Student Loan Refinancing: What You Need to Know

Refinancing your student loans can be a complicated decision and process that should ultimately save you money, or help make your budget more breathable. You'll have to decide if you should refinance, how you go about it, and which company to pick - all questions we explore below.

Best Student Loan Refinance Companies

We reviewed 11 banks and companies that refinance student loans to see which ones had the most favorable rates and payment or forbearance policies. The best companies will have lower rates and good terms for leniency, flexibility, or repayment if students meet hard times.

Best Student Loan Refinancing with Low Interest Rates

The best lenders with low rates for refinancing a student loan were generally SoFi and Citizens Bank, followed by Commonbond, LendKey, and MEFA depending on the loan duration. Per the table below, these companies reported the lowest range of interest rates as of December 2016, and will mostly be applicable to borrowers with excellent credit and strong employment histories.

TermTypeLowest #1Lowest #2
5 YearFixedLendKey3.25% - N/ASoFi3.375% - 5.99%
VariableLendKey2.09% - N/ASoFi2.19% - 5.11%
7 YearFixedSoFi3.88% - 6.49%Commonbond4.00% - 6.49%
VariableSoFi2.49% - 5.24%Commonbond2.54% - 5.17%
10 YearFixedSoFi4.49% - 6.74%CollegeAve4.55% - 6.40%
VariableCitizens Bank2.60% - 7.80%SoFi2.99% - 5.49%
15 YearFixedCitizens Bank4.94% - 7.92%MEFA4.95% - 6.85%
VariableSoFi3.36% - 5.86%MEFA3.41% - 6.31%
20 YearFixedCitizens Bank5.19% - 7.99%SoFi5.25% - 6.74%
VariableCitizens Bank3.05% - 8.00%SoFi3.61% - 6.11%

*Note: LendKey: If you are not a member of a participating credit union, you will be required to pay $30 to apply and be matched with a credit union to refinance your college or grad loans.

It's hard to say whether these lenders will offer you the absolute lowest rates, since APRs are highly specific to your profile. Your actual interest rates will be within these ranges based on your credit score and may end up on the higher end of the ranges depending on your debt to income ratio, co-signers’ credit histories, among other factors. It is best to submit your actual data to see who offers you the lowest rates; we'd recommend that you compare rates across at least three companies, in case other lenders have had better experience with borrowers similar to you and can offer you attractive APRs.

Best Student Lenders to Refinance with for Bad Credit

If you have little credit history, or a high debt to income ratio, we’d recommend starting with CommonBond and SoFi. We found that they were the best lenders for students who fall into the "bad credit" category because they offered the two lowest ceilings in APR ranges out of the 11 lenders. They were followed by College Ave, Earnest, DRB and MEFA based on the loan term.

TermTypeLowest #1Lowest #2
5 YearFixedCommonBond, SoFi5.99%Darian Rowayton Bank6.15%
7 YearFixedCollege Ave6.30%CommonBond, SoFi6.49%
10 YearFixedCollege Ave6.40%SoFi6.74%
15 YearFixedSoFi6.74%MEFA6.89%
20 YearFixedSoFi6.74%Earnest6.99%
VariableCommonBond6.04%Earnest, SoFi6.11%

While you may get a better interest rate than the ones gathered above - it’s nice to know that these loan companies’ capped their rate ranges below other lenders. At the very least, the most you'll be charged in interest expense will be lower than other competing student loan companies.

Best Student Loan Refinancing with Flexible Policies

Aside from your interest rate charges, another important feature is how accommodating the lenders will be if you your budget gets squeezed, or something drastic happens to your job. Here are a few of our top recommendations, and why they stand out compared to others.

Student Lenders with the Best Forbearance and Hardship Policies

LendKey: Compared to other companies, LendKey has the most lenient stated forbearance policy. Based on your circumstances, you can forbear (or defer payments on your loan with interest still accruing) up to 18 months if you have a loan with 15 or 20 years. For loans with smaller terms, you can forbear up to one year, which is standard.

Earnest: If you are deployed or on active duty, or even return back to school, Earnest lets you defer your payments up to 36 months - the most generous we’ve seen thus far. Most other lenders typically allow up to one year of deferment, to be taken in three month intervals.

Student Lenders with the Best Support

SoFi: SoFi maintains an active community and job support to add value to their student loans. If you lose a job, SoFi will defer your payments up to one year (interest still accrues), while their Career Strategy team helps you find a new job. The lender helps networking by organizing events for members to attend and expand their social circles.

CommonBond: The company offers very similar features as SoFi above, with one notable addition: CommonBridge. It is a unique opportunity that members have to work on consulting projects at CommonBond. This helps members gain more marketable work experience, provides them with some income, and otherwise helps to fill a gap between jobs that might deter some employers.

Student Loan Refinance Interest Rate Comparison by Bank

Below are two tables showing how the various banks stack up when it comes to interest rates. In addition to the ones highlighted above in the various "best" companies, we also surveyed lenders like iHelp and Wells Fargo. Other major banks such as Citibank and Chase no longer refinance student loans.

Rates assume a 0.25% ACH or EFT discount, where applicable. You can earn an additional 0.50% discount if you are a PMA client with Wells Fargo, or 0.25% with a prior Wells Fargo issued education loan or an existing bank account. Even with these discounts, however, Wells Fargo's APR ranges did not beat the two companies with the best student loan refinancing rates, and had some of the highest rates offered in December 2016.

