Student Loan Refinancing
Best Student Loan Refinance Companies
How to Pay off Student Loans Fast
Managing Your Student Loan Debt
Best Parent PLUS Loan Refinance Companies
Why Parents Should Refinance Student Loans
How to Refinance Parent Student Loans
Parent’s Guide to Student Loans
When to Apply for Private Loans
How to Pay for College Tuition
Applying for Student Loans Guide
Find Scholarships & Grants
Student Loan Refinance 101
Student Loan Glossary
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An Annual Percentage Rate, or APR, is the interest rate for a whole year (rather than just a monthly fee or rate) as applied on a student loan, mortgage, credit card, or other type of loan. This number may differ from your interest rate because it takes into account any fees associated with your loan.
Ascent Student Loans is a national private loan company that offers non-cosigned and cosigned loans for undergrad and grad students including Non-Cosigned Future Income-Based Loans, Non-Cosigned Credit-Based Loans, and Cosigned Credit-Based Loans. Ascent is a lending partner of Purefy for private student loans, and their loan options and rates can be viewed in Purefy’s Compare Rates tool.
In the student loan industry, a borrower is the person who has taken out some type of student loan including federal, private, and refinance loans.
A college application is the process by which prospective students apply for acceptance into a college or university.
College Ave is a relatively new company (launched in 2014) offering both private student loans and student loan refinancing. Designed to help you pay for school simply and inexpensively, or refinance student loans to manage debt more easily, College Ave can be a useful financial tool. With its proprietary technology platform and easy online application, College Ave has become one of the top lenders for both private student loans and student loan refinance. College Ave is a lending partner of Purefy for private student loans and student loan refinancing, and their loan options and rates can be viewed in Purefy’s Compare Rates tool.
In the student loan world, consolidation refers to the act of combining multiple student loans into one. Consolidating student debt can be done through a federal Direct Consolidation Loan or a private student loan refinance.
A cosigner is someone who signs your student loan or refinancing application with you — usually a parent, relative, or close friend. The cosigner is ultimately responsible for making payments if the borrower is unable to do so. Having a cosigner with good credit is a great way to ensure that the borrower can get the best rates on private student loans and student loan refinancing.
Some private lenders offer cosigner releases for borrowers who refinance their student loans. It’s an excellent opportunity for people more financially comfortable in their careers to refinance their loans to a lower rate or more manageable repayment term, while releasing a cosigner from their obligations. This process also removes the loan from the cosigner’s credit report, which can help lower their debt-to-income ratio.
Credit bureaus are companies that collect credit ratings on individuals from a variety of creditors and make the information available to financial institutions. There are three national credit bureaus: Experian, Equifax, and TransUnion.
A credit check is when a financial institution or company looks at information about a person’s credit history and financial behavior. There are two type of credit checks: a soft credit check that does not impact credit score, and a hard credit check that appears on an individual’s credit report and could cause a small negative impact to credit score. Credit checks are what private student loan lenders use to determine an applicant’s eligibility as well as which interest rates they qualify for.
A credit history is a record of a person’s credit usage, activity, and bill payments. Ultimately, it’s meant to provide an indication of someone’s ability to repay debt and make on-time payments.
A credit report is prepared by a credit bureau and contains a detailed view of a person’s credit history. Student loan lenders use the information from a credit report to determine an applicant’s overall creditworthiness.
A person’s credit score is a number between 300 and 850 that represents their ability to pay back a loan and overall level of creditworthiness. The number is calculated by a number of factors associated with an individual’s credit report including payment history, credit usage, length of credit history, types of credit, and recent credit inquiries. Credit score plays a major role in determining whether a private lender will approve a student loan or refinance application, and which rates to offer an applicant.
A CSS Profile is an account with the College Board that includes information about a student, their family’s finances, and their assets. By submitting this profile, prospective students may be able to qualify for institutional aid (separate from federal aid) which comes directly from the school they want to attend. (Note: not all schools participate.)
