Student Loan Refinancing
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As we move closer to the eventual end of the pandemic-related deferments for federal student loans (as of this date, August 31, 2022), people are in the process of evaluating the refinance options available to them.
They are also weighing the looming interest rate increases that are sure to negatively impact refinancing loans in the future.
Today, there are over 44 million people with federal and private student loans totaling more than $1.6 trillion. The amount is staggering — it’s more than all the credit card debt in the U.S. combined.
If you are a member of the armed forces or a veteran and belong to Navy Federal Credit Union, you may have financed your private student loans through them. Let’s take a look at why you should consider refinancing those loans.
When you look at how to refinance Navy Federal student loans (or any federal or private student loans), you want to weigh the pros and the cons.
Is there money to be saved? Can you change the terms of your current loans to better meet your needs through refinancing? Will you need a cosigner to get the best rate? These are all questions that can be answered during the student loan refinance process.
Let’s take a look at the benefits and the drawbacks of refinancing Navy Federal student loans, as well as the best way to compare student loan lenders and offers.
There are a number of pros to refinancing Navy Federal Student Loans, or any federal or private student loans.
When you took out those loans, the interest rates were probably significantly higher than they are now. In fact, depending on the type of student loan and the year it was initiated, you could be paying rates as high as 8% to 9% with variable rates that are even higher.
By refinancing those high-interest loans, you can gain some significant savings. Let’s look at the pros of refinancing federal and private student loans:
The biggest (and most obvious) benefit to refinancing your loans is the ability to save money. When you refinance your federal and private student loans, including loans from Navy Federal, you will get a new interest rate based on today’s private lender marketplace.
To get a glimpse of the big picture, today’s interest rates are at historic lows. While that may not last forever, student loan refinancing rates are currently starting at 1.74% for variable rate loans and 2.74% for fixed rate loans.
When we say that today’s current rates may not last, we’re basing that on the current guidance from the Federal Reserve Bank (also known as the Fed) that is reporting a possibility of up to eight more increases over the next two years. The Fed’s intention is to curb inflation and a possible recession. However, even at the minimum increases, this could raise interest rates anywhere from 2% to 4%.
Today’s sense of urgency has people looking at their refinancing options while the rates are low and there is still money to be saved.
To get an idea of the amount of money you could save, try this Student Loan Refinance Calculator. It will determine your lifetime savings on interest, as well as calculate your new monthly payment.
As an example, if you have student loans totaling $32,000 (the current national average right) and you are paying 7.2% interest over the next 8 years, your monthly payment is about $440. You will also be paying more than $10,000 in interest throughout the life of the loan.
If you were to refinance that same $32,000 at 8 years, but for 3.2%, your monthly payment would drop to $378 per month and you would save almost $6,000 in interest.
Most people ended up graduating with multiple student loans taken out at different times during their college career.
If that’s the case, you now have multiple student loan bills each month with different due dates and payment amounts, which can create a nightmare when trying to manage your finances.
By refinancing, you can consolidate all of those bills into one easy payment and reduce your monthly headache. Most lenders also offer autopay, which can make your life easier — not only is your bill paid automatically, but a lot of private lenders offer a .25% interest rate discount for autopay.
If your focus is more short-term and your main goal is a lower monthly payment, many refinancing lenders offer terms up to 20 or 25 years, which spreads your payments out over a longer period and reduces your monthly amount due.
Be sure to weigh the long-term impact of lengthening your student loan repayment term. There is a good chance that you may pay more in interest with the longer term loan.
You could always take advantage of the lower payments now with a longer term, and then refinance again later to a shorter term when you can make larger payments.
Maybe your goal is to pay off your loans as soon as possible. Paying off your loans more quickly could allow you to put your buying power somewhere else, like buying a house, getting married, or starting a family.
By refinancing your loans to a shorter term, you can pay them off faster and focus your resources elsewhere. Keep in mind that refinancing to a shorter term will increase your monthly payment, but you will save money on interest in the long term.
