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College Students and Recent Grads

Guide to Filing the FAFSA

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

college student loans bills graduate

Over the past decade, college tuition rates rose an average of 5% per year. The average bachelor’s graduate in 2015 had over $35,000 in student loan debt. To graduate without burdensome debts, students must maximize their aid options. This means understanding the Free Application for Federal Student Aid (FAFSA), and using their knowledge to maximize student aid.

Starting with the 2017-2018 FAFSA, maximizing federal aid is easier than ever. The U.S. Department of Education now allows access to the FAFSA three months earlier (October rather than January). Applicants will also use an earlier year for income and tax information. This means it’s easy to incorporate FAFSA into the college application timeline.

What is the FAFSA?

The FAFSA is the Free Application for Federal Student Aid. It’s a dense form that students must complete to receive federal student aid.

The form ensures that federal student aid goes to students with the greatest need. However, this does not mean that only low-income families should fill out the form. Filling out the FAFSA is the only way to receive access to low-cost federal student loans. The FAFSA also gives families access to some scholarships, grants, and work-study programs. Some schools require a completed FAFSA for a student to apply for merit-based aid.

What do I need to fill out the FAFSA?

Filling out the FAFSA may seem daunting, but proper preparation will help families complete the application with minimal stress.

Here’s a checklist of items you’ll need before filling out the FAFSA.

All Students

  • Social Security number
  • Alien registration number (if you are not a U.S. citizen)
  • Student’s federal income tax returns from the appropriate year
  • Student’s prior year W-2 or other earning statements from the appropriate year
  • Student’s records of untaxed income from the appropriate year
  • Student’s bank statements (checking, savings)
  • Student’s non-retirement investment account statements (after tax brokerage, 529 accounts, Coverdell ESA accounts, CDs, money market accounts)
  • Student’s record of non-taxed income (including income gifts that come from 529 plans owned by grandparents, income gifts to pay tuition, etc.)
  • Student’s records for investment real estate
  • An FSA ID to sign electronically

Dependent Students Only

  • Parent’s federal income tax returns from the appropriate year
  • Parent’s W-2 or other earning statements from the appropriate year
  • Parent’s records of untaxed income from the appropriate year
  • Parent’s banking and checking account statements
  • Parent’s non-retirement investment account statements (after tax brokerage, 529 accounts, Coverdell ESA accounts, CDs, money market accounts)
  • Parent’s records for investment real estate (not personal home)

Most students will be considered dependents. This is true even if a student is self-supporting for a period of time prior to starting college.

To be classified as independent, a student must meet one of these qualifications:

  • Student turns 24 prior to January 1 of FAFSA start year (see chart above)
  • Student is starting postgraduate studies
  • Student is on active military duty (not for training purposes or for state service only)
  • Student is a military veteran
  • Student supports dependent children
  • Student is a legally emancipated minor
  • Parents died after age 13, foster child after age 13, or dependent or ward of the state after age 13
  • Student is homeless or self-supporting and at risk of homelessness after July 1 in the year prior to start year (see chart above)

One of the most important ways to ease the stress is to gather documents from the appropriate time. Use the chart below as a reference guide to understand the appropriate documents.

School attendance windowFAFSA formFAFSA availabilityIncome and tax yearAssets and liabilitiesBorn before this date for independent student statusHomeless or self-supporting and at risk of homelessness after this date for independent status
July 1, 2016-June 30, 20172016-2017January 1, 2016-June 30, 20172015As of filing FAFSAJanuary 1, 1993July 1, 2015
July 1, 2017-June 30, 20182017-2018October 1, 2016-June 30, 20182015As of filing FAFSAJanuary 1, 1994July 1, 2016
July 1, 2018-June 30, 20192018-2019October 1, 2017-June 30, 20192016As of filing FAFSAJanuary 1, 1995July 1, 2017
July 1, 2019-June 30, 20202019-2020October 1, 2018-June 30, 20202017As of filing FAFSAJanuary 1, 1996July 1, 2018

 

When are the FAFSA deadlines?

College students need to fill out the FAFSA every year that they want to receive federal financial aid. A traditional student who spends four years in school can expect to fill out the FAFSA four times through their college career.

Starting with the 2017-2018 FAFSA, the U.S. Department of Education extended the FAFSA deadlines. Previously, the U.S. Department of Education released the FAFSA on the January 1 prior to the attendance window. Applicants could complete the form from January 1 through the end of the attendance window.

 

Now, the U.S. Department of Education releases the FAFSA on October 1 prior to the attendance window. You may complete the FAFSA from the date it is released until the end of the attendance window. You can retroactively receive grants and loans for the school year provided that you complete the FAFSA by the end of the attendance window.

