10 Questions to Ask When Choosing a Student Loan Refinance Lender

By Casey Bond · October 14, 2023 · 7 minute read

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10 Questions to Ask When Choosing a Student Loan Refinance Lender

More than 43 million Americans have student loan debt. Today, the average borrower graduates with a balance of nearly $38,000. For those with private loans, that amount may be closer to $40,500.

If you’re among those borrowers looking for ways to reduce student loan debt as quickly and easily as possible, you may want to consider refinancing.

A common reason for refinancing student loans is to secure a lower interest rate, which can help lower monthly payments and save money on interest. But you may also choose to refinance to change other loan terms or change your lender.

But choosing a refinance lender can be overwhelming. So to help you evaluate student loan refinancing companies, we’ve created a handy cheat sheet. Asking these 10 questions can help you zero-in on your best fit.

Student Loan Refinance Lender Questions Cheat Sheet

1. How Great is the Rate?

One of the main reasons to refinance your loans is to get a lower interest rate.

Ask the lender to provide your interest rate before doing a hard credit pull. Most online lenders allow you to prequalify with a “soft” credit pull , which won’t impact your credit score.1 This should allow you to “rate shop” without affecting your credit.

A “hard” credit inquiry, on the other hand, stays on your credit report for up to two years. One or two hard inquiries will probably have a minimal impact on your credit. But several within a short period can harm it, which is why it’s important to get quotes before officially applying for a loan.

You can use a student loan refinancing calculator to estimate your total savings with a new refinanced loan, even before you prequalify.

💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

2. Do the Pros Outweigh the Cons?

All new federal student loans are granted through the William D. Ford Federal Direct Loan (Direct Loan) Program. Private student loans, on the other hand, are provided by individual financial institutions.

Refinancing federal student loans is an option available to borrowers. Sometimes, refinancing can be beneficial. For example, it may be a good idea if you can qualify for a lower interest rate and save a significant amount of money.

Others may find that refinancing a federal loan isn’t the right option for them. Here’s a quick list of some of the pros and cons to consider if you’re thinking of refinancing federal student loans.

Some of the Pros to Consider:

•   Long-Term Savings: Refinancing to a lower interest rate could potentially help you save money in interest over the life of the loan.

•   Lower Monthly Payments: You can also choose to extend the repayment term, which would result in lower monthly payments. This may make sense if you’re struggling to fit your payments into your budget. However, you may pay more interest over the life of the loan if you refinance with an extended term.

•   Faster loan payoff: Imagine having no more student loans to pay back! By shortening your loan term, you could speed up your repayment.

•   Rate Change: Variable rates often start off lower than fixed rates, which can be helpful if you plan to pay off your loan quickly.

Some of the Cons to Consider:

•   Loss of Access to Federal Repayment Plans: When you refinance federal loans with a private lender, they’ll no longer qualify for any federal repayment plans. This includes income-driven repayment plans that reduce payments to a small percentage of your income.

•   No Longer Eligible Federal Forgiveness Programs: If you’re pursuing Public Service Loan Forgiveness (PSLF) or other federal forgiveness programs, refinancing may not be the right option for you, since doing so makes your loans ineligible.

•   Inability to Defer Your Loans: You’d also lose the opportunity to put your federal student loans into deferment or forbearance in the event of financial difficulty.

3. Can You Pick Between Fixed and Variable Rate Loans?

With a fixed rate loan, the interest rate is locked in for the entire life of the loan. This means you’ll have a predictable monthly payment for the entire term.

The interest rate on a variable-rate loan, however, can go up or down over time, depending on market conditions. While the initial rate may be lower, you could end up with a high rate a few years into your loan.

Fixed-rate loans are generally considered to be less risky than variable rate loans. But if you’re able to repay your loan in a relatively short time period, variable-rate loans can be worth considering.

You can use SoFi’s student loan payment calculator to estimate your student loan payments with a fixed rate. Tools like this can help give you an idea of how much more you may need to be paying each month if you want to pay your loan off faster.

4. Can You Choose Your Loan Term?

Typically, this is the case. But beware: Choosing the term that results in the lowest monthly payment isn’t always the best option. Stretching out your repayment term helps reduce the monthly payments, but it also means you’ll pay more in interest over the life of the loan.

If you recently graduated, you may not be making enough money to afford your current payment. In that case, a longer term with lower monthly payments to free up some cash flow in the short-term might make sense.

Be realistic about how much you can afford to pay back each month. If you can afford a higher monthly payment, you’ll likely pay off your loan more quickly, and ultimately pay less money in interest.

💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

5. What Happens if You Lose Your Job?

Life is unpredictable, and if you unexpectedly lose your job, it may be difficult to keep up with your loan payments. When you miss loan payments, you might incur late fees or other penalties. Additionally, late payments can have a negative impact on your credit score. After a series of missed payments, the loan could go into default.

Borrowers with federal student loans can apply for deferment or forbearance to temporarily reduce or pause their loan payments while they look for work. Or they can look into income-driven repayment plans, provided their federal student loans are current.

6. Will the Lender Help With Your Career?

The higher your earnings, the easier it is to pay off your student loans quickly. A lender who helps you get ahead in your career understands this principle.

Lenders know that if you can’t get a job, or you lose your job, you won’t be able to pay back your loans. Ask your lender if they offer any networking or other career services that could help you advance in your career.

7. What Other Perks Come With Your New Loan?

Not all lenders are created equal. As you are reviewing different lenders and refinancing options, review everything the lender has to offer. In some cases, you might find you qualify for similar refinancing options at a few different lenders, but one might offer additional benefits that pushes it ahead of the other options.

A few of the perks of refinancing with SoFi include:

•   Zero hidden fees: There are no application fees, origination fees, or prepayment penalties.

•   Add a cosigner: Many students have limited income and credit history, so adding a cosigner could help improve their application’s chances of being approved.

•   Automatic payments: Not only can automatic payments help prevent any late or missed payments, but enrolling your SoFi loan in autopay could qualify you for an interest rate reduction.

8. Is the Application Online?

The last thing you want is to be buried in a mountain of actual paperwork. Look for lenders that offer a short, simple, online form.

9. What’s the Lender’s Reputation?

Make sure to do your due diligence on any potential lender. A quick Google search should provide some online reviews and media coverage of the lender, which will help you determine if they’re legitimate.

You can also check out their social media pages. Overall engagement levels and conversations within a lender’s social communities may provide additional, valuable insights and help give you a sense of the company’s commitment to things like customer service.

10. Will the Lender Grow With You?

Sure, lenders can refinance your student loans, but what about helping you with other financial milestones, such as buying a home and saving for retirement? Look for a lender that sees the big picture—and wants to invest in your long-term success.

Start the Refinancing Process Today

Whether you’re ready to start your application or you’re just beginning to consider refinancing, the SoFi team is here to help. Refinancing your student loans with SoFi could help you spend less money in interest, lower your monthly payments, or even pay off your loan faster. (You may pay more interest over the life of the loan if you refinance with an extended term.)

Keep in mind that refinancing federal student loans with a private lender will eliminate them from federal protections and benefits like deferment, loan forgiveness, and income-driven repayment plans.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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