Best Student Loan Refinance Options of 2024

Should you refinance your student loans?

Refinancing student loans is feasible, if:

• Your current student loan debt has a high-interest rate.
• You want to pay off your debt soon.
• You want to switch to lower interest rates.
• You want to convert multiple loans into a single loan.
• You have a reliable income and good credit.

It is not mandatory to have perfect credit for refinancing purposes. Just check if you qualify for a better interest rate than your current interest rate.

Pros and cons of refinancing student loans

Refinancing comes with several benefits—especially if you have a high balance.

Pros of refinancing

• Lower monthly payments
• A quicker payoff time (if you choose a short-term loan)
• More cash in your pockets
• Less interest paid over time
• A shorter path to debt-free living

Cons of refinancing

• Losing the benefits of certain programs attached to your federal student loans, like the Public Service Loan Forgiveness Program (PSLF), flexible repayment plans, pause payments, and an interest rate determined by the government instead of your credit score.
• It could hit your credit score as you’re essentially cutting a loan short and shifting it from one lender to another.

Can you refinance multiple times?

Yes, you can. There is no limit on how many times you can refinance. You should consider doing it often if it helps you further save money on interest costs by choosing a new repayment term suiting your current financial situation.

Who is eligible for student loan refinancing?

Though private lenders decide the eligibility of student loan refinancing, here are the following factors that they typically consider:

• Eligible loan: As most lenders refinance federal and private student loans for undergraduate, graduate, and professional degrees, you should know if your loan qualifies for refinancing.
• Credit history: This is a critical criterion as most lenders will do a credit check as they look for a decent credit score.
• Repayment history: You must have a solid repayment history on your current student loans.
• Consistent income: Lenders prefer consistent enough income, so you can afford your monthly payments.
• Debt-to-income ratio: This ratio assesses whether you can afford your new loan’s monthly payments.
• State requirements: Even if you are a U.S. citizen, some banks and lenders may only accept applicants from certain states.

If you don’t meet some of the above-mentioned criteria, you may consider applying with a creditworthy co-signer.

Just keep to note that every lender is different, so they all have various requirements – some are stricter than others.

What are the costs of student loan refinancing?

Refinancing involves switching from one lender to another. Your current lender will lose all the interest going forward while your new lender will gain it.

The majority of the private lenders charge no upfront fees. Some lenders hide and roll the upfront fees into the loan’s interest rate resulting in an apparent “no-cost” loan, with a higher interest rate.

Some lenders also charge a small application fee.

Also, in some rare cases, you might be required to pay an origination fee, which is a one-time fee to cover the costs associated with processing the loan, after you agree to your new loan terms and conditions. This might be in the range of 5% of your loan, generally added to your loan balance.

What is co-signer release?

Co-signer release is the process by which a co-signer can get off the hook of an existing loan, which means the co-signer is no longer responsible for the loan. Once a borrower proves to the lender they’re financially stable they qualify for the co-signer release.

Student loan refinancing is another way of availing a co-signer release. Your co-signer will be released once you refinance student loans into a new loan, as your old loans are paid off.

Not all lenders offer co-signer release.

Is refinancing student loans better than consolidation?

It boils down to the preferences of the borrowers. Consolidation can be viewed as a strategic move while refinancing can be viewed as a measure to save money.

• Student loan refinancing happens through private lenders, while student loan consolidation is usually a government process
• Both federal and private student loans qualify for refinancing, while for student loan consolidation, only federal student loans are eligible
• Refinancing requires a lender’s approval based on your eligibility factors like your credit history and debt-to-income ratio.

Keep to note, when you consolidate, you will do it through the Department of Education and maintain your federal benefits. When you refinance, you’ll do it through a private lender and lose federal benefits, but you’ll save money if you have a lower interest rate.

Can parents transfer Parent PLUS Loans to their children?

Parent PLUS Loans carry a higher interest rate, and these federal loans are non-transferable. The result is parents, as borrowers, have to bear the load by themselves, but there is a “fix” to this tricky situation.

The “fix” involves refinancing. Parent PLUS loans are eligible for refinancing, and these loans can be transferred to a child by refinancing them. A child should apply and get it approved as they would refinance their loans by a private lender.

But it’s important to note that all lenders do not provide this option.

How to choose the best student loan refinance lender?

Here are the factors worth considering while finding the right option for you:

• Shop around for a good interest rate: You might find that some lenders offer better rates than others, so it’s worth taking the time to compare them all. You’ll want to look at the loan fees and APR, and not just the interest rate alone. Some lenders will have a lower rate but their overall costs of originating the loan come make it more costly.
• Research the company: Remember, the company is the entity with whom you have to deal throughout your entire repayment term. Start by researching reviews about the company on the following parameters: Was the actual refinancing process the same as described? Were other customers satisfied with the overall service? How is the customer support?
• Repayment terms: The repayment term is the time duration in which you have to pay back your loan. You need to carefully select the term which suits you the best as per your financial situation. The repayment term directly affects your monthly interest payments. The longer the repayment term, the smaller your monthly interest payment will be and vice-versa.
• Customer service: It’s always good to see what other people think about a company before you decide to work with them. You can check out their social media pages, read testimonials from past clients, and read reviews on websites like Yelp and Trustpilot. This will give you an idea of whether they provide good customer service.