Deadlines for state and institutional aid

State and institutional aid organizations are not as lenient as the U.S. Department of Education. Most states require aid applicants to complete their FAFSA as soon after October 1 as possible. You can check your state-specific deadline on the FAFSA website.

Most states have just one FAFSA deadline, even if you plan to attend school on a delayed schedule. Often states give out aid on a first come, first served basis. Do not delay completing the FAFSA. You can work out changes based on your attendance after you’ve completed the FAFSA.

In general, you want to file the FAFSA as soon as you can to maximize institutional aid. Many universities grant institution-specific aid shortly after accepting students. Submit your FAFSA to all potential schools soon after you apply. Even if a school hasn’t accepted you yet, you should allow them to see your FAFSA responses.

Filling out the FAFSA alone may not be enough to get aid from your state or school. Many states require that you fill out additional forms to receive state-based aid. The most common form is the College Scholarship Service (CSS) profile. The CSS profile considers more data, and it offers students and their families the opportunity to flesh out their financial situation.

The CSS profile and other financial aid applications DO NOT replace the FAFSA. To get any federal student aid, you must fill out the FAFSA. You may also need to fill out additional forms. The Edvisors Network maintains a comprehensive list of state-based scholarships and grants. Students can research the forms that their state requires.

Students who are seeking college-based aid may have to complete institutional applications. These applications may be in addition to the FAFSA or in lieu of it. If aid details aren’t clear from the school’s website, contact the financial aid department to learn more. Many students find that their best chance at institutional aid comes right after applying to the school.

What happens after I fill out the FAFSA?

1. You’ll receive your Student Aid Report via e-mail

Three to five days after you complete the FAFSA, you will receive a Student Aid Report via email. This report is what schools will use to determine your eligibility for federal (and sometimes other) student aid.

 Understanding your Expected Family Contribution’ (EFC)

The most important number on the FAFSA is your Expected Family Contribution (EFC). Your family’s EFC is the amount parents and students are expected to allocate toward educational expenses. This amount can vary from zero dollars to more than the expected cost of college. This number is in the upper right-hand corner of the Student Aid Report.

In general, the lower your EFC, the more federal aid you will receive. Your specific eligibility for federal aid depends on your school’s cost of attendance.

The Student Aid Report also includes a Data Release Number (DRN). You will need this four-digit code to allow your school to change certain information on your FAFSA.

In addition to these two numbers, you will see your responses to questions on the FAFSA. If you find a mistake, you will need to correct it on FAFSA.gov. You can use your FSA ID to log in and submit changes. If your situation changes (such as the number of people in your parents’ household or your dependency status), you will need to update your FAFSA because it will change your EFC.

2. Schools will submit awards packages to you

The U.S. Department of Education will send your Student Aid Report to any schools you have listed on your FAFSA. If you apply for another school after completing the FAFSA, you should log in to FAFSA.gov to submit your Student Aid Report to that school.

Once you’ve been accepted to the school, the school will use the EFC and their cost of attendance to determine your eligibility for federal aid. The school will send you a report that includes your eligibility for federal grants, subsidized and unsubsidized loans, and work-study programs. They may also send you details about other financial awards that you’ve received from the state or the institution.

You may need to contact the financial aid office at a school to see if you’re eligible for any scholarships or grants that they didn’t list. Be proactive in meeting other financial aid deadlines defined by your school’s financial aid office. Completing the CSS profile or institutional applications may allow you to earn more scholarships or grants or better loan rates. Check with schools where you’ve been accepted and your state’s website to learn more.

You can receive awards packages from multiple schools, even if you haven’t enrolled. Compare the awards packages to find the most cost-effective education. The federal aid will remain the same in every package, but the state and institutional aid can have a huge effect on your out-of-pocket costs.

3. You have to accept or decline the financial aid offered to you

Once you choose a school, you will need to decide whether or not to accept the various forms of aid. Most people will accept grants and scholarships since those do not need to be paid off.

You will need to decide if accepting federal work-study or loans is best in your circumstances. You can work closely with a financial aid officer from your school to understand the pros and cons behind these options.

Once you make a decision, you’ll have the option to accept aid (including loans) through an online platform offered by your school.

what-happens-after-i-fill-out-the-fafsa

How is my federal aid package determined?

Federal aid is awarded based on expected family contribution (and to a lesser extent the cost of attendance at your chosen university). A lower expected family contribution means you’ll get more aid, including subsidized loans and possibly a Pell Grant for low-income students.

