You’ve probably heard that credit card debt and auto loans can be refinanced, but can student loans be refinanced? The answer is yes. In fact, refinancing your student loans might be a great option to lower your interest rate and possibly even reduce your monthly payments.
Not sure what’s involved? Here’s a detailed look at student loan refinancing basics so you can decide if it’s the right decision for you.
The Student Loan Refinancing Process
When you refinance your student loans, you’re essentially taking out a new loan and using it to pay off your existing student loans. Refinancing may allow you to secure a lower interest rate or reduce monthly payments.
Student loan refinancing may also allow you to change your repayment term. If you took out a private student loan to pay for your education, the repayment terms were set when you borrowed the loan.
If you borrowed federal loans, there are eight repayment plans you can choose from, including the Standard 10-year Repayment plan, or one of four income-driven repayment plans. If you refinance, you can choose a shorter or longer repayment term.
A shorter repayment term will mean that your monthly payments will increase, but that you’ll most likely pay less in interest over the life of your loan. In contrast, a longer repayment term will mean that your monthly payments will decrease but that you might pay more in interest over the life of your loan.
Wondering about the interest rates on your refinanced loan? Interest rates on federal loans are set by the government and are fixed for the life of the loan. For example, federal undergraduate loans for the 2018 to 2019 school year have a 5.05% interest rate , you might qualify to pay less in interest if you decide to refinance at a later date.
When it comes to private or refinanced student loans, the interest rate and loan terms will depend on several factors including your income and credit score—or the income and credit score of your co-signer.
Is It Worth It to Refinance Your Loans?
You might be wondering whether it makes sense to go through all the hassle of refinancing your student loans. You might be surprised by how much you can save and how little work it takes to refinance your student debt. Take a look at this student loan refinance calculator to see how refinancing your student loans could change your interest rate or monthly payments.
Can your student loan application be filled out on your lunch break? Yes! It can take just a few minutes to apply online to see if you qualify and get a quote.
Once you’re pre-approved, you will have to send in some scanned documents and sign a form to finish the process. It can take anywhere from a few days to a few weeks for everything to be completed.
And if you’re approved for a lower interest rate, you could stand to seriously reduce the amount of interest you pay over the life of the loan—provided you don’t extend your loan term.
Depending on how much you have in student debt, reducing your rate by just a few percentage points could save you thousands of dollars over the life of your loan. Student loan refinancing lenders that offer low rates, like SoFi, could help you significantly reduce your interest rate.
What Types of Student Loans Can Be Refinanced?
Both federal or private student loans can be refinanced, but some lenders only refinance private student loans—if you want to refinance federal student loans, take a look at each lender’s policy. At SoFi, we refinance both private and federal student loans.
If you currently have a few different loans with different lenders, refinancing could mean a simplified repayment plan, with only one monthly payment to track. However, you’ll lose out on some federal benefits if you choose to refinance with a private lender.
You would no longer be eligible for protections like forbearance, deferment, or Public Service Loan Forgiveness if you refinance. If you plan on taking advantage of these protections, you may be better off keeping your federal loans as is, or consolidating them with the government with a Direct Consolidation Loan .
Many private student lenders—including SoFi—are starting to offer more benefits to their borrowers. As a SoFi Member, you could qualify for unemployment protection, which would allow you to temporarily pause your loan payments in the event you unexpectedly lose your job through no fault of your own. As you’re shopping around for a refinancing loan, be sure to review all of the lender’s policies to see what benefits are available.
What to Look for in a Student Loan Refinance Company
When it comes to refinancing your student loans, consider finding a lender that doesn’t charge you origination fees or pre-payment fees. Usually, you’ll have the choice between a fixed or variable rate loan.
Each type has its benefits, so review your loan and financial situation to determine what would be best for you. While variable interest rate loans tend to offer lower introductory rates, they will go up if interest rates go up.
Refinancing could be an opportunity to take charge of your student loan debt. With a lower interest rate and manageable monthly payments, refinancing might alleviate some student loan stress.
If you’re ready to refinance, consider SoFi, the leading student loan refinancing provider. At SoFi, there are no origination fees or pre-payment penalties, and you’ll have access to SoFi member benefits, like community events and career counseling.
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.
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.
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 .