Debt-to-income ratio (or DTI) is a snapshot of how much monthly income goes toward debt. DTI can be calculated by simply adding up monthly debt payments and dividing the total by gross monthly income (pre-tax).
If student loan payments are missed for 270 days (or about nine months), they’ll enter student loan default. Once student loans enter default, there are many serious consequences including: the entire unpaid loan balance and interest becomes immediately due, the default will be reported to credit bureaus which will further damage credit, and the loan holder can pursue legal action against the borrower.
If a borrower applies and is approved for federal loan deferment, payments can be postponed on student loans for up to three years. If a borrower is eligible for a deferment, they also may not be responsible for paying the interest that accrues on their loan during the deferment period. Eligibility is typically determined by medical, professional, or financial hardship. Some private lenders also offer deferment, for example to borrowers who go back to school to pursue another degree, or for military personnel who go on active duty.
Student loan delinquency occurs once a single student loan payment is missed. Delinquency status is maintained until the past-due balance is completely paid (including any late fees, if applicable). Typically, federal student loans can be delinquent for about 90 days before the delinquency is reported to the three national credit bureaus.
Federal student loan consolidation is a method of managing federal loans through a Direct Consolidation Loan. With this type of loan, multiple federal loans are streamlined and combined into one big loan and payment. Direct Consolidation Loans have fixed interest rates, meaning the interest rate will stay the same for the length of the loan. The interest rate is determined by using the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent.
Federal PLUS Loans are broken down into two different groups: Grad PLUS Loans and Parent PLUS Loans. The former option is designed for college students pursuing a graduate or professional degree or certificate, while the latter is for parents looking to help an undergraduate student pay for school.
In the student loan industry, a disclosure is meant to reveal additional information related to rates, terms, lenders, and more. For example, a disclosure may inform potential borrowers how rates are calculated for a specific lender.
Earnest student loans is a high-tech lender with a streamlined application process, its own proprietary loan servicing platform (including a mobile app), plus competitive rates and unique perks that can help student loan borrowers save money. Earnest offers both fixed- and variable-rate student loan refinance loans, with flexible repayment terms ranging from five to 20 years. Earnest is a lending partner of Purefy for student loan refinancing, and their loan options and rates can be viewed in Purefy’s Compare Rates tool.
In the student loan industry, eligibility refers to the list of requirements a potential borrower must meet in order to be approved for a private student loan or student loan refinance.
An individual’s employment history is a record of their past and current jobs. It’s an important eligibility factor for student loan refinancing that private lenders use to determine if an applicant will be approved and for which rates.
With an Extended Repayment Plan, the loan servicer extends your repayment term to 25 years. Your payments can be fixed or graduated, and this option can lower your monthly payments substantially if you’re really struggling to make ends meet. However, because of the longer term, you’ll pay more in interest charges than you would with a 10-year repayment plan. Only borrowers with more than $30,000 in outstanding federal Direct Loans are eligible for an Extended Repayment Plan.
The Free Application for Federal Student Aid, or FAFSA, is what the federal government and colleges use to determine the amount of aid a prospective college student qualifies for. It’s free to complete the FAFSA, but it’s a good idea to submit the application as soon as possible to make it more likely to qualify for financial aid, including grants. Once the FAFSA is complete, the applicant will receive a Student Aid Report containing a summary of financial information and Expected Family Contribution (EFC), or how much a family is expected to pay toward education costs.
Federal financial aid includes the amount of federal student loans a student qualifies for, as well as any grants or work-study programs that a student is eligible for. This aid is determined from the personal, financial, and family information provided in the Free Application for Federal Student Aid, or FAFSA.
With federal student loans, the lender is the U.S. Department of Education.
Federal student loans are issued by the U.S. Department of Education. These loans don’t require a credit check and typically offer low rates that are set each year by Congress. Federal loans also come with access to beneficial federal student loan programs including Public Service Loan Forgiveness, income-driven repayment plans, forbearance, and deferment.