The expected family contribution accounts for four variables:

  • Student’s income (and spousal income for independent students)
  • Student’s non-retirement assets (and spousal income for independent students)
  • Parent’s income (for dependent students)
  • Parent’s non-retirement assets (for dependent students)

Parents and students can shelter a limited amount of their income and assets from the EFC. The sheltering limits change each year, and they are published within the FAFSA application.

Students are expected to contribute 50% of their income after sheltering. They are expected to contribute 20% of nonsheltered assets to their educational expenses. Students cannot shelter as much income or net worth as parents.

Parents are expected to contribute 22% to 47% of income after sheltering. They are expected to contribute 12% of nonsheltered assets.

Using the EFC and an expected cost of attendance, the U.S. Department of Education appropriates funds. The FAFSA4caster will help you determine your current EFC and an expected aid package based on current costs of attendance. This is a useful tool for students who are more than one year out from starting college.

Full-time students with an EFC less than $5,200 can expect to receive a Pell Grant worth between $600 and $5,185.

Students who demonstrate financial need (those with a cost of attendance greater than their expected family contribution) will be eligible for either direct subsidized or direct unsubsidized loans. Both loans for undergraduate students have an interest rate of 3.76%. Graduate students will pay 5.31% on their direct unsubsidized loans.
The federal government places limits on direct borrowing. The limits are in the table below. If you need to borrow more money, you will have to look to federal PLUS Loans (higher interest rates), private loans, or covering educational expenses through other means.

YearDependent Student LimitIndependent Student Limit
First Year Undergraduate$5,500 (up to $3,500 subsidized)$9,500 (up to $3,500 subsidized)
Second Year Undergraduate$6,500 (up to $4,500 subsidized)$10,500 (up to $4,500 subsidized)
Third Year + Undergraduate$7,500 (up to $5,500 subsidized)$12,500 (up to $5,500 subsidized)
Undergraduate Student Total Limits$31,000 (up to $23,000 subsidized)$57,500 (up to $23,000 Subsidized)
Graduate StudentsN/A$20,500 (unsubsidized only)
Graduate Student Total LimitsN/A$138,500 (up to $65,500 in subsidized loans). Aggregate amount includes totals from undergraduate studies.

How can I maximize my federal aid?

You must use accurate information when you complete the FAFSA. However, careful planning and understanding the FAFSA can help you maximize your aid. Keep these steps in mind as you apply for aid.

Avoid common FAFSA errors

It’s easy to make errors when you’re filling out a 100+ question application, and the wording on the FAFSA can be unclear. These are a few mistakes to avoid.

Easy mistakes that can throw off your FAFSA submission

Incomplete e-signature. The FAFSA can also trip you up on seemingly-easy steps, like providing an e-signature. If you don’t provide the e-signature correctly, or think you hit ‘submit’ but didn’t, you may waste valuable time waiting for an email that won’t come until you sign the form properly.

Missing mistakes on your Student Aid Report. About two weeks after you submit the form, you should receive a Student Aid Report which gives you basic information about your eligibility for federal student aid along with your Expected Family Contribution – what your family is expected to pay. The SAR also includes a four-digit Data Release Number (DRN), which you’ll need to allow your school to change certain information on your FAFSA.The SAR also lists your responses to the questions on your FAFSA, so be sure to review it and correct any mistakes.

Income verification notifications. After you receive your SAR, check to see if you’ve been flagged for ‘income verification’ as about 1/3 of students are required to verify their parent’s income with additional proof to complete the FAFSA process. The government usually follows up on students who are more likely to qualify for the federal Pell grant or other grant-based aid, Page says. If flagged for income verification, you’ll have to submit verification to each school you apply to, and the schools may have different paperwork and processes.

Missing deadlines in e-mail. When you create and submit the FAFSA, you give the Education Department your email address. The Education Department will email you, so you need to check the inbox of the email address you provided for correspondence. Create your FAFSA account using an email account you check regularly. Turn on your email notifications on your devices so you won’t miss any emails reminding you to submit your FAFSA form or letting you know if something went wrong somewhere in the process.

If you’re not sure what a question means, use the guide Completing the FAFSA to understand the definition. The wording of questions leads a lot of people to overestimate their EFC.

How can I use FAFSA to plan for college costs?

The FAFSA is not a college-cost planning tool, but you can use other tools to plan for upcoming college costs. College Navigator offers free information on current college costs. Using it with estimated aid from the FAFSA4caster will give high school students a good idea of their aid options. You could also consider using a paid tool like EFC Plus for an easier college-planning tool.