If you aren’t satisfied with the rate you qualify for due to a low credit score or insufficient income, consider using a cosigner.
A cosigner can be a parent, grandparent, or even a friend that is willing to vouch for you and has a financial profile that will get you a better deal.
And the good news — there are a number of refinance lenders that offer a cosigner release option where you can have the cosigner removed from further responsibility once you have made a predetermined number of on-time payments (usually 12 to 24 months).
Like many people, your parents may have taken out Parent PLUS Loans or private parent loans to help supplement your education expenses. Refinancing is a great way to take responsibility for those loans now that you are in a better financial position.
By moving the student loans solely into your name, your parent can focus on other financial options without having to worry about your debt. They may be saving for retirement or planning to travel and would appreciate being able to do that without the burden of additional financial obligations.
Unlike a mortgage or home equity loan, there are no application or origination fees for student loan refinancing, and most lenders don’t have any prepayment penalties. That means you can refinance as often as there are benefits to gain at no cost to you.
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It’s important to consider the potential drawbacks to refinancing Navy Federal student loans. Here are two drawbacks to consider:
Most private lenders (including Navy Federal) offer a form of deferment or forbearance. When you refinance, any benefits associated with your Navy Federal loans will be lost. However, the company that you refinance with will have a new set of benefits — be sure to review these before you proceed with refinancing. All of Purefy’s recommended lenders offer some form of financial hardship assistance or forbearance, if you have difficulty making ends meet in the future.
Refinancing comes with eligibility requirements that include credit and income limits that applicants must meet. Use Purefy’s Rate Comparison Tool to see if you are eligible and receive up to four pre-qualified quotes. We describe the process in more detail below.
If you aren’t eligible for student loan refinancing on your own, remember that you can always reapply with a cosigner.
Student loan refinancing combines your current loans into a single loan with a new rate and term. See how much you can save by entering your loan information below, or by getting quotes from multiple lenders using Purefy’s rate comparison tool.
Lifetime Interest Savings
New Monthly Payment
Like what you see? Check your actual prequalified rates from the industry’s top lenders in just 2 minutes or less.
Refinancing student loans is a personal decision for everyone. It is important to understand your financial goals and what you are trying to accomplish through refinancing. Do you want to save money over the long term, or are you interested in lowering your monthly payments now?
There are no right or wrong answers to these questions — it’s a matter of what works for each person on an individual basis.
The good news is there are no fees or obligations to explore your options or to apply for a refinanced student loan.
Refinancing student loans, whether Navy Federal, federal, or private, is best done when you have your financial ducks in a row. This would include:
When you took out your private Navy Federal loan, you may have noticed that your initial approval was based primarily on available income rather than credit score. This criteria is unique to Navy Federal student loans and not typically the case with refinancing lenders.
Most student loan refinancing lenders take credit scores into account, so your credit score should be at least 660 (the minimum for most refinance lenders). And remember, the higher the score, the lower the interest rate.
Credit scores can be tricky to improve, as increasing your score often happens slowly over time. You have to borrow money and show that you can pay it back on time every month, while keeping your overall credit utilization low. But each time you officially apply for a loan, you’ll undergo a hard credit pull which may lower your credit score temporarily. It’s important to be careful how many times you actually apply for credit (including car loans, credit cards, mortgages, etc.). Most bureaus consolidate multiple inquiries of the same type over a short period of time, so if you are rate shopping it’s most beneficial to keep multiple applications within a 14-day time period.
You want to keep your credit in good shape, so check your credit report and score once per year for free. An annual review is a good way to make sure you correct any mistakes that could affect credit decisions, as well as ensure your identity hasn’t been stolen.
Can you demonstrate strong income? Have you been at your job for a while? If you have your own business, does it show a profit? Student loan refinance lenders will consider these factors and more when you apply, so without strong income you will likely need a cosigner.
