Updated July 8, 2018

Best Student Loan Refinance: September 2018

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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. 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 the average borrower pays around $382 per month for the next 10 years.

What if that's not affordable? Consider refinancing.

Save Money

The great thing about refinancing your student loans is the thousands of dollars you could save on interest.

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, which means you pay less interest on the loan.

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?

In this article, you'll learn:

Is it worth it to refinance student loans? Refinancing student loans can be a smart idea if you have good credit, steady income, and are not applying for loan forgiveness or federal income-driven plans. Refinancing can give you a lower interest rate and/or more affordable term options, which could save you thousands in interest.

How to Find the Best Student Loan Refinance Option

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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.

Do you have federal student loans? If so, consider if other options are better for you instead. You can be eligible for income-driven plans or loan forgiveness. Even consolidation can make your federal loan repayment more manageable.

To learn more, read:

What to Look for in a Student Refinance Loan

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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, and you want it to be lower than what you pay now. 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, and 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. Read more on how to improve your credit score here.

  • Type of interest rate: Lenders offer fixed and variable interest rates. A fixed rate means you know exactly how much you will owe every month for the whole term of the loan. But if you know you can pay your debt off quickly (in the next few years), a variable rate may be beneficial. Their rates are often lower than the fixed rate option. This can save you more money in the end. However, the rate may increase over time, and your monthly payment amounts would increase. If you aren't sure how long you'll need to pay off your debt, stick with the fixed rate.

  • Fees: You don't have to pay an origination fee on a student loan refinance. Sometimes choosing a refinance option with an origination fee allows 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.

    Prepayment Penalties: In the future, you might decide to pay off your student loans early if you have the money. That's great! But you need to make sure your student loan company won't charge you a prepayment penalty for doing so. Most student loan companies do not do this - and none of the ones on our list do - but you should steer clear of those who do, since you might want to pay off your loans early.

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 Student Loans
    Read ReviewLearn More

    SoFi Student Loans

    Pros:
    • Keep federal grace period
    • Refinance Parent Plus loans
    Cons:
    • Must have great credit score

    Our Review: (4.6) Is student loan refinancing a good idea? Is SoFi legit? Is NOW a good time to refinance? Read on. The answers may surprise you... Read full review

    Refinance Student Loans

SoFi is not a traditional bank. Its funds come from alumni and various investors in the company. SoFi looks at details about you beyond just your credit score, such as your career and education. 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

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

  • 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 Student Loans
    Read Review

    Earnest Student Loans

    Pros:
    • Option to skip one payment every 12 months after 6 months of on-time payments
    • Option to switch between variable and fixed rates
    • Focus on other aspects and not just your credit score
    Cons:
    • Require more documentation than other companies
    • Limitations on where you live
    • You must have little to no credit card debt

    Our Review: (4.6) Student lender Earnest offers a brilliant way for graduates to save money on student loan debt. Read on to learn why Earnest is legit... Read full review

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 can be helpful because it means putting your loan payments 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? Many times, the interest will continue to accrue while you're not making payments, which increases the amount you will owe in the future.

Best Student Loan Refinances Nationwide: Laurel Road

    Laurel Road Student Loans
    Read Review

    Laurel Road Student Loans

    Pros:
    • Low repayment options for medical residency
    • Keep federal grace period
    • Forgiveness is available due to disability
    Cons:
    • No mobile app
    • Forbearance options are on a case-by-case basis

    Our Review: (4.6) If your student loan interest is too high, consider refinancing with Laurel Road. But wait. Read this review to learn how it works and what to watch out for... Read full review

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

  • 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 student loan companies, setting up autopay can mean between a 0.25% to 0.50% reduced rate.

Best Refinance with an Easy Application: CommonBond

    CommonBond Student Loans
    Read Review

    CommonBond Student Loans

    Pros:
    • Hybrid program
    • Quick process - once approved funds will pay your loans within 2 weeks
    Cons:
    • Your state eligibility may restrict options
    • Long process to approval

    Our Review: (4.5) You could try waving a magic wand to banish your student loans for good, but getting a better deal on your interest rate is a more realistic way of getting them to go away faster... Read full review

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

  • 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 credit pull to provide you with a preliminary rate. Once you decide and apply they will need to do a hard credit 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 Student Loans
    Read Review

    LendKey Student Loans

    Pros:
    • Offer interest rate reduction beyond auto-debit reduction
    • Excellent customer service
    • Return policy within 30 days you can return your loan
    Cons:
    • Cumbersome application process
    • Lack of transparency regarding loan documents

    Our Review: (4.4) Saving thousands of dollars on your student loans sounds perfect, and that's just what LendKey promises. Is it the real deal, though?... Read full review

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.

  • 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 creditworthy cosigner is a parent, family member or close friend that has a positive credit history and is willing to help you with your payments if you become unable to pay. Having a cosigner helps because a lender is looking at two financial scenarios instead of one alone, allowing for better rates.

Other Options for Student Loan Refinance

  • iHelp provides clients with transparency and personal help. Soon they will issue Parent Plus loans for students' parents, too. They 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, personalized service, and fixed and variable rates.

  • Elfi offers a great incentive program: For every friend you refer, you get $400 and your friend gets $100. Also, if you sign up and receive a loan within one 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. Make sure you look at a lot of different sources in a 14-day period. This way, you can shop around to find the best rates and the highest savings - and you can avoid more than one hard inquiry to your credit report.

Why Refinance Your Student Loans?

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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 paying less interest in the end, saving you money.

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.

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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 refinance at all?

  • 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. Pick the shortest term for which you can easily afford the payments, which will provide you the biggest savings on interest over the life of the loan.

  • 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 the remainder of your loan balances - meaning you don't owe any more money.

  • 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 typically 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 rate. If the rate you're paying now is the lowest available in the market, there is no need to refinance. This assumes you can afford the standard payment each month, though.

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 state's judicial site for more information. There may be incentives to using a refinance option within your own state, so consider these options too.

Common Questions

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  • 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 you can only consolidate federal student loans as they are part of 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, such as federal loan forgiveness.

  • 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, though it is certainly a factor. 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 be prepared to answer questions such as: What loans do you have, what are the interest rates, and are you able to afford a monthly payment? The second step is to visit one or more of the websites suggested above and fill in your information. Then, you will receive offers for loan refinancing. Make sure you read and understand the rates and terms of your offer(s). Finally, accept the terms of your chosen loan refinance offer, 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 author's alone. Please support CreditDonkey on our mission to help you make savvy 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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