Parents and students looking to keep student loan debt low will benefit from using the Family Budget Analyzer, which can help you find places to cut expenses. A college cost projector will help you know the costs that your family needs to cover. Sallie Mae also offers a long-range planning calculator that can help you estimate your total indebtedness upon college graduation.

Understanding the FAFSA is one small part of planning for college costs. It will pay for you to understand it, but federal aid is just one component of the college-planning picture. Most students will need to devote time to finding a cost-effective education and applying for grants and scholarships to supplement federal aid.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Hannah Rounds
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Hannah Rounds is a writer at MagnifyMoney. You can email Hannah here

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How to Set Up IBR, PAYE, and ICR Student Loan Repayment Plans

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

How to Set Up IBR, PAYE, and ICR Student Loan Repayment Plans

Does the amount you earn on a yearly basis pale in comparison to your monthly student loan payments? Do you have federal student loans? If the answer is “yes” to both of these, then you might benefit from a student loan repayment plan. These income-driven plans include:

Income-driven repayment plans can reduce your monthly payment amount — sometimes dramatically — because they cap that payment at a (hopefully) affordable level, based on your income and family size. Your payment adjusts annually according to these factors.

Specifically, the amount you pay is calculated as a percentage of your discretionary income. According to the Federal Student Aid office, for IBR and PAYE, discretionary income is the difference between your income and 150% of the poverty guideline for your family size and state of residence. For ICR, it’s the difference between your income and 100% of the poverty guideline. (You can look up the poverty guidelines used to determine eligibility for some federal programs, if you want more information.)

A great benefit of these plans is that each has a maximum length — usually 20 or 25 years — after which all remaining loan balances are forgiven. Note, however, that you will generally be taxed on the amount that gets wiped away.

Want to find out how to apply for an income-driven repayment plan? Read on for information on how the process works.

Getting started with income-driven repayment plans

Generally, if you want to set up your student loan account on an income-driven repayment plan, your best bet is to first contact your student loan servicer. (Not sure which loan servicer you have? You can check on the National Student Loan Data System website.)

If you log into your account online, you should see a section for changing your repayment plan. At the least, your servicer should address the issue in an FAQ section of its site.

It’s your loan servicer’s job to help you find the best plan for your situation, but you need to contact it as soon as you start having difficulty in making payments. You don’t want to miss any payments and end up delinquent (or worse, in default) because you couldn’t pay. Plus, loans that are in default aren’t eligible for income-driven repayment plans.

How to apply for income-driven student loan repayment

The application process is very simple and straightforward. The first step is to fill out the Income-Driven Repayment Plan Request form. This can be done online, or you can apply with a paper application supplied by your student loan servicer.

When you make your request, you have to choose the specific plan you’d like to go with. You can select one yourself, or you can ask your loan servicer to choose the plan with the lowest monthly payment amount.

Since you’re applying for a repayment plan based on your taxable income, you will need to provide proof of income. The easiest way is to use your most recent tax return, as long as your income hasn’t changed significantly from the date you filed. You will also need to have filed a federal income tax return for the past two years.

The online application makes it easy to find your adjusted gross income (AGI) — you can use the IRS Data Retrieval Tool to import your income information. If you apply with a paper application, you’ll need to supply a paper copy of your most recent federal tax return or an IRS tax return transcript.

If your income has changed a lot since you last filed, or if you haven’t filed two federal tax returns yet, there are other ways of proving your income.

First, if you don’t have any source of income at all, you just need to indicate that on your application. Only taxable income counts. So if you receive any government assistance or any other income that’s not considered taxable, you don’t need to report it here.

If you do earn an income, you’ll need to provide your most recent pay stubs or other alternative documentation that shows how much you make.

Additionally, if you have federal loans with multiple loan servicers, you must request income-driven repayment for each loan individually. There’s a section of the application that asks if you have eligible loans with more than one servicer, so you can indicate that there.

The application itself shouldn’t take long to complete, but the entire process can take a few weeks, depending on which loan servicer you have.

If you have an immediate need to lessen your payments, your loan servicer may apply a forbearance to your federal loans while the process wraps up. That’s why it’s important to contact your servicer as soon as you realize that you can’t make your payments.

You have to reapply annually

You’ll be required to submit your proof of income on an annual basis after you apply the first time. As your income changes, so does your payment, so you need to provide this information continuously. However, there’s no income limit for income-driven repayment plans.

If you start earning more and you’re on an IBR or PAYE plan, your payment amount is capped at the amount you’d be paying under the standard 10-year repayment plan. It will never exceed that amount. Technically, your loans will still be under your chosen income-driven repayment plan, but your monthly payment is no longer based on your income. You can still have your outstanding loan balance forgiven after your repayment term ends (if you don’t pay your loan off before then).

