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9 Pros and Cons of Refinancing Student Loans

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.

When faced with any big decision in life, it can help to write a list of the benefits and drawbacks for each option. This same strategy is useful if you’re considering the pros and cons of refinancing student loans.

Refinancing can have some upsides, including saving you money on interest and adjusting your monthly payments.

But switching to a new lender could also come with downsides, which are important to consider before you make any changes to your debt.

If you’re debating the best way to move forward, read on to learn the pros and cons of refinancing student loans.

5 major pros of student loan refinancing

Whether you’ve got private or federal student loans, refinancing with a private lender can be a great way to restructure your debt. Here are the main benefits of refinancing your student debt.

1. Snagging a lower interest rate on your loans

Perhaps the biggest benefit of refinancing student loans is qualifying for a lower interest rate. When you refinance, you replace one or more of your current student loans with a new loan.

Assuming you meet eligibility requirements, this new loan could have a lower interest rate than what you have now. A lower rate could save you money over the life of your loans.

2. Adjusting your monthly payments with new repayment terms

Since refinancing involves taking out a new loan, it also gives you the opportunity to adjust your monthly payments with new repayment terms. Many lenders offer repayment terms of five, seven, 10, 15 or 20 years.

If you choose a shorter term, your monthly payment might go up — but you’d get out of debt faster. Or you could lengthen your loan term to lower your monthly payments.

Reducing your monthly student loan bills could be a huge help if you’re struggling to make ends meet. Just note that adding years to your debt will mean you’ll pay more interest in the long run.

3. Simplifying repayment by combining many loans into one

Student loan refinancing also gives you the chance to combine several loans into one new one. Instead of keeping track of multiple bills to different loan servicers each month, you’ll only have to remember a single payment.

Note that student loan refinancing is different from federal consolidation, which also combines multiple loans into one. Consolidation involves taking out a direct consolidation loan from the federal government, and it only works for federal loans.

But while federal consolidation can simplify your debt, it doesn’t lower your interest rate. Only refinancing offers savings on interest to qualifying borrowers.

4. Switching to a new lender with better benefits

When you refinance, you have your choice of lender, whether a bank, credit union or online lender such as SoFi,CommonBond or Earnest. If you haven’t had great experiences with your loan servicer, you might appreciate the option to switch to a new one.

Plus, some lenders offer useful perks to their refinancing customers. SoFi, for example, provides career coaching and networking events to its refinancing borrowers.

5. Relieving a cosigner of responsibility for your debt

If you had someone cosign your student loans, refinancing could offer the chance to remove them from your debt. As a result, your cosigner will no longer be on the hook for your student loans.

It’s also possible to refinance parent PLUS loans in your name if your parents borrowed on your behalf. That said, you’ll need to be able to meet your refinancing provider’s requirements for credit and income on your own to refinance without a cosigner.

4 potential downsides of refinancing your student loans

Although refinancing student loans can save you money, it could also come with some potential cons. Before applying, make sure you understand the consequences of refinancing.

1. Losing access to federal programs and plans

Many students borrow federal student loans from the government, but refinancing is done with a private lender. So if you refinance federal student loans, you turn them into private debt and lose access to federal programs.

The government offers some useful borrower protections, such as income-driven repayment plans,forbearance and Public Service Loan Forgiveness. Once you refinance, your loan will no longer qualify for any of these federal programs.

If you’re confident that you can make on-time payments, this might not be much of a sacrifice. But if you’re worried about your ability to repay your loan or are working toward loan forgiveness, be wary of turning your federal debt private through refinancing.

2. Giving up flexibility in your repayment terms

While the government offers a range of repayment plans, most private lenders aren’t so flexible. Once you choose your terms, you’re typically locked into your repayment plan unless you decide to refinance again.

Note that you can pay off your loan ahead of schedule without penalty. But if you chose a short term and are struggling to keep up with high monthly payments, your lender might not be so flexible.

What’s more, only some private lenders offer the chance to postpone payments through deferment or forbearance in the event you lose your job or go back to school. Before choosing a refinancing lender, find out your options if your financial circumstances change.

3. Having to meet credit and income requirements

Before issuing you a new loan, private lenders want reassurance that you’ll be able to pay it back in full and on time. That’s why they have fairly lofty requirements for credit and income before approving you for a refinanced student loan.

Most lenders look for a credit score of 650 or higher, as well as a steady source of income or offer of employment. Some also look at your savings and debt-to-income ratio. Finally, some lenders require proof that you graduated, though there are a few that will work with borrowers who don’t have a degree.

Although refinancing may lower your interest rate, only the most creditworthy borrowers will qualify for the best rates.

4. Possibly needing to take on a cosigner

If you can’t meet credit and income requirements, there is a workaround: You could apply with a creditworthy cosigner. Even if can qualify alone, adding a cosigner to your application could help you get the most competitive rates.

But sharing debt is a big responsibility, and it could lead to conflict if you can’t pay. Before adding a cosigner to your refinanced student loans, make sure you both have an open conversation about the responsibility for repaying the debt.

Weigh the pros and cons of refinancing student loans before you act

Student loan refinancing can be an excellent way to save money on interest and choose new terms on your student loans. It’s especially useful for creditworthy borrowers who have a steady source of income and are confident about their ability to repay their loan.

But if you’re worried about sacrificing federal protections, such as income-driven repayment, or you are working toward a federal loan forgiveness program, you should think twice before turning your debt private.

In the end, your approach to paying off student loans needs to be customized to your unique situation. Think about your short- and long-term goals, and carefully weigh the pros and cons of refinancing student loans. This way, you’ll be ready to choose the student loan repayment strategy that’s right for you.

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.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca 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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Refinance with Earnest

Refinancing rates from 2.27% APR. Checking your rates won’t affect your credit score.

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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

Learn more Secured

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

LEARN MORE Secured

on Laurel Road Bank’s secure website

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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on Earnest’s secure website

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

LEARN MORE Secured

on SoFi’s secure website

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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on CommonBond’s secure website

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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on LendKey’s secure website

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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on Citizens Bank (RI)’s secure website

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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on Discover Student Loans’s secure website

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]

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Nick Clements
Nick Clements |

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