by Zack Friedman, Senior Contributor,
Student loan refinancing rates have plummeted even lower.
Here’s why and what you need to know.
Student Loan Refinancing: Rates Drop Even Further
Rates for student loan refinancing now have dropped to as low as 1.81%.
Why? The Federal Reserve cut interest rates for the third time this year, and lenders have reduced student loan refinancing rates to a near-term low. That’s great news for student loan borrowers who want to get a lower interest rate, save money and pay off debt faster.
Here’s how to refinance your student loans.
Student Loan Refinance: Should I Refinance Student Loans?
Many borrowers ask: Should I refinance student loans?
If you want to save money and pay off student loans faster, student loan refinance is an effective tool. When you refinance student loans, you exchange your current student loans for a new, single student loan with a lower interest rate.
Student loan refinancing has several advantages, including:
- lower interest rate
- single monthly payment
- fixed or variable interest rate
- flexible 5-20 year loan repayment term
- one student loan servicer
- pay off your student loans faster
- save money
Student Loan Refinancing: How To Apply
If you want to know how to refinance student loans, it’s important to understand how to apply. The process is simple, and you can apply entirely online.
Step 1: Get the best interest rate
There are multiple trusted, online lenders that can refinance student loans with low interest rates and easy, online applications. Compare the best interest rates and loan terms. Most borrowers will refinance student loans with the lender who gives them the lowest interest rate. Most lenders allow you to check your preliminary interest rate online for free within two to three minutes without any impact to your credit score.
Step 2: Use a student loan refinance calculator
This free student loan refinance calculator shows you how much money you can save when you refinance student loans.
For example, let’s assume you have $85,000 of student loans at an 8.0% interest rate and 10-year repayment term. If you refinance that student loan with a 3.0% interest rate and 10-year repayment term, you would lower your monthly payment by $211 and save $25,262 in total payments. If you are a doctor, dentist or pharmacist with a large student loan balance, your savings may be even higher.
Step 3: Apply online
You can apply online to refinance student loans in 10-15 minutes. You can also upload any supporting documents, which may include a copy of your driver’s license, transcripts, recent pay stubs or job offer letter.
Student Loan Refinance: Key Questions
1. Do I qualify for student loan refinance?
The best candidates for student loan refinancing typically have the following:
- A credit score of 65o or higher
- Current employment or a written job offer
- Stable, recurring monthly income
- A low debt-to-income ratio
- No history of student loan default
If you have bad credit or don’t meet these other requirements, you can apply with a co-signer with strong credit and income. Your co-signer can help you get approved for student loan refinancing and receive a lower interest rate. While your co-signer will be equally financially responsible for the student loan, some lenders allow the co-signer to be released subsequently from any financial obligations.
To maximize your chances to get approved to refinance student loans, you can apply to multiple lenders. Since each lender makes a separate underwriting decision, getting rejected from one lender does not negatively impact your chances with another lender.
2. Can you refinance Parent PLUS Loans?
Yes, you can refinance Parent PLUS Loans. Parent PLUS Loans have relatively high interest rates, so refinancing can lower your interest rate and save money.
3. Is there a fee to refinance student loans?
There are no fees to refinance student loans. There are also no prepayment penalties, so you can pay off student loans anytime with no charge.
4. Should I refinance my federal student loans?
You should not refinance federal student loans if you plan to pursue public service loan forgiveness, an income-driven repayment plan, or deferral or forbearance options. You can still refinance your private student loans and leave your federal student loans outstanding. Most lenders today offer employment protection if you lose your job and want to pause your monthly payments.
5. How often can I refinance student loans?
Borrowers often ask: When should I refinance student loans? The answer: you should refinance student loans whenever you qualify for a lower interest rate. There is no limit to how often you can refinance student loans. If you can get a lower interest rate and save more money, then student loan refinancing may be a smart financial move.