If you have federal student loans, there are four main student loan repayment options available to you: Standard Repayment, Graduated Repayment, Extended Repayment, Income-Driven Repayment (IDR).
With federal student loans, in most cases, the borrower will be automatically set up with one of nine servicers: Nelnet, Great Lakes Educational Loan Services, Inc., Navient, FedLoan Servicing (PHEAA), MOHELA, HESC/EdFinancial, CornerStone, Granite State – GSMR, or OSLA Servicing.
After filling out a Free Application for Federal Student Aid (FAFSA), the applicant will receive a financial aid award letter from each school. This letter provides essential details about the monetary assistance the student can receive — particularly in the form of federal aid.
A fixed interest rate will stay the same (or be “fixed”) for the entire length of a loan. Keep in mind that because the lender takes on more long-term risk with a fixed rate, it will usually be higher than the initial rate on a variable rate loan.
Entering forbearance allows federal student loan borrowers to postpone making payments on their loans. However, the borrower is still responsible for paying the interest that accrues on their student loans while in forbearance. The interest can be paid as it accrues during the forbearance period, or it can be allowed to accrue and be capitalized — added to the loan balance — at the end of the forbearance term. There are two types of federal forbearance:
Graduate PLUS Loans, also called federal Direct Grad PLUS Loans, are a type of federal student loan provided by the U.S. Department of Education. You’re eligible for a Grad PLUS Loan if you’re a graduate or professional student enrolled at least half time at an eligible school and working on a degree or certificate, you meet the general eligibility requirements for federal student aid, and don’t have certain negative items on your credit report in the past five years. If you don’t meet the Department of Education’s credit requirements, you can apply with a cosigner.
Both federal and private student loans have options for graduate students. Federal graduate loans include Direct Unsubsidized Loans and Grad PLUS Loans. Private student loans for grad students can help cover any funding gaps that federal loans fall short of.
Under a Graduated Repayment Plan, your payments start off quite low and manageable. But every two years, your payments will increase. After 10 years of payments, your loans will be completely paid off. Despite paying off your loans in 10 years, you’ll pay more in interest charges with a Graduated Repayment Plan than you would with a Standard Repayment Plan. This can be a smart option for recent college grads early in their careers, who don’t have a high income yet but should start seeing increases as work experience grows. All borrowers are eligible for Graduated Repayment.
Like scholarships, grants are a type of financial aid that doesn’t need to be repaid. The Department of Education provides a number of grants based on financial need — a crucial reason to fill out the FAFSA — and other requirements. Additionally, you may be able to find state- and school-based grants, along with grants from private companies and organizations, to help you pay for college.
Income is the amount of money you make per year, and household income is the amount married couples make together. Income is another eligibility requirement for student loan refinancing that can impact approvals and rates.
For federal student loan borrowers who took out loans after July 1, 2014, your monthly payment will be 10% of your discretionary income, and your repayment term will be 20 years.
Your payment will be the lesser of 20% of your discretionary income or what your fixed payment would be with a 12-year repayment term.
Unlike the other federal repayment options, IDR plans are dependent on your income and family size. In some cases, you could even qualify for a payment as low as $0, meaning you won’t have to make payments and you won’t become delinquent on your loans. For those who qualify, IDR plans can, in certain situations, make a significant dent in how much of your loans you actually pay back — while reducing your monthly payments. Generally, the borrowers who benefit most from staying on these plans long-term have a high student loan balance relative to their income.
There are four IDR plans available:
Interest is the amount of money paid regularly at a particular rate for the use of money borrowed from a student loan lender, or for delaying the repayment of a student loan debt. In essence, it’s the “extra” money you have to pay back the lender for the opportunity to use their money to go to college (or pay off your existing student loans by refinancing).
For private student loans under an interest-only payment plan, you only pay the interest that accrues while you’re in school; you don’t have to start making full payments against the principal until you graduate. This approach won’t save you as much lifetime interest as immediate repayment, but you’ll pay less in interest than you would if you used a deferred payment plan.
