Typically, it does not cost a borrower money to refinance student loans. Most lenders do not charge origination fees or application fees. However, you can end up paying fees if you don’t make your payments on time.
In the right circumstances, refinancing your student loans could help you save both time and money as you work to pay down your student debt, without costing you any money to do so.
Key Points
• Most lenders do not charge application or origination fees for refinancing student loans.
• Refinancing can lower interest rates, simplify repayment, and offer flexible loan terms.
• Borrowers with federal loans who refinance lose access to income-driven repayment, forgiveness programs, and other federal protections.
• Late payment or returned payment fees may apply if loan payments are missed.
• To avoid hidden fees, read the loan terms carefully and consider setting up automatic payments for potential rate discounts.
Student Loan Refinancing Recap
Student loan refinancing is the process of paying off one or more existing student loans with a new loan through a private lender. Depending on the terms of your current loans and your creditworthiness, you may be able to get a lower interest rate or lower monthly payment.
You can typically refinance both federal and private student loans.
Refinancing is different from federal student loan consolidation, which involves combining several eligible federal loans into a Direct Consolidation Loan. While that process can simplify your repayment plan and help you maintain federal loan protections, it typically doesn’t help you save money.
Every situation is different, but with the right refinance loan, you could potentially save money as you pay down your student debt.
That said, there are both benefits and drawbacks of refinancing to consider.
Pros of Student Loan Refinancing
Can Save You Money
If you qualify for a lower interest rate than what you’re currently paying, refinancing your student loans could save you money on interest over the life of the loan. Keep in mind that this includes keeping the loan term the same. If you extend your loan term, you could end up paying more in interest, even with a lower rate.
If you don’t qualify for a lower rate on your own, you may be able to add a cosigner with solid creditworthiness to help improve your chances.
Can Give You More Flexibility
Student loan refinance lenders typically offer a range of repayment terms, allowing you to shorten or lengthen the amount of time you have to pay off your debt.
Simplifies Your Repayment Plan
If you have multiple student loans across more than one servicer or lender, refinancing them all into one new loan can make repayment a little easier.
Cons of Student Loan Refinancing
You’ll Lose Federal Benefits and Protections
If you have federal student loans, refinancing with a private lender will cause you to lose certain benefits and protections, such as access to income-driven repayment plans, federal loan forgiveness programs, and more.
It May Not Save You Money
If your current interest rates are already low, it may be tough to qualify for something even lower. Also, applying for a longer repayment period than what you already have could end up costing you more in interest over the life of the loan.
You May Get Less Help When You’re Struggling
Federal student loans allow you to apply for student loan deferment or forbearance if you’re struggling to make your payments. When you refinance with a private lender, you may not get these same benefits.
Deferment and forbearance options can vary by private lenders. With SoFi, for instance, you may qualify for a deferment if you return to graduate school on a half-time or full-time basis, undergo disability rehabilitation, or serve on active duty in the military.
How Much Does It Cost to Refinance Student Loans?
Refinancing student loans with a private lender typically does not come with any costs to the borrower. Most companies do not charge any fees associated with student loan refinancing. If you are being charged fees (see below), you may want to look elsewhere for your refinance.
Common Fees When Refinancing Your Student Loans
If a lender does charge fees for refinancing, these are some you may run into:
• Application fee: This fee covers the cost of processing the application and is typically due when you submit your application.
• Origination fee: Some lenders charge this fee to help cover the costs of processing your loan and disbursing the funds.
• Late payment fee: Many lenders charge this fee if you miss a student loan payment. Depending on the lender, you may get a grace period between your due date and when the fee is assessed.
• Returned payment fee: If you try to make a payment but don’t have enough money in your checking account to cover it and no overdraft protection, some lenders may charge you a fee for the failed transaction.
In most cases, you won’t have to pay anything up front to refinance your student loans. With SoFi, there are no application fees, no origination fees, no late fees, and no prepayment penalties.
As you’re shopping around, make sure you read the fine print to understand the cost of refinancing student loans with that particular lender.
Serious savings. You could save thousands of dollars
thanks to flexible terms and low fixed or variable rates.
Reducing the Cost of Refinancing Student Loans
Because many student loan refinance lenders don’t charge upfront fees, shopping around with those costs in mind can help you improve your chances of finding a low- or no-cost lender.
Keep in mind, though, that some lenders may charge what are called “hidden fees.”
Instead of showing up in marketing material, these fees are often buried deep in the terms and conditions of the loan and can be tough to find if you’re not looking for them.
Taking the time to thoroughly read the terms and conditions before refinancing could help you avoid unexpected fees down the line.
If you get approved for the new loan, you might consider setting up automatic payments to help avoid missing a payment and getting charged a late fee. Some lenders, including SoFi, offer an interest rate discount to qualified borrowers using autopay.
Then, you might make it a goal to always have a buffer in your checking account or overdraft protection to ensure a payment doesn’t get returned.
Considering SoFi to Avoid Upfront and Hidden Costs
If you’re considering refinancing your student loans, shopping around can take time. When refinancing with SoFi, you don’t have to worry about paying upfront costs or hidden fees.
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.
FAQ
Does it cost money to refinance loans?
No, it typically does not cost money to refinance student loans. Most student loan refinance lenders do not charge fees associated with refinancing — including application fees and origination fees. If you are being charged a fee to refinance, that could be a red flag and you may want to look elsewhere.
What is a finance charge on a student loan refinance?
On a student loan refinance, a finance charge is what you pay the lender beyond the principal balance. This would include interest and any fees associated with the loan.
How much does it cost to consolidate student loans?
If you want to consolidate your federal student loans, there is no application fee associated with a federal Direct Consolidation Loan. It does not cost the borrower anything to consolidate federal loans.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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