A note about new employment: some lenders will accept an offer letter for income verification, but not all lenders will. If you have an offer but have not yet begun employment, check with the lender to ensure this is acceptable before applying and undergoing a hard credit pull.
Not only do lending companies want to know that you make enough money, but they also want to know that you manage it well and aren’t over-extended on the money you spend each month. A low DTI shows lenders you can afford the monthly payments for the new loan.
You can determine your DTI by using a calculator such as the one Purefy offers here.
It’s a fairly simple calculation: just divide your monthly rent/mortgage and other fixed expenses (your car loan, student loans, credit card minimums, etc.) by your gross monthly income. As a general rule, most lenders want your DTI at 38% or below to qualify for student loan refinancing.
If you have weighed the pros and cons and decided to move forward with refinancing your Navy Federal student loans, then the next step is to do a comparison of multiple lenders since each one has different rates, benefits, and underwriting criteria.
Rather than visit each lender’s site, consider using a student loan marketplace like Purefy’s Rate Comparison Tool.
Purefy’s state-of-the-art digital quote generation engine will collect some personal information about you and your loan needs, submit that info to a group of industry-leading lenders, and generate a quote comparison report with pre-qualified offers that allows you to choose the best option for your lifestyle and needs.
It’s 100% free and there’s no obligation to move forward with an application.
Here’s how it works:
Just fill out the information requested and Purefy will do a soft credit check (meaning it won’t impact your credit report) to connect you with real student loan refinancing offers. Your information is transmitted using top-tier secure encryption (SHA-256 RSA) and is 100% secure.
You will need to provide the following details:
In about two minutes, you will receive a report outlining pre-qualified offers from multiple lenders. These are actual offers based on your unique credit profile, not teaser rates or estimates.
Once you receive the student loan refinancing offers, it’s time to evaluate and compare your options. You will see each lender’s best fixed and variable rates (if applicable), the terms available, your new monthly payment, and any other special offers or benefits.
From there, you may want to use the student loan savings calculator to compare the bottom line for each quote. The calculator will determine your monthly payment as well as the amount of interest you can expect to pay over the life of the loan. You might also want to verify if the lender offers a .25% discount for using autopay and if that discount is factored into the quote.
Once you have made your selection, it’s time to move on to the application process. You will be automatically connected to the private lender’s application system.
Now comes the actual student loan refinance application, which should take about 15 minutes to complete. At this point, the lender will complete a hard credit pull which will show as an inquiry on your credit report.
Once you are pre-approved, you will need to provide supporting documents to verify your information. These can include:
Once you are approved, all there is to do is e-sign your loan documents to finalize your new loan. The refinance lender will pay off your existing loan(s) and issue loan documents for your new refinanced student loan.
Be sure to continue making payments on the old loans until you are notified that the final payment has been made. If you end up making a payment and the existing loan is overpaid, your old lender will return the money either to you directly or to your new lender to be applied to your new loan.
Don’t worry — at Purefy, you are supported by an award-winning team of student loan advisors who can answer your questions and guide you through the entire process, from comparing quotes to finalizing the loan application.
Refinancing student loans is a big decision, so you can get a personalized Student Loan Refinance Consultation set by appointment where you have dedicated time with an expert. Or you can call 202-524-1115 if you just have a quick question.
Like all of Purefy’s services, the consultation is free to you as the borrower.
Purefy’s Student Loan Advisors are ready to guide you through the student loan process.
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Refinancing private student loans – like those from Navy Federal – can provide a variety of benefits including saving money, paying off college debt faster, simplifying your finances, and lowering your monthly payment.
Like with any big purchase, a refinance deserves a closer look to find the best lender with the options and attributes that you’re looking for. By using Purefy’s custom process, you can find the loan product that most closely fits your lifestyle and budget.
When you ask the question, “How do I Refinance Navy Federal Student Loans?”, Purefy has the answer!
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