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Do You Refinance Student Loans If You Only Save 1%?

Kat Tretina
refinancing-questions-student-loan-expert
refinancing-questions-student-loan-expert

Before You Read, Lower Your Student Loan Payment

It’s that quick & easy — really. Our free tool checks a network of top refinance lenders and shows you options in one easy chart.
Checking rates takes 2 minutes with no impact on your credit
Federal & private loans are eligible
No maximum loan amount

Before You Read, Lower Your Student Payment

It’s that quick & easy — really. Our free tool checks a network of top refinance lenders and shows you options in one easy chart.

Checking rates takes 2 minutes with no impact on your credit
Federal & private loans are eligible
No maximum loan amount

Anyone with student loan debt knows how costly interest charges can be.

Even federal student loans can have sky-high interest rates. For example, as of 2020, Grad PLUS Loans have an interest rate of 7.08% — which can cause thousands in interest charges to accrue on your loan.

Student loan refinancing can be an effective method for paying off your debt faster while saving money. But not everyone can qualify for a dramatic interest rate reduction.

However — if you’re eligible for a rate reduction of just 1%, should you refinance student loans? For most people, the answer is a profound yes.

Here’s why refinancing your debt makes financial sense with a 1% lower interest rate offer.

If you only save 1%, is it a good idea to refinance student loans?

With refinancing, you take out a loan from a private lender for the amount of your existing debt. If you have federal and private loans, they are combined together so you have just one loan, one loan servicer, and one simple monthly payment.

When you refinance your federal or private student loans, the lender will review your credit and income to determine whether or not to approve you for a loan. They’ll also use this information to decide which new interest rates to offer you, based on the current rates.

Depending on your creditworthiness, you may only qualify for a modest rate reduction rather than the lender’s lowest advertised rates.

If your rate decreases by just one percentage point, student loan refinancing can still be a smart, effective strategy for managing your debt for several reasons:

1. Refinancing your student loans takes just a few minutes

Unlike applying for other financial products like a home mortgage, applying for a refinancing loan is a quick and easy process. In most cases, you can finish your student loan refinancing application in as little as 15 minutes, so it doesn’t take much time to get big results.

To speed up the process, use Purefy’s Compare Rates tool to get rate quotes from multiple top lenders — all in one place — without affecting your credit score. Once you find your best rate option and a loan that works for you, you can move forward with the loan application.

When you’re ready to apply, the lender will ask for basic information about yourself. Be prepared to enter your name, address, Social Security number, employer name, income, current student loan balance, and lender information.

Make sure you have some documentation on hand, such as a government-issued ID, a recent pay stub or tax return, and a loan statement from your lender.

The 2 Best Companies to Refinance Student Loans

Our Top-Rated Picks for 2022 Offer Low Rates and No Fees

efli-lender
No Maximum Loan Amount

Fixed Rate

5.48% – 8.94% APR 4

Variable Rate

5.28% – 8.99% APR 4
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Precision Pricing — Pick Your Monthly Payment

Fixed Rate

5.19% – 9.74% APR 2

Variable Rate

5.72% – 9.74% APR 2

2. Student loan refinancing doesn’t cost you anything

If you don’t have a significant decrease in interest rate, is refinancing student loans worth it?

The answer is still yes.

That’s because there is no cost to refinancing your student loans. With Purefy’s partner lenders, there are no application fees, origination fees, or prepayment penalties, so you won’t pay anything to refinance your debt.

The only time you’ll pay a fee is if you miss a payment and get charged a late fee. If you always make your payments on time — a great reason to sign up for automatic payments — you won’t pay any extra fees.

3. You’ll still save money

Lowering your interest rate by a single percentage point may not sound like a big deal. But when it comes to student loan refinance interest rates, 1% can make a real impact on your overall savings.

To put that rate in perspective, let’s say you had $35,000 in student loans at 7% interest and a 10-year repayment term. With a $406 minimum monthly payment, you’d repay a total of $48,766 over the length of your loan. You’d pay $13,766 in interest charges alone.

If you refinanced your loans and qualified for a 10-year loan at 6% interest, your monthly payment would drop to $389. But over your repayment term, you’d pay just $46,629.

By taking 15 minutes to refinance your loans, you’d save $2,137. Not bad, right?

 Original LoanRefinanced Loan
Loan Amount$35,000$35,000
Loan Term10 Years10 Years
Interest Rate7%6%
Minimum Monthly Payment$406$389
Total Interest$13,766$11,629
Total Repaid$48,766$46,629

4. You could lower your monthly payment

Sometimes you may only get a small rate reduction because you opt for a longer loan term. While you could get a lower rate with a shorter term, selecting a longer term can be a smart idea if your budget is tight.

With a longer loan term — some lenders offer loan terms of 12, 15, or even 20 years — you could dramatically lower your monthly payment, making it much more affordable.

With a longer loan term, you’ll pay more in interest over time. But you’ll have more cash flow right now, which can be helpful as you start your career.

As you get more established and make more money, you can make extra payments or even pay off your debt early. None of Purefy’s partner lenders have prepayment penalties, so there’s no downside to paying off your debt ahead of schedule.

Should you refinance student loans?

If you only qualify for a modest rate reduction, you may be wondering: should you refinance student loans? Except in certain circumstances, refinancing can be a smart way to manage your debt even if you only lower your interest rate by one percent.

Need more help to make a decision? Schedule a free student loan refinance consultation with Purefy’s award-winning team. Whether you don’t know where to start or want step-by-step guidance on your options, your personal student loan expert can help you navigate through the refinancing process and make a decision that’s right for you.

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Student Loan Refinance

Today’s Rates Starting From 4.49% APR1

Take the guesswork out of shopping for a student loan refinance. Compare real prequalified offers from multiple top rated lenders in 2 minutes with no impact on your credit score.
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ascent student loans

Before you go, let’s make sure is offering you the best rate.

It takes two minutes and has no impact on your credit score.

1

Answer a few questions with our easy & secure form.

2

Purefy checks for your prequalified rates from top lenders.

3

Pick your best rate and finish the application online in minutes.

Ascent Rate Disclosure

Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills or DR Bank, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentStudentLoans.com/Ts&Cs.

Rates are effective as of 12/1/2023 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized back account each month. For Ascent rates and repayment examples please visit: www.AscentStudentLoans.com/Rates.

1% Cash Back Graduation Reward subject to terms and conditions. Click here for details.

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 5.09% 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.

ISL Rate Disclosure

Earnest Rate Disclosure

2 Earnest Rate Disclosure:


Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.44% APR to 9.99% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.97% APR to 9.99% 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.

Advertiser Disclosure:

THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.

Earnest Rate Disclosure

Rates displayed include the 0.25% Auto Pay discount. You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.67% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.64% APR to 16.45% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination 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. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. 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. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.

Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.

Responsible borrowing tip: Explore all scholarship, grant and federal options before applying for a private loan.

Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.

Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.

Advertiser Disclosure:

THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.

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 10/13/2023. 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.

ELFI Rate Disclosure

Education Loan Finance is a nationwide student loan provider offered by Tennessee based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 12/11/2023. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.

College Ave Rate Disclosure

College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
Minimum loan amount $1,000, as certified by your school and less any other financial aid you might receive.
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 1/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

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