For ICR plans, your payment amount could fluctuate between the lesser of 20% of your discretionary income and what your monthly payment would be if you had a 12-year fixed plan. On a REPAYE plan, your monthly payment is simply 10% of your discretionary income.

Whose income is taken Into consideration?

If you’re married and wondering if your spouse’s income will be taken into consideration, it depends on how you file your federal taxes.

Filing separately means only your income and loans will matter (unless you’re on a REPAYE plan, which considers both incomes, regardless of how you file).

Filing jointly means your monthly payment will be based off of your joint income. If you and your spouse file jointly and you both have eligible federal student loans, all of them will be taken into consideration, but your spouse doesn’t have to enter into an income-driven repayment plan for you to join.

Meet the income-driven repayment plans

Now, let’s take a look at each major plan type and some of their respective details:

Income-Based Repayment plan overview

You don’t qualify for IBR unless your payment amount would be less than what you’re paying under the standard 10-year repayment plan.

A good way to estimate whether you’ll qualify is to check if your total student loan debt is higher than (or makes up a significant portion of) your annual discretionary income, which would reduce your monthly payment under IBR. If your debt-to-income ratio — how much student loans and other debt you have relative to your income — is high, you may qualify for this option. You can calculate your DTI in a few simple steps using information about your monthly income, debts and payments.

Borrowers who got their first student loans after July 1, 2014, have a maximum term of 20 years under IBR plans, while borrowers who had loan balances before July 1, 2014, have a maximum 25 year term. Anything left after those terms expire will be forgiven.

Pay As You Earn plan overview

For PAYE, your monthly payment will be about 10% of your discretionary income, and never more than what you’re paying under the standard 10-year payment plan.

You have a maximum of 20 years to pay back your loans under this plan, after which your balance is forgiven.

The qualifications for PAYE are the same as IBR — you must be paying less under PAYE than you were under the standard 10-year plan.

However, PAYE is only available to those who were new, first-time borrowers as of Oct. 1, 2007, and who received a disbursement in the form of a direct loan on or after Oct. 1, 2011.

Revised Pay As You Earn plan overview

REPAYE is a fairly recent addition to the income-driven repayment plan menu. It’s similar to PAYE in many ways but distinct in a few key ones.

For example, unlike with PAYE, REPAYE is available to any borrower, regardless of when you received your first federal student loan. And, if you’re married, your spouse’s income will be considered in calculating your monthly payment, no matter how you file your taxes.

Under this plan, your monthly payment is 10% of your discretionary income, and you must repay your loans for 20 years if they were used for undergraduate studies (or 25 years if you took out loans for graduate or professional studies) before they are forgiven.

Income-Contingent Repayment plan overview

Your monthly payment under the ICR plan is the lesser of these two options: 20% of your discretionary income, or the amount you would pay on a 12-year fixed repayment plan, adjusted according to your income.

Under this plan, your term is 25 years before you can receive forgiveness. There are no initial guidelines you must qualify under — anyone can choose this plan to repay their student loans.

Benefits of income-driven repayment plans

As mentioned, the big bonus for all four of these repayment plans is that your outstanding balance is forgiven after your repayment term is complete. Also, if you qualify for forgiveness after 10 years through the Public Service Loan Forgiveness program, that takes precedence.

IBR, PAYE and REPAYE have an extra perk if you took out a subsidized student loan: If your monthly payment isn’t enough to cover any interest that accrues monthly on your subsidized loan, the government will pay the difference for the first three years. For REPAYE plans, the government will also pay half of the difference on your unsubsidized loan and continue to cover half of the difference after three years on your subsidized loan.

You can use MagnifyMoney’s student loan calculators to see which plans could offer you the lowest monthly payment. Income-driven plans aren’t guaranteed to give you the lowest possible payment — all situations are different. And don’t forget that there are other repayment plans that aren’t reliant upon your income but can still lower your monthly payment, such as the graduated and extended repayment plans.

Check with your loan servicer first

Before applying for an income-driven repayment plan, it’s best to check with your loan servicer to get its input. You don’t want to end up owing more per month than you do now. These repayment plans are designed to help you, not hurt you.

You may find that forbearance or deferment is a better option, especially if you’re only experiencing a temporary economic hardship. Note that both forbearance and deferment can result in interest piling up, so be careful to examine all your options before you decide.