Student loan interest rates are calculated differently for federal and private student loans. Federal student loan interest rates are set annually by Congress, and they’re primarily based on the high yield of a U.S. Treasury note auctioned in May of each year. Unlike the U.S. Department of Education, private lenders require a full credit check when you apply for a private student loan. Because these lenders function differently than the government, they provide a range of interest rates for all borrowers, based on creditworthiness. This arrangement is called risk-based pricing. When you apply for a private loan, the lender runs a credit check and uses your income information to determine whether there’s a risk that you’ll default on loan payments. The lower your credit score and income, the likelier it is that you’ll have a high interest rate.
If you’ve been considering student loan refinancing, one lender to look at is Iowa Student Loan. Despite its name, the company works with borrowers from all over the country — not just Iowa residents — and it offers low interest rates and some unique perks. Iowa Student Loan is a lending partner of Purefy for student loan refinancing, and their loan options and rates can be viewed in Purefy’s Compare Rates tool.
This is the organization or company a student loan borrower is actually borrowing money from.
The London Inter-Bank Offered Rate, or LIBOR for short, is a benchmark interest rate which is used by banks to lend money to each other. It is also used as an index rate for variable rate loans, which are usually tied to 1-month, 3-month, or annual LIBOR rates. In such cases, if LIBOR increases, the variable rate on the loan will increase, and vice versa.
In terms of student loan refinancing, loan limits are the minimum and maximum total student loan debt amounts that private lenders are willing to refinance.
This is who takes a prospective student loan borrower’s application, handles the approval process, presents the loan agreement, and disburses the funds.
The loan principal, or principle balance, is the total amount still owed on a student loan or refinance loan.
This is who handles a student loan borrower’s monthly bills, receives payments, considers requests for deferment or forbearance, and does anything else related to the maintenance of a student loan or student loan refinance.
This is a fee charged by a lender after entering a loan agreement to cover the cost of processing the loan. Purefy does not partner with any private student loan or refinancing lenders who charge origination fees.
Parent PLUS Loans are student loans offered by the federal government to parents who want to borrow money to pay for their child’s education.
Refinancing Parent PLUS Loans allows you to take out a loan from a private lender that covers the cost of your current Parent PLUS debt. The new loan is completely different from your old ones — with a new repayment term, interest rate, and monthly payment. And, if you had multiple student loans before, refinancing gives you just one loan and one monthly payment going forward. Refinancing your Parent PLUS Loans and lowering your current interest rate can be a very big deal for your finances — especially when considering Parent PLUS Loans typically have the highest interest rate of any federal student loan.
With the Pay As You Earn (PAYE) income-driven repayment plan, your monthly student loan payment will be reduced to just 10% of your discretionary income, and never more than your payment on a standard 10-year repayment plan.
PenFed Credit Union is a leading student loan refinancing company that offers competitive interest rates and unique benefits. PenFed allows you to refinance both federal and private student loans. The credit union also offers parent loan refinancing, which lets parents refinance Parent PLUS loans or private loans they took out on behalf of their children. If you’re married, you can take advantage of PenFed’s spouse loan refinancing program. With this option, you can combine your loans together. Rather than juggling multiple loans, interest rates, and monthly payments, you’ll have just one loan and one monthly payment to worry about as a couple. Full disclosure: Purefy originates PenFed’s student loan refinancing loans.
Prepayment refers to the action of paying off your full student loan balance earlier than scheduled — typically by making larger monthly payments than you actually owe, or by making large lump sum payments until your principal balance is paid off. Some private lenders may have prepayment penalty fees for paying off debt faster than the agreed upon repayment term — but Purefy does not partner with any private lender who has prepayment penalties.
Pre-qualification is the process of a private lender analyzing information from a potential student loan or refinancing borrower, and providing an interest rate quote. This takes place before the borrower actually applies for a loan, and it may involve a soft credit check, which has no impact to your credit score.
