What Goes Into a Student Loan Refinance Rate and How Do They Change?

Kat Tretina

Borrowers have a tremendous amount of student loans. It’s estimated that the total federal student loan debt is at $1.6 trillion, and private student loan debt exceeds $123 billion.

With so much debt, many borrowers are turning to student loan refinancing to lower their interest rates and repay their loans. But how does student loan refinancing work, and how are student loan refinance rates determined? Here’s what you need to know before refinancing your loans.

How does student loan refinancing work?

Student loan refinancing is a process where you work with a private lender to take out a loan for the amount of your current education debt. You can refinance federal or private student loans and qualify for a lower interest rate, different repayment term, and even a lower monthly payment. Refinancing your loans can help you save money over time or pay off your loans faster.

How are student loan refinance rates determined?

When thinking about refinancing, it’s important to know that rates can vary a great deal from lender to lender. And, not all borrowers will qualify for the lowest advertised rates. Lenders determine your individual interest rates based on the following five factors:

1. Interest rate type

What are student loan refinance rates, and how do they work? When you refinance your student loans, you have the option of choosing variable or fixed interest rates.

Variable interest rates tend to start lower than fixed rates. However, they can fluctuate over the life of your loan, impacting your monthly payments and how much interest accrues on your loan.

Fixed interest rates are usually higher than variable rates, but they’ll never change, and your payments will never increase.

Variable rates are best for borrowers who want to pay off their loans as quickly as possible. They can take advantage of the lower initial rate to accelerate their debt repayment and pay off the loan before the rate increases too much.

For borrowers who don’t want to worry about market changes, fixed interest rates make more sense since you’ll have a set monthly payment.


When establishing variable interest rates, student loan refinancing lenders look to the London Interbank Rate (LIBOR). The LIBOR interest rate is the rate at which banks are willing to lend to one another.

The LIBOR isn’t the rate you’ll pay when you refinance your loans. Instead, refinancing lenders use it as an index that guides their rates. Lenders will typically charge you the LIBOR rate plus a percentage for their margin.

For example, the three-month LIBOR rate is 0.206% as of November 23, 2020. If a lender’s rates are the LIBOR plus a 2% margin, your interest rate would be 2.206%.

The LIBOR rate is constantly changing, so your rate can increase or decrease based on the LIBOR’s performance.

3. Credit score

Your credit score has a significant impact on what interest rates you’ll qualify for when you refinance your student loans. Lenders tend to reserve the best student loan refinance rates for borrowers who have an excellent credit score, meaning a score between 800 and 850.

Credit Score RangeRatingPercentage of Population
300 – 578Very Poor16%
580 – 668Fair17%
670 – 739Good21%
740 – 799Very Good25%
800 – 850Excellent21%

If you have a lower score, you might still qualify for a loan, but you will likely have to pay a higher interest rate. To improve your loan application, focus on boosting your credit score. Make all of your monthly payments on time, pay down existing debt, and limit new credit applications.

4. Cosigner

If you have less-than-perfect credit or insufficient income, it can be difficult to qualify for a loan with a competitive interest rate on your own. However, some lenders allow you to add a cosigner to your application. A cosigner — someone with good to excellent credit and a steady source of income — applies for the loan with you, sharing responsibility for its repayment.

By adding a cosigner to your application, you become a more attractive candidate for a loan. Lenders are more likely to approve you and give you a lower rate than if you applied by yourself.

5. Loan term

The lowest interest rates are typically associated with shorter loan terms. If you want the best possible rate, opt for a loan term of five to eight years; you’ll get a lower rate than if you applied for a loan with a term of 10 to 20 years. Plus, you’ll pay off your loans earlier, eliminating that burden from your life.

When to apply for student loan refinancing

If you’re trying to decide when the best time to refinance your loans is, you should know that current refinance rates are at historic lows.

Rates can vary from lender to lender, so it’s a good idea to comparison shop before submitting an application. Purefy’s Compare Rates tool makes the process quick and easy; just fill out one simple form, and you’ll get quotes from top refinancing lenders without impacting your credit score.

Keep in mind that there’s no limit on how many times you can refinance your loans. If you refinance now and your credit improves or interest rates drop later on, you can refinance your loans again to take advantage of the lower rates.

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6.94% – 11.58% APR 5

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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 01/01/2023. 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.

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.

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 4.64% APR to 9.19% 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.

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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 6.94% to 11.58% 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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