And while it’s crucial to check with your servicer, remember that this is your decision, and you don’t have to follow your servicer’s advice. The best solution will be the one that saves you the most money while also fitting with your own financial goals.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

Emily Long
Emily Long |

Emily Long is a writer at MagnifyMoney. You can email Emily here

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College Students and Recent Grads, Pay Down My Debt

7 Best Options to Refinance Student Loans – Get Your Lowest Rate

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Are you tired of paying a high interest rate on your student loan debt? You may be looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn. We have created the most complete list of lenders currently willing to refinance student loan debt. We recommend you start here and check rates from the top 7 national lenders offering the best student loan refinance products. All of these lenders (except Discover) also allow you to check your rate without impacting your score (using a soft credit pull), and offer the best rates of 2019:

LenderVariable APRFixed APRMax Loan Amount 
Laurel Road Bank

2.43% - 6.65%

3.50% - 7.02%

No Max

Visit Lender Secured

on Laurel Road Bank’s secure website

Earnest

2.27% - 6.89%

3.47% - 7.59%

No Max

Visit Lender Secured

on Earnest’s secure website

SoFi

2.27% - 7.55%

3.49% - 7.94%

No Max

Visit Lender Secured

on SoFi’s secure website

CommonBond

2.37% - 7.95%

3.48% - 8.24%

No Max

Visit Lender Secured

on CommonBond’s secure website

LendKey

2.24% - 6.67%

3.49% - 7.50%

$125k / $175k

Visit Lender Secured

on LendKey’s secure website

Citizens Bank

2.46% - 9.24%

3.45% - 9.62%

$90k / $350k

Visit Lender Secured

on Citizens Bank (RI)’s secure website

Discover Student Loans

$150k

Visit Lender Secured

on Discover Bank’s secure website

*Discover’s lowest rates shown include a 0.25% interest rate reduction while enrolled in automatic payments.

You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score.

We have also created:

But before you refinance, read on to see if you are ready to refinance your student loans.

Can I get approved?

Loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loans and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.
LenderMinimum credit scoreEligible degreesEligible loansAnnual income
requirements
Employment
requirement
 
Laurel Road Bank

Not published

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Laurel Road Bank’s secure website

Earnest

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Earnest’s secure website

SoFi

Good or Excellent
score needed

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on SoFi’s secure website

CommonBond

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on CommonBond’s secure website

LendKey

680

Undergraduate
& Graduate

Private & Federal

$24K

Yes

Learn more Secured

on LendKey’s secure website

Citizens Bank

680

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

$24K

Yes

Learn more Secured

on Citizens Bank (RI)’s secure website

Discover Student Loans

Not published

Undergraduate
& Graduate

Private & Federal

None

Yes

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on Discover Bank’s secure website

Diving Deeper: The best places to consider a refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a single shopping period (which can be between 14-30 days, depending upon the version of FICO). So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

Here are more details on the 7 lenders offering the lowest interest rates:

1. Laurel Road

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Laurel Road Bank : Variable Rates from 2.43% and Fixed Rates from 3.50% (with AutoPay)

Laurel Road Bank offers a highly competitive product when it comes to student loan refinancing.

Pros Pros

  • Forgiveness in the case of death or disability: They may forgive the total student loan amount owed if the borrower dies before paying off their debt. In the case that the borrower suffers a permanent disability that results in a significant reduction to their income,Laurel Road Bank may forgive some, if not all of the amount owed.
  • Offers good perks for Residents and Fellows: Laurel Road Bank allows medical and dental students to pay only $100 per month throughout their residency or fellowship and up to six months after training. It is important for borrowers to keep in mind that the interest that accrues during this time will be added on to the total loan balance.

Cons Cons

  • Higher late fees: While many lenders charge late fees,Laurel Road Bank’s late fee can be slightly steeper than most at 5% or $28 (whichever is less) for a payment that is over 15 days late.
  • You lose certain protections if you refinance a federal loan: While not specific to Laurel Road Bank, it is important to keep in mind that you will give up certain protections when refinancing a federal loan with any private lender.

Bottom line

Bottom line

As a lender,Laurel Road Bank prides itself on offering personalized service while leveraging technology to make the student loan refinancing process a quick and simple one. Consider checking out their low-rate student loan refinancing product, which is offered in all 50 states.

2. Earnest

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Earnest : Variable Rates from 2.27% and Fixed Rates from 3.47% (with AutoPay)

Earnest focuses on lending to borrowers who show promise of being financially responsible borrowers. Because of this, they offer merit-based loans versus credit-based ones. 

Pros Pros

  • Flexible repayment options: Earnest offers some of the most flexible options when it comes to repayment. They allow you to choose any term length between 5-20 years. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.
  • Ability to switch between variable and fixed rates: With Earnest, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later.
  • Loans serviced in-house: Earnest is one of just a few lenders that provides in-house loan servicing versus using a third-party servicer.

