10 Questions to Ask When Choosing a Student Loan Refinance Lender

April 07, 2020 · 9 minute read

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10 Questions to Ask When Choosing a Student Loan Refinance Lender

If you graduated with student loans, it’s possible you have a combination of federal and private student loans. According to some reports, around 70% of all American students take out student loans to pay for college.

When you first took out your student loans, you agreed to a certain repayment plan and interest rate. However, it may be possible for you to find a better student loan repayment plan by refinancing.

Just a few years ago, not many people knew that they could refinance student loans. Fast-forward to today and there are regular news headlines on the subject. Almost overnight, refinancing has become a popular strategy for people looking to save money on student loans.

Not surprisingly, the demand for student loan refinancing has prompted a bevy of online lenders to start offering the service. That’s great news for you—after all, competition breeds innovation, and the smart lenders will continue to improve in order to win your business.

One of the main reasons many students choose to refinance their student loans is to secure a lower interest rate. But you may also choose to refinance to improve your lending terms or change your lender. If you qualify for a better interest rate than you currently have, it can help you save money over the life of the loans. But, it is important to know that when refinancing federal student loans with a private lender you’ll lose access to federal benefits such as student loan forgiveness programs and deferment.

But choosing a lender can be overwhelming. Which student loan refinance company is the best? How do the services of lenders differ? Which one should you trust with your money? If you do your homework and take a little time up front to shop around, you can figure out the answers to these questions for you—and potentially save money, too (and maybe even land a few unexpected perks).

To help you evaluate student loan refinance companies, we’ve created the handy cheat sheet below. 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 pull stays on your credit report for up to two years, and can affect your credit score. You can use a student loan refinancing calculator to estimate your total savings with a new refinanced loan, even before you prequalify.

2. Can You Refinance Federal Loans?

All new federal student loans are granted through the William D. Ford Federal Direct Loan (Direct Loan) Program . Federal loans are different from private student loans, which are made by banks, lenders, and other financial institutions.

Refinancing federal student loans is an option available to borrowers. Sometimes, refinancing can be beneficial, for example when a borrower is able to qualify for a lower interest rate. 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: Although you may end up paying more over time if you choose a lower monthly payment by extending the term of your loan, it may make sense for you if you can’t afford a higher one.

•   Shorten Your Loan Term: Imagine having no more student loans to payback! By shortening your loan term, you could speed up your repayment.

•   Rate Change: You may be able to switch out a fixed rate loan for a variable rate loan and vice-versa.

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.

•   No Longer Eligible Federal Forgiveness Programs: If you’re pursuing Public Service Loan Forgiveness (PSLF), refinancing may not be the right option for you, since doing eliminate your loans from being eligible for the program.

•   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. While some lenders, including SoFi , do offer some borrower protections, not all do.

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 also have fixed monthly payment. The interest rate on a variable rate loan can go up or down over time, depending on market conditions.

Although fixed rate loans are generally considered to be less risky as compared to variable rate loans, 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, yes. But beware: It may seem as though choosing the lowest monthly payment would be the best refinancing option, but you’ll most likely pay more money over time if you do that. That’s because lower monthly payments are typically achieved by stretching out the loan term, which means you’ll be paying more in interest over the life of the loan.

But If you recently graduated, you may not be making enough money to pay the monthly amount you’re currently signed up for, and 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.

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. An emergency fund could help you stay afloat while you look for another job.

When a borrower misses loan payments, they might incur late fees or other penalties. Additionally, late payments can have a negative impact on the borrower’s 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 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.

Some private lenders provide forbearance options for financial hardship situations. For example, SoFi’s unemployment protection program allows eligible members to temporarily put loans on hold if they lose their job through no fault of their own.

SoFi members also have access to career services that can assist with their job search. Not all lenders provide options that allow borrowers to pause their payments, so it is worth asking as you review different lenders.

6. Will the Lender Help With Your Career?

One of the best ways to decimate student debt is to increase your earnings and, thus, your student loan repayment power. 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, enrolling your SoFi loan in autopay could qualify you for an interest rate reduction.

•   Career Services: SoFi offers career services from Korn Ferry, whenever you need them.

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 can help you understand how legit the company is.

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 refi 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.

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.

SoFi offers flexible terms and low rates to help you save, and the entire application process can be completed easily online. There are no hidden fees, and you’ll have access to a suite of complimentary, member-exclusive resources. SoFi allows you to refinance previously consolidated loans as well. And if you choose to go back to school, you could be able to defer your payments until you graduate.

Interested in refinancing? Learn more about how refinancing with SoFi could impact your student loans. You can get a quote and find out if you pre-qualify in just a few minutes.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

CLICK HERE for more information.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.


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