Updated December 8, 2017

Best Student Loan Refinance: January 2018

Read more about Student Loans
This article contains references to products from our partners. We may receive compensation if you apply or shop through links in our content. You help support CreditDonkey by reading our website and using our links. (read more)

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. Over 44 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

© CreditDonkey

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

© CreditDonkey

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.

    Soft Credit Pull versus Hard Credit Pull: There are two different types of credit pulls each will affect your credit differently. A soft credit pull will not affect your credit score. A hard credit pull will drop your credit score by at least a couple of points if not more.

  • 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. Also, keep in mind the annual percentage rate (APR) this is what you are charged for borrowing on a yearly basis.

  • 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 will 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.)

Tip: A deferment on your loans is great. Being able to put your loans on hold for a specific period. Make sure you know the terms though - will you be required to make interest-only payments during this time? Will the interest continue to accrue during those three years?

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)

Tip: Autopay is a great option for not only your refinanced loans, but all bills. Autopay will prevent you from missing a payment and incurring a late fee. For most loan companies this could mean between a 0.25% to 0.50% discounted rate.

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)

Note: Don't forget about the two different credit pulls. Refinance companies will usually do a soft pull to provide you with a preliminary rate. Once you decide and apply they will need to do a hard pull to give you your actual rate. The hard pull will eventually show up on your credit report. As a reminder they will fall off of your credit report after two years and will not affect your FICO score after 12 months.

Best Refinance With A Community Appeal: LendKey

LendKey provides clients with a quick and easy application. They connect you to hundreds of credit unions and local banks to get you the best rates. A few features we love about LendKey include:

  • No origination fees.

  • Offers interest-only payments on loans for up to four years.

  • Cosigner release options after 12 months.

  • No prepayment penalties on your loans.

  • Referral bonuses; $50 for every friend that gets approved and $200 for every friend that takes a loan with LendKey.

  • Multiple terms and rates available such as; 5, 7, 10, 15, and 20 with low variable and fixed interest rates.

Tip: Having a cosigner apply with you for refinancing can increase your odds of getting a better interest rate. A credit worthy cosigner is a parent, family member or friend that has a positive credit history. It helps in that now a lender is looking at two financial scenarios instead of one alone and will provide better rates.

Other Options for Student Loan Refinance

  • iHelp provides clients with transparency, personal help and soon they will help with Parent Plus loans. The offer three repayment options while you're in school; deferment, interest-only payments and standard interest/principal payments.

  • Purefy is great in that if you're married you can combine loans with your spouse. Purefy also offers discounts on loans, and fixed and variable rates.

  • Elfi offers a great incentive programs for every friend you refer you get $400 and you friend will get $100. Also, if you sign-up and complete the process within a month from your original inquiry you will receive $100.

Tip: Many banks offer student loan refinance options. Citizens Bank offers borrowers a refinance program and other loan options for school and your future.

Why Refinance Your Student Loans?

© CreditDonkey

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.

Tip: Did you know that the London Interbank Offered Rate (LIBOR) may be tied to your student loans. About half of all interest rates on variable interest rate loans are determined by LIBOR. What is LIBOR? It is the average interest rate that is paid on deposits of U.S. dollars in the London market. Basically, it's banks charging other banks for your loans.

Is a Student Loan Refinance Right for You?

© CreditDonkey

Before you refinance, ask yourself the following questions:

  • Have you considered 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. Keep in mind that many refinance companies offer many repayment terms such as 5, 7, 10, 15, and 20 years. Make sure to apply for the term you will need.

  • 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.

Contact your loan servicer and discuss with them these 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.

What is a loan servicer? A loan servicer is the company that handles tasks related to your student loan, including billing. The loan servicer may help you with repayment plans, consolidation, and other options.

Tip: You may live in a state that offers refinance options:

These are just a few; check your states judicial site for more information. There may be incentives to using a refinance option within your own state.

Common Questions

© CreditDonkey

  • 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. You can refinance both federal and private loans, but can only consolidate federal student loans as it is a federal program. Keep in mind with consolidation you may enter an income driven repayment plan which could have up to a 25-year repayment period. If you decide to refinance you will lose out on any federal loan benefits that you may have accrued.

  • 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.

  • How do you qualify to refinance? If you decide to refinance your student loans there are some steps that you must take to qualify. The first step is to answer these questions, what loans do you have, what are the interest rates, and are you able to afford a monthly payment? The second step visit one of the websites suggested above and fill in your information. Finally accept the terms of the refinance and get on your way to lower student loan interest rates.

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.

More from CreditDonkey:


How Do Student Loans Work


How to Lower Student Loan Payments


How to Get Rid of Student Loans

More Articles in Reviews

Student Loans

Average Student Loan Debt

On average, college graduates leave college with over $37,000 in student loan debt. Some leave with as much as $121,000 in debt. Many graduates remain in debt until they are well into their 40s.

Leave a comment about Best Student Loan Refinance?


December
25
2017

Citi ThankYou Points

Learn what is ThankYou Points and how much a point is worth. Read this review to find the best ways to earn points fast and how to redeem for best value (including the top Citi transfer partners).
More Articles in Reviews






About CreditDonkey®
CreditDonkey is a student loan comparison website. We publish data-driven analysis to help you save money & make savvy financial decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

†Advertiser Disclosure: Many of the card offers that appear on this site are from companies from which CreditDonkey receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditDonkey does not include all companies or all offers that may be available in the marketplace.

*See the card issuer's online application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However, all information is presented without warranty. When you click on the "Apply Now" button you can review the terms and conditions on the card issuer's website.

CreditDonkey does not know your individual circumstances and provides information for general educational purposes only. CreditDonkey is not a substitute for, and should not be used as, professional legal, credit or financial advice. You should consult your own professional advisors for such advice.