Cons Cons

  • Cannot apply with a cosigner: Unlike many of the other lenders, Earnest does not allow borrowers to apply for student loan refinancing with a cosigner.
  • No option to transfer Parent PLUS loans to Child: If you are a parent that is looking to refinance your Parent PLUS loan into your child’s name, it is important to note that this cannot be done through refinancing with Earnest.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

Earnest, who was recently acquired by Navient, is making a name for themselves within the student refinancing space. With their flexible repayment options and low rates, they are definitely an option worth exploring.

3. SoFi

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SoFi : Variable rates from 2.27% and Fixed Rates from 3.49% (with AutoPay)*

SoFiwas one of the first lenders to start offering student loan refinancing products. More MagnifyMoney readers have chosen SoFi than any other lender. The only requirement is that you graduated from a Title IV school. In order to qualify, you need to have a degree, a good job and good income.

Pros Pros

  • Borrowers can refinance private, federal and Parent PLUS loans together: Through SoFi, borrowers have the ability to combine all of their student loans (private, federal and Parent PLUS) when refinancing. Along with the ability to refinance Parent PLUS loans, parents can also transfer the PLUS loans into their child’s name.
  • Access to career coaches: SoFi offers their borrowers access to their Career Advisory Group who work one-on-one with borrowers to help plan their career paths and futures.
  • Unemployment protection: SoFi offers some help if you lose your job. During the period of unemployment they will pause your payments (for up to 12 months) and work with you to find a new job. However, just remember that any unemployment protection offered by SoFi would be weaker than the income-driven repayment options of federal loans.

Cons Cons

  • No cosigner release: While they offer you the opportunity to refinance with a cosigner, it is important to know that SoFi does not offer borrowers the opportunity to release a cosigner later on down the road.
  • You lose certain protections if you refinance a federal loan: This con is not unique to SoFi (and you will find it with all other private lenders). Federal loans come with certain protections, including robust income-driven payment protection options. You will forfeit those protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

SoFi is really the original student loan refinance company, and is now certainly the largest. SoFi has consistently offered low interest rates and has received good reviews for service. In addition, SoFi invests heavily in building a “community” – which means you can start to get other benefits once you are a SoFi member.

SoFi has taken a radical new approach when it comes to the online finance industry, not only with student loans but in the personal loan, wealth management and mortgage markets as well. With their career development programs and networking events, SoFi shows that they have a lot to offer, not only in the lending space but in other aspects of their customers lives as well.

4. CommonBond

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CommonBond : Variable Rates from 2.37% and Fixed Rates from 3.48% (with AutoPay)

CommonBond started out lending exclusively to graduate students. They initially targeted doctors with more than $100,000 of debt. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university (graduate and undergraduate).

Pros Pros

  • Hybrid loan option: CommonBond offers a unique “Hybrid” rate option in which rates are fixed for five years and then become variable for five years. This option can be a good choice for borrowers who intend to make extra payments and plan on paying off their student loans within the first five years. If you can a better interest rate on the Hybrid loan than the Fixed-rate option, you may end up paying less over the life of the loan.
  • Social promise: CommonBond will fund the education of someone in need in an emerging market for every loan that closes. So not only will you save money, but someone in need will get access to an education.
  • “CommonBridge” unemployment protection program: CommonBond is here to help if you lose your job. Similar to SoFi, they will pause your payments and assist you in finding a new job.

Cons Cons

  • Does not offer refinancing in the following states: Idaho, Louisiana, Mississippi, Nevada, South Dakota and Vermont.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

CommonBond not only offers low rates but is also making a social impact along the way. Consider checking out everything that CommonBond has to offer in term of student loan refinancing.

5. LendKey

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LendKey : Variable Rates from 2.24% and Fixed Rates from 3.49% (with AutoPay)

LendKey works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders.

Pros Pros

  • Opportunity to work with local banks and credit unions: LendKey is a platform of community banks and credit unions, which are known for providing a more personalized customer experience and competitive interest rates.
  • Offers interest-only payment repayment: Many of the lenders on LendKey offer the option to make interest-only payments for the first four years of repayment.

Cons Cons

  • Rates can vary depending on where you live: The rate that is advertised on LendKey is the lowest possible rate among all of its lenders, and some of these lenders are only available to residents of specific areas. So even if you have an excellent credit report, there is still a possibility that you will not receive the lowest rate, depending on geographic location.
  • No Parent PLUS refinancing available: Unlike several of the other student loan refinancing companies, borrowers do not have the ability to refinance Parent PLUS loans with LendKey.
  • You lose certain protections if you refinance a federal loan: As when refinancing federal loans with any private lender, you will give up your federal protections if you refinance your federal loan to a private one.