See Loan Principal.
Private lenders for student loans or refinance loans are usually banks, credit unions, or other financial institutions. With private student loans or student loan refinancing, you can compare rates and terms from a variety of private lenders before applying. This can be very useful when deciding the best option since rates, terms, and eligibility can vary widely from lender to lender.
Private student loans are offered by banks, credit unions, and other financial institutions such as online lenders. Private lenders perform a credit check to determine loan eligibility. Interest rates vary among different lenders and are primarily based on creditworthiness. Because of this, many students will need a cosigner with a strong credit history and good income in order to qualify. Private loans can be a helpful solution for filling in necessary funding gaps so that students can afford college.
Called PSLF for short, the Public Service Loan Forgiveness program is designed for people who choose a career with a federal, state, local, or tribal government agency or for an eligible not-for-profit organization. If you do qualify, you’ll receive forgiveness for your entire remaining balance after you’ve made 120 qualifying monthly payments. Other requirements include:
There’s no cap on how much can be forgiven, and unlike some other forgiveness programs, the discharged amount is not considered taxable income by the IRS.
Purefy was launched in 2014 to offer a simple, transparent, and time-saving way to find the best student loans. We are nimble, innovative, and dedicated to providing you tools and options to help lower your student loan rates and get out of debt sooner. Plus, we have the best team of student loan experts in the business.
Purefy is here to help student loans borrowers realize their financial goals — from applying for private loans and paying less interest to refinancing student loans and ditching debt sooner. With Purefy, you can save money on student loan interest while customizing your term to pay off debt on your schedule. Whether you’re a student loan borrower, parent, or current college student, Purefy has the tools you need to achieve student loan success.
Purefy’s Compare Rates tool allows you to check student loan and refinance lenders, rates, and terms with complete confidence. Our goal is the same as yours — to find the best loan for your financial needs.
Student loan refinance rates can change often, so how do you keep track of them easily? With a rate comparison tool, the process is simple. You see your rate options from top lenders all in one place and all at once. With Purefy’s Compare Rates tool, it takes just one fast form — with no impact on your credit. By quickly discovering your lowest refinance rate, you’ll be able to save the most money on your student loan payments.
The main reason that people refinance student loans is to get a lower interest rate, a more favorable repayment term, or a bit of both. But there are other great reasons to choose student loan refinancing, too. Below are the primary benefits of student loan refinancing:
A repayment term is the length of time a student loan or refinance borrower has to repay their debt in full.
Revised Pay As You Earn (REPAYE) is the newest of the income-driven repayment (IDR) plans for federal loan borrowers. It was launched in 2015 as part of the Obama Administration’s efforts to help student loan borrowers manage their debt. Under REPAYE, the Department of Education extends borrowers loan terms. Instead of the standard 10-year repayment plan, you’ll have 20 years if all your loans were used for undergraduate study. If you took out loans for a graduate or professional degree, your repayment term will be 25 years. With REPAYE, your monthly payment is generally capped at 10% of your discretionary income. For the purposes of federal student loan payments, your discretionary income is the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.
Scholarships are a type of financial aid that you don’t have to pay back. Your school may offer several options based on merit and financial need. Academic and athletic scholarships are common. In addition to scholarships provided by your school, you can also apply for scholarships from private companies and organizations. Websites like Scholarships.com and FastWeb list millions of scholarships that you can apply for. While you won’t be eligible for all of them, you may still be able to get a significant amount of cash to help you cover your costs.
With a secured loan, you have to put something of value down as collateral. For example, when you take out an auto loan or home loan, your car or house serves as collateral on the loan. If you fall behind on your payments, the lender can take and sell your property to offset their costs. Secured loans tend to have the lowest interest rate of any loan, because there’s less risk to the lender. The opposite of a secured loan is an unsecured loan, which has no collateral and includes loans such as personal loans and student loans.
