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The 7 Top Student Loan Refinance Tips

Kat Tretina

If you have student loan debt, you could be making payments well into your 30s or even your 40s.

The average college graduate has nearly $30,000 in student loan debt. According to the One Wisconsin Institute’s Student Loan Project, those with bachelor’s degrees take 21.1 years to repay their debt, on average.

Why does repaying student loan debt take so long? High interest rates can cause your loan balance to grow over time, making it difficult to make progress against the principal.

If you’re wondering how to lower student loan interest so you can save money while paying off your loans faster and getting out of debt once and for all, student loan refinancing is an effective strategy.

Plus, student loan refinancing offers a bunch of other helpful benefits and customizable features, too.

Here’s what you need to know to refinance your student loans and maximize your savings.

Why student loan refinancing is so effective

When you take out student loans as a college student, you may be stuck with high interest rates and unfavorable loan terms. Over time, the higher interest rates can cause your loans to balloon, and you can owe far more than you initially borrowed. By refinancing your student debt, you can save money and pay off your debt faster.

To refinance your student loans, you apply for a loan from a private lender for the amount of your existing education debt. You can refinance both private and federal loans. However, there are some drawbacks to refinancing federal loans you should consider before submitting your loan application.

If you’re approved for a refinancing loan, the lender will pay off your existing student loans. Going forward, you’ll have just one loan with a new interest rate, minimum payment, and repayment term. Depending on your credit history and application, you could qualify for a lower interest rate when you refinance, allowing you to save a substantial amount of money over your loan’s life.

7 student loan refinancing tips to help you get the best deal

If you decide that student loan refinancing is right for you, use these seven tips to help you find the right lender and the best loan to save the most money and get the best features.

1. Research student loan refinancing companies

There are dozens of student loan refinancing companies on the market. Since they’re all private lenders, they offer different interest rates, loan terms, benefits, and borrower options. It’s important to research multiple lenders instead of applying to the first one you find; rates and eligibility criteria can vary from lender to lender. Some things to consider include:

  • Loan amounts: Lenders often have loan minimums and maximums. If you have a large loan balance, you’ll have to look for a lender that caters to people with high loan amounts.
  • Degree requirements: Most refinancing lenders require applicants to have a bachelor’s degree to qualify for a loan. If you didn’t graduate or are still in school, your options are more limited.
  • Credit score: Most lenders require applicants to have good to excellent credit. If you don’t meet those criteria on your own, you’ll need a creditworthy cosigner to apply for the loan with you.

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2. Check lender reviews and customer feedback

Before selecting a lender, check lender reviews and customer feedback. You can read lender reviews on Purefy and learn about each lender’s loans and policies. And, you can read about firsthand customer experiences on sites like TrustPilot.

3. Determine your student loan payoff goals

When refinancing your loans, think about what your primary goal is before you submit your loan application. These are three of the most common goals:

  • You want to save money: If you want to save money, you should look for a lender that offers the lowest interest rates for your credit score and desired loan term.
  • You want a smaller monthly payment: If your goal is figuring out how to lower your monthly student loan payment,look for a lender that has longer loan terms, such as 12, 15, or 20 years.
  • You want to pay off your loan as quickly as possible: If you want to become debt-free as soon as possible, select a lender that offers shorter loan terms and variable interest rates. You can take advantage of lower initial interest rates to pay off your debt more aggressively.

4. Consider added benefits and features

Not all lenders offer the same benefits and features. When shopping for a lender, make sure you compare the following perks:

  • Cosigner release programs: Some refinancing lenders allow you to apply for a cosigner release after making on-time payments for a few years. If approved, your cosigner is removed from the loan.
  • Hardship options: If you cannot afford your payments because of a job loss or medical emergency, some lenders allow you to enter forbearance. You can temporarily postpone or reduce your payments for a few months at a time without defaulting on your loans.
  • Discounts: Some refinancing lenders offer interest rate discounts for existing customers or for signing up for automatic payments.

5. Decide if you want a fixed-rate loan or a variable-rate loan

Next, figure out if you want a fixed-rate loan or a variable-rate loan when you refinance. With a fixed-rate loan, your interest rate and monthly payment never change. If you opt for a variable-rate loan, your rate will typically start lower than if you chose a fixed-rate loan. However, it can change over time.

Choosing a variable-rate loan is one of the ways to lower student loan interest, and can be a good strategy if you want to pay off your debt ahead of schedule. But if you’ll take several years to repay your loan, selecting a variable-rate loan can be risky since it can fluctuate.

6. Select a loan term

When looking for a loan, pay attention to the different loan terms.

While a longer loan term will give you a lower monthly payment, you’ll usually pay a higher interest rate to get a longer term. And, you’ll pay more in interest over time.

To get the best student loan refinance rates, you typically will need to choose a shorter loan term, meaning eight years or less. If you can afford a shorter loan term, it’s a great way to save money and get rid of your debt sooner.

7. Compare rates and terms from multiple lenders

It’s always a good idea to compare student loan refinance rates and terms from several lenders before making a decision. Rates can vary widely from lender to lender, so it’s smart to get quotes from different lenders so you can find the right loan for you and save the most money.

How to find the best student loan refinancing lender quickly

Now that you know how to lower student loan interest rates and manage your debt with student loan refinancing, you can start the process of finding a lender.

While you can comparison shop on your own, it can be time-consuming and frustrating to research and check a large number of lender websites. Luckily, there’s a better way. You can use Purefy’s Compare Rates tool to get quotes from top student loan refinancing lenders at once all in one place, without affecting your credit score.

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ELFI Rate Disclosure

4 ELFI Rate Disclosure:

Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 12/01/2022. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

SoFi Rate Disclosure

3 SoFi Rate Disclosure:

Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

Earnest Rate Disclosure

2 Earnest Rate Disclosure:

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.64% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 4.24% APR to 8.54% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

ISL Rate Disclosure

5 Iowa Student Loan Rate Disclosure:

Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 3.94% to 8.48% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

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