Variable Interest Rates for Student Loan Refinancing - as of Dec 2016

Lender5 Year7 Year10 Year15 Year20 Year
Citizens Bank2.21% - 7.70%N/A2.60% - 7.80%2.85% - 7.95%3.05% - 8.00%
College Ave2.87% - 5.75%3.63% - 5.75%3.62% - 5.87%3.92% - 6.12%N/A
CommonBond2.24% - 5.04%2.54% - 5.17%3.04% - 5.42%3.42% - 5.74%3.65% - 6.04%
Darien Rowayton Bank3.89% - 5.54%3.94% - 5.74%3.99% - 5.94%4.09% - 6.29%4.19% - 6.54%
Earnest2.39% - 5.21%2.73% - 5.41%3.23% - 5.81%3.60% - 5.96%3.85% - 6.11%
iHelpN/AN/AN/AN/A2.50% - 8.50%*
LendKey2.09% - N/DN/DN/DN/DN/D
MEFAN/AN/AN/A3.41% - 6.31%N/A
SoFI2.19% - 5.11%2.49% - 5.24%2.99% - 5.49%3.36% - 5.86%3.61% - 6.11%
WellsN/AN/AN/A3.74% - 8.49%3.74% - 8.49%
* iHelp: Rates displayed exclude the LIBOR base. You'll have to find out what the current LIBOR is when you submit your information.

Fixed Interest Rates for Student Loan Refinancing - as of Dec 2016

Lender5 Year7 Year10 Year15 Year20 Year
Citizens Bank4.74% - 7.79%N/A4.79% - 7.86%4.94% - 7.92%5.19% - 7.99%
College Ave4.40% - 6.30%4.40% - 6.30%4.55% - 6.40%5.10% - 7.00%N/A
CommonBond3.50% - 5.99%4.00% - 6.49%4.61% - 7.00%5.12% - 7.49%5.37% - 7.74%
Darien Rowayton Bank4.45% - 6.15%4.55% - 6.74%4.75% - 7.00%5.15% - 7.24%5.40% - 7.45%
Earnest3.63% - 6.30%4.12% - 6.60%4.73% - 6.99%5.24% - 6.99%5.49% - 6.99%
iHelpN/AN/A4.75% - 8.00%5.50% - 9.00%N/A
LendKey3.25% - N/DN/DN/DN/DN/D
MEFAN/AN/AN/A4.95% - 6.85%N/A
RISLA4.24% - 6.39%N/A4.99% - 7.39%5.49% - 7.89%N/A
SoFI3.38% - 5.99%3.88% - 6.49%4.49% - 6.74%5.00% - 6.74%5.25% - 6.74%
WellsN/AN/AN/A6.24% - 10.74%6.24% - 10.74%
* iHelp: Rates displayed exclude the LIBOR base. You'll have to find out what the current LIBOR is when you submit your information.

As you can see, the 11 major education loan companies offer a wide array of interest rates for refinancing. The more you can compare, the better the amount of information you'll have to make a better financial decision for yourself.

How to Refinance Your Student Loan

The best way to refinance your college or graduate studies loans is to submit your information to several banks or lenders, and see what APR and repayment flexibility they’ll offer you. It is a short process. We recommend you compare offers from at least three lenders if you’re looking to lower your student loan bills, since they can evaluate students very differently.

Here is the information you usually need to see these offers:

  • Name and address
  • Citizenship
  • Annual Income
  • School and degree obtained
  • Loan amount

Note: If you’re consolidating your loans at the same time, they’ll want to know the different lenders and amounts you’ve borrowed from each.

Most refinancing companies don’t require a social security number, because they’re able to use a combination of your name and address to locate you and conduct a soft inquiry into your credit situation. Once they determine your creditworthiness, they will display an offer with the variable and fixed interest rates they’re thinking of charging you.

There can be a surprising range of Interest rates charged by bank, so don’t get disheartened if one refinancing lender doesn’t give you the rate that fits best with your budget. They calculate and emphasize variables differently, and have different repayment experiences with various types of consumers. So if one bank had terrible experiences with other students from your college or credit score, they’re not going to be so forgiving. Chances are decent that a competing lender saw good repayments from those groups, and will be willing to extend you more cheaper rates.

Should You Refinance Your Education Loans?

To lower your monthly bill, you should refinance your student debt - especially if:

  • Your salary increases: this improves your debt-to-income ratio, which banks take to mean that you’ll be less likely to miss out on payments
  • You’ve paid off some debt: your debt-to-income ratio gets better, which banks take to mean there’s less competition or stress on your means
  • Your credit score improves: you’re better about paying bills or debt on time, which makes you less risky and eligible for lower interest rates on average
  • Have a new co-signer: if your spouse or a parent is willing to co-sign and help shoulder the risk, this lets the bank breathe more easily and give you better terms
  • Interest rates have dropped nationally: it’s cheaper for banks to get their money, so they may pass savings onto you. This is especially relevant for people who hold PLUS loans, since most interest rates are generally below the 7% charged

Even if none of these things apply, you can still submit your information and see what banks offer back. Student loans average $26,700 in debt, and any amount will help. There are no origination fees or application charges, so what it takes is time. Banking environments might be more relaxed, or they want more refinanced student loans business. Underwriting or other risk assessment calculations might have changed in your favor, and improve your chances of getting better rates. Submitting your information to a lender lets them perform a “soft inquiry” on your credit history, which doesn’t impact your credit score until you actually refinance your college or grad school debt.

Refinancing your old loans means that you’ll get lower payments, but with the trade-off of taking on a new debt term from five to 20 years, and potentially paying more in interest expense over the longer duration. This might be a good short-term solution for many to make ends meet, but we’d highly recommend trying to pay more than the monthly bill to ease the future debt burden.

If you’re refinancing federal student loans, you will lose some of the more generous hardship and forgiveness benefits - especially Perkins loans. Teachers, nurses, law enforcement or Peace Corps members can lose the option of having their Perkins loans cancelled or forgiven. You also won’t be able to strategically prepay your more expensive loans first since everything is bundled together into a new loan.

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