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Refinancing Federal Student Loans 101: What It Means and How to Save Money

Kathryn Morstad

All through college, you have taken out federal student loans to bridge the gap in financing for your tuition and other expenses. It makes sense — they are easy to get, have great interest rates, and don’t require a credit check.

Now that you’ve graduated, you’re juggling multiple due dates, payment amounts, and repayment terms. How can you simplify and organize this sometimes overwhelming mound of paperwork?

That’s a question a lot of people are asking today. Student loan debt is at an all-time high that’s estimated to be about $1.56 trillion in 2020. With an average debt of $29,650, it’s no wonder that people are looking for solutions to harness their student loans and create something more manageable.

What is student loan refinancing?

In simple terms, refinancing is the process of working with a qualified lender to pay your existing loans in full and provide you with a single comprehensive loan for the total amount. You decide how many of your loans (including other private student loans) you want to include in this new refinanced loan.

Today, the refinancing process has been simplified by Purefy to bring together multiple lenders who compete for your business with you only needing to provide a few simple pieces of personal information.

Why refinance federal student loans?

Most people refinance because they are looking for cost savings as well as a more streamlined payment process. By refinancing federal student loans, you are often able to reduce your interest rate and chose more favorable repayment terms that meet your individual needs.

While you do need to have a good credit history and a stable income, there are no fees to generate a new loan.

Can you also refinance private student loans?

Absolutely. As long as you meet the credit requirements and the debt-to-income ratio parameters, private lenders will work with you to find the most advantageous loan program that puts both your federal and private student loans in one neat package.

As a gauge, most private lenders require a credit score in the high 600s at a minimum, with a debt-to-income ratio of 50% or less.

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Fixed Rate

4.48% – 7.29% APR 4

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Fixed Rate

3.99% – 8.24% APR 3

Variable Rate

2.49% – 8.24% APR 3
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Fixed Rate

3.99% – 8.99% APR 2

Variable Rate

3.24% – 7.99% APR 2
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Fixed Rate

3.94% – 8.48% APR 5

Variable Rate

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Reasons to refinance student loans

  • Save money with a lower rate — By obtaining a lower interest rate on your loan, you can save significant money over the life of the loan.  For instance, for a $30,000 loan with a 10-year repayment schedule, the difference between 4% and 6% interest rate could save you over $5,000.
  • Shorten the repayment term — When you shorten your repayment term during the refinance process, you pay off that loan more quickly and free your finances up to pursue other goals like buying a home or taking that dream vacation.
  • Lengthen the repayment term — Maybe you are getting swallowed up by loan payments. By refinancing to a longer repayment term, you lower your monthly payment and give yourself some breathing room.  No one says you can’t change it later or double up on payments when you are able.
  • Choose fixed or variable rate — You have the ability to choose either a fixed rate, with one stable amount, or a variable rate, that tends to be lower in the beginning when you may just be starting out and need the break.
  • Add or drop a cosigner — Depending on your credit history, you may want a cosigner to guarantee your loan so that you can build your credit score.  Or you may have a cosigner currently but are at a place in your life where you want to relieve that person of the responsibility and build your own credit profile.
  • Combine and simplify payments — Refinancing allows you to consolidate all of your student loan amounts into one easy monthly payment with one due date to remember.

How to find your best student loan refinance options

The best way to find the refinance package that works for you is to shop around and compare rates. The problem is that process can be time consuming and confusing with information presented in a variety of forms that makes comparison difficult.

Purefy understands this problem and has created our rate comparison tool to guide you through the process.

At Purefy, we work with some lending industry lenders and have created a tool to help you determine the best loan package for you and your lifestyle. Our simple-to-use tool returns lender pre-approval offers in a format that is both easy to understand and comprehensive in its detail.

If you are trying to decide when to refinance student loans, remember that there are plenty of lenders out there ready to compete for your business. With a rate comparison, you can determine the best loan program for you without affecting your credit score.

When you use Purefy’s rate comparison tool, you have access to our thoroughly vetted lender team. We give you access to them all in one place and you don’t have to shop around to different websites where you need to fill out lengthy applications. 

You’re in a place to choose your own solution. Do you want to continue to struggle with the various federal student loans that you have accumulated over your academic career or consider a refinance option that gives you some freedom and control? If refinancing sounds like an idea that interests you, Purefy is here to provide answers.

Check out what our best lenders have to offer at Purefy and with a few simple easy-to-answer pieces of information, you can start to take charge of your financial future.

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Student Loan Refinancing

Refinancing from 2.99% APR

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with no impact on your credit score.

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 11-21-2022. 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 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 2.24% APR to 7.99% 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 4.24% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 3.49% APR to 8.24% 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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