Bottom line

Bottom line

LendKey is a good option to keep in mind if you are looking for an alternative to big bank lending. If you prefer working with a credit union or community bank, LendKey may be the route to uncovering your best offer.

6. Citizens Bank

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Citizens Bank (RI) : Variable Rates from 2.46% and Fixed Rates from 3.45% (with AutoPay)

Citizens Bank offers student loan refinancing for both private and federal loans through its Education Refinance Loan.

Pros Pros

No degree is required to refinance: If you are a borrower who did not graduate, with Citizens Bank, you are still eligible to refinance the loans that you accumulated over the period you did attend. In order to do so, borrowers much no longer be enrolled in school.

Loyalty discount: Citizens Bank offers a 0.25% discount if you already have an account with Citizens.

Cons Cons

Cannot transfer Parent PLUS loans to Child: If you are looking to refinance your Parent PLUS loan into your child’s name, this cannot be done through Citizens Bank.

You lose certain protections if you refinance a federal loan: Any time that you refinance a federal loan to a private loan, you will give up the protections, forgiveness programs and repayment plans that come with the federal loan.

Bottom line

Bottom line

The Education Refinance Loan offered by Citizens Bank is a good one to consider, especially if you are looking to stick with a traditional banking option. Consider looking into the competitive rates that Citizens Bank has to offer.

7. Discover

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Pros Pros

  • In-house loan servicing: When refinancing with Discover, they service their loans in-house versus using a third-party servicer.
  • Offer a variety of deferment options: Discover offers four different deferment options for borrowers. If you decide to go back to school, you may be eligible for in-school deferment as long as you are enrolled for at least half-time. In addition to in-school deferment, Discover offers deferment to borrowers on active military duty (up to 3 years), in eligible public service careers (up to 3 years) and those in a health professions residency program (up to 5 years).

Cons Cons

  • Performs a hard credit pull: While most lenders do a soft credit check, Discover does perform a hard pull on your credit.
  • No Parent PLUS refinancing available: Discover does not offer borrowers the option of refinancing their Parent PLUS loans.
  • You lose certain protections if you refinance a federal loan: Be careful when deciding to refinance your federal student loans because when doing so, you will lose access federal protections, forgiveness programs and repayment plans.

Bottom line

Bottom line

If you’re looking for a well-established bank to refinance your student loans, Discover may be the way to go. Just keep in mind that if you apply for a student loan refinance with Discover, they will do a hard pull on your credit.

1. Discover’s lowest rates shown include a 0.25% interest rate reduction while enrolled in automatic payments.

 

Additional Student Loan Refinance Companies

In addition to the Top 7, there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders:

Traditional Banks

  • First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 1.95% – 4.45% APR. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 3.75% and fixed rates starting at 3.99%. You would likely get much lower interest rates from some of the new Silicon Valley lenders or the credit unions.

Credit Unions

  • Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 3.75% APR. You can borrow up to $100,000 for up to 25 years.
  • Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 4.81% and fixed rates start at 4.29%.
  • Thrivent: Partnered with Thrivent Federal Credit Union, Thrivent Student Loan Resources offers variable rates starting at 4.00% APR and fixed rates starting at 3.99% APR. It is important to note that in order to qualify for refinancing through Thrivent, you must be a member of the Thrivent Federal Credit Union. If not already a member, borrowers can apply for membership during the student refinance application process.
  • UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $150,000 and rates start as low as 4.05% (variable) and 3.99% APR (fixed).

Online Lending Institutions

  • Education Loan Finance:This is a student loan refinancing option that is offered through SouthEast Bank. They have competitive rates with variable rates ranging from 2.80% – 6.01% APR and fixed rates ranging from 3.29% – 6.69% APR.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 4.53% – 7.20% (fixed) and 4.30% – 6.97% APR (variable).
  • IHelp : This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.00% to 8.00% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Purefy: Purefy lenders offer variable rates ranging from 2.82%-8.42% APR and fixed interest rates ranging from 3.75% – 9.66% APR. You can borrow up to $150,000 for up to 15 years. Just answer a few questions on their site, and you can get an indication of the rate.
  • RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.

Is it worth it to refinance student loans?

If you are in financial difficulty and can’t afford your monthly payments, a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance student loans, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by refinancing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance your student loans to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance. You can also email us with any questions at [email protected]

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]