Consolidating student loans with a spouse involves combining all your loans together into one new loan — instead of maintaining separate loan accounts. If you want to combine student loans with a spouse, PenFed Credit Union is the only lender that offers that option. A spouse student loan consolidation through PenFed allows you to add loans from both partners during the application process, making it easier to take advantage of the benefits of refinancing for both of you. During the application process, PenFed will combine your income and debts to determine your eligibility, which can be helpful if one spouse works full-time while the other is a stay-at-home parent or only works part-time. What’s more, your interest rate will be based on the higher of your two credit scores and the higher degree between the two of you — so the person with the higher level of education should apply as the primary borrower.
The Standard Repayment Plan is the default repayment option for federal student loans; it’s what you’re automatically enrolled into. You’ll have a fixed monthly payment and pay off your loans within 10 years, and it’s the most simple and basic of repayment plans. In general, you’ll pay less in interest charges under a Standard Repayment Plan than you would with other options. All borrowers are eligible for Standard Repayment.
Consolidation is the act of combining multiple student loans into one loan. Consolidating federal student loans is possible through a Direct Consolidation Loan or a student loan refinance, but consolidating private loans is possible only through student loan refinancing. You can also consolidate private loans with your federal loans by refinancing.
When you first take out a student loan, you typically don’t have to start making payments immediately. In many cases, your student loan payments are deferred until you graduate, leave school or drop below half-time enrollment. But even then, you’ll typically get a grace period, during which you’re not required to make payments. The length of your grace period depends on the type of student loan you have.
The student loan interest deduction allows eligible student loan borrowers to deduct some or all the amount they paid in interest on their student debt as an adjustment to their income.
Direct Subsidized Loans are undergraduate student loans and are available to students with financial need. There’s no credit check. If you’re attending school at least half-time, then the U.S. Department of Education will cover the interest that accrues on your Subsidized Loans while you’re in school and for the first six months after you leave school. Also, interest does not accrue if your loan is placed in a deferment. The amount you can borrow with Subsidized Loans is determined by your school, and cannot exceed your financial need.
Unsecured loans don’t require any form of collateral. Lenders review your loan application and decide whether to issue you a loan based on your credit score, income, current debt, and other factors. Because there is no collateral, unsecured loans pose more of a risk to lenders. As such, unsecured loans tend to have higher interest rates than secured loans (such as auto or home loans). However, if you have good to excellent credit, you can still qualify for relatively low interest rates.
Direct Unsubsidized Loans are available to both undergraduate and graduate students and don’t require financial need to qualify. Undergrads can qualify for both Subsidized and Unsubsidized Loans. There’s no credit check requirement. Like Subsidized Loans, interest starts accruing immediately with Unsubsidized Loans. The difference is that the government doesn’t cover the cost for you. So, if you don’t make interest-only payments while you’re in school, that interest will capitalize when you start making payments, increasing your principal balance. Your school will determine the amount you can borrow with Unsubsidized Loans each year, and there’s an annual limit based on your year in school and whether you’re a dependent or independent student based on your FAFSA.
The United States Department of Education is a Cabinet-level department of the United States government that is administered by the United States secretary of education. Their budget supports new postsecondary grants, loans, and work-study assistance to help students and their families pay for college.
Unlike fixed interest rates, variable rates fluctuate over the life of your loan. The interest rate will typically change on a monthly, quarterly or annual basis. Variable rates are usually calculated based on the London Interbank Offered Rate, called LIBOR for short. This rate is a market benchmark for many different types of loans and credit cards globally. If the LIBOR falls, so will the rate on your loan. But if the LIBOR increases, your interest rate — and monthly payment — will go up with it. Variable interest rates typically start out lower than fixed interest rates because the lender is shifting some of the interest rate risk to you. If the rate goes up, you’re the one who will end up paying for it via higher monthly payments.
Work-study programs can be an excellent way to pay for college through employment at your school. Your eligibility is typically based on the information you share on the FAFSA. The job opportunities are typically part-time and flexible, which can make it easier to manage your class schedule and workload.