make sure you get the most from the refinance.

Best Student Loan Refinance Companies

Given the above characteristics, these are our choices for the top student loan refinance companies.

Best Student Loan Refinance With No Origination Fee: SoFi

SoFi is not a traditional bank. Its funds come from alumni and various investors in the company. SoFi focuses on the big picture - not just your credit score. A few of the reasons we love SoFi for student loan refinancing include:

  • No origination fee (many lenders charge an origination fee to cover the cost of processing the application and underwriting the loan)

  • Variety of options, including fixed and variable rate loans

  • Offers rate discounts for automatic payments (0.25% savings on the rate)

  • Offers a variety of terms to help make the loan affordable (5-, 7-, 10-, 15-, and 20-year terms)

  • Will refinance private and federal student loans

  • Will suspend your payments temporarily if you lose your job

  • Earn money if you refer friends ($100 for every referral)

Use caution when refinancing federal loans. You could lose any loan forgiveness options you may have earned. Once you refinance into a private loan, the federal benefits disappear.

Best Student Loan Refinance for Low Balance: Earnest

Earnest uses unique aspects about your life to qualify you for a student loan refinance. Your savings pattern, job history, and investments determine the rate. A few of the reasons we love Earnest include:

  • Minimum loan amount of just $5,000, which is half of the $10,000 many other banks require

  • Choose the payment you can afford first, then Earnest tailors your rate and term to make that payment work

  • You can switch your fixed interest rate to variable or vice versa every six months at no charge

  • Earnest offers forbearance if you become unemployed due to circumstances outside of your control

  • You can defer your loans if you decide to go back to school (up to 3 years)

  • You can choose your own payment options (bi-weekly, extra payments, etc.)

Best Student Loan Refinances Nationwide: Laurel Road

Laurel Road is a division of Darien Rowayton Bank, a large player in the student loan field. It's an online lending entity offering student loans in all 50 states. We love Laurel Road for the following reasons:

  • Offers student loan refinancing in all 50 states

  • No origination fees

  • No prepayment penalties, putting you in control of when you pay your loan off

  • Up to 1 year of forbearance if you experience economic hardship

  • Offers a 0.25% discounted rate if you sign up for autopay

  • Allows you to choose your term options (5-, 7-, 10-, 15-, and 20-year)

Best Refinance with an Easy Application: CommonBond

CommonBond provides clients with a streamlined application and transparent process. They provide a simple system and education to keep your student loans in check. A few features we love about CommonBond include:

  • Online application with access to the Care Team via phone, email, or live chat

  • No origination fees

  • CommonBridge program provides support during economic hardship, including postponing payments

  • Referral bonus of $200 for every friend you refer

  • No prepayment penalty

  • Offers three rate options: fixed, variable, and hybrid (fixed rate for 5 years, then variable rate for 5 years)

Why Refinance Your Student Loans?

The purpose of refinancing student loans is often to save money. It's not the only reason, though. Many borrowers do so to make managing multiple student loans easier. Bringing several loans together into one loan can make it easier to manage your payments.

If you can obtain a lower interest rate while you're at it, you'll benefit even more. Most student refinance loans don't have a prepayment penalty, either. You can get ahead by paying your loans off early. This means less interest in the end, giving you even more financial freedom.

Is a Student Loan Refinance Right for You?

Before you refinance, ask yourself the following questions:

  • Have you exhausted all options for federal loan repayment options?
    Federal repayment plans, loan consolidation, and forbearance may be options for you. Determine what you can afford. Look at your financial goals. Then decide if refinancing is the right choice. For example, if you are eligible for loan forgiveness, why pay more than necessary?

  • Will a refinance shorten your term?
    A lower interest rate doesn't do you any good if you take a longer term. A lower payment may sound appealing. However, if you stretch the payments out over 20 years rather than 10, you'll pay much more in the end. The longer you borrow the money, the longer you pay interest. This could mean a difference of thousands of dollars.

  • Will a refinance make your payments more affordable?

    Counterintuitively, a shorter term could make your payments unaffordable. It doesn't make sense to refinance if you can't afford the payments. A default is much worse than stretching your payments out for a longer term.

There are Other Options Too

Refinancing your student loans isn't the only option. Before you jump in and refinance, make sure you exhaust your other options:

  • Federal loan forgiveness: Certain programs forgive a portion of your outstanding student loans. If you work in public service, as a teacher, or child care provider, inquire about these programs. They usually require you to enroll in an income-based repayment plan. After a specific period, you may receive forgiveness of your loan balances.

  • Income repayment plan: If you have federal loans, you may be eligible for an income repayment plan. The DOE tailors your payments to your current income. The payments change as your income changes. This goes on for 20 years. After that point, most programs forgive the remaining balance.

  • Leave your loan alone: You always have the option to stick with the Standard Repayment Plan. You'll pay your loan off in 10 years at today's competitive rate. This assumes you can afford the standard payment.

Common Questions

  • What's the difference between refinancing and consolidating?
    Refinancing student loans gives you the option to find a better rate and term. Consolidating your federal student loans means lumping multiple loans into one. You pay a weighted average of all interest rates on your loans. Consolidating doesn't usually save you money. It simply reorganizes your student debts.

  • What credit score do you need to get approved?
    It goes without saying, the higher your score the better. Each lender has their own requirements. Basically, they don't want late payments, collections, or any type of default on your credit report. The lenders we chose don't focus solely on your credit score. They look at your employment history, savings patterns, and potential for the future too.

  • How do you prove you can afford the refinance?The lender will ask you for appropriate documents. Be prepared to show your last few paystubs and tax returns. Lenders will look for consistent income and employment over the last year or so. They don't base your approval solely on your income. But it does play a big role.

Bottom Line

Student loan refinancing is a great way to take control of your financial future. Ignoring your options could leave you wasting money on interest for many years. Review our favorite student loan refinance lenders and see if you have the option to save money too.

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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