Mon. Jan 25th, 2021

If you’re saddled with student debt and worried about making payments on your federal loans during the coronavirus pandemic, you can breathe a sigh of relief. An executive action in August pauses payments on federal loans and sets interest rates at 0% through the end of the year. Private lenders may offer their own special relief programs, or you can refinance your private student loans to save money.

Whether you have federal, private or both types of student loans, consolidating or refinancing them might help you reduce your student debt, better manage payments and work toward other financial goals. Too much student debt can affect your ability to save for retirement, increase disposable income or qualify for other loans, such as a mortgage. This guide explains the differences between refinancing private student loans and consolidating federal student loans, the pros and cons of each, and the best options for different situations.

  • How can you refinance student loans?
  • How soon can you refinance student loans?
  • Is there a downside to refinancing student loans?
  • How can you choose the best student loan refinancing company?

The Best Student Loan Refinance Companies of 2020

Methodology: National student loan refinance companies in this guide are selected based on consumer ratings and availability of products.

No student loan refinancer is perfect for every borrower. These lenders are a good starting point for most people, but you should read student loan reviews and research each company on your own.

Best for instant decisions

Splash Financial operates in every state to refinance student loans, including federal, private and Parent Direct PLUS loans for undergraduate and graduate programs. The company refinances loans for law, dental and medical school, plus MBA loans, and offers a special refinance program for doctors in training.

Lender Highlights

  • Loan types: refinancing
  • Minimum FICO credit score: 660
  • Co-signer accepted: yes
  • Better Business Bureau rating: A-

Best Features

  • Refinances a broad range of student loans

  • Charges no prepayment penalty

  • Offers fixed- and variable-rate loans

See full profile

Best for online service

SoFi is an online lender that has provided more than 375,000 borrowers with over $30 billion in refinanced student loans, including undergraduate, graduate and parent loans. The company has expanded from refinancing in all 50 states to also offer its own undergraduate, graduate and parent loans.

Lender Highlights

  • Loan types: dental, graduate, law, MBA, medical, parent, refinancing, undergraduate
  • Minimum FICO credit score: 680
  • Co-signer accepted: yes
  • Better Business Bureau rating: A

Best Features

  • Refinances all types of student loans

  • Allows borrowers to complete the lending process entirely online

  • Provides loan terms from five to 20 years

  • Charges no late, origination or application fees

See full profile

Best for instant approval

College Ave Student Loans offers undergraduate, graduate and parent loans to borrowers in all 50 states. The lender specializes in simple student loan applications with instant decisions.

Lender Highlights

  • Loan types: dental, graduate, international, law, MBA, parent, refinancing, undergraduate
  • Minimum FICO credit score: undisclosed
  • Co-signer accepted: yes
  • Better Business Bureau rating: A+

Best Features

  • Provides loans from $1,000 up to 100% of the school-certified cost of attendance

  • Allows full, interest-only, flat or deferred payment options

  • Charges no origination or prepayment fees on student loans

See full profile

Best for customer service

Education Loan Finance, also known as ELFI, is a national student loan refinancing program for federal and private student loans from Tennessee-based SouthEast Bank. Undergraduate, graduate and parent loans can be refinanced, as well as loans for MBA programs, and for law, dental and medical school.

Lender Highlights

  • Loan types: dental, graduate, law, MBA, medical, parent, refinancing, undergraduate
  • Minimum FICO credit score: 680
  • Co-signer accepted: yes
  • Better Business Bureau rating: A+

Best Features

  • Sets no maximum loan amount

  • Refinances all types of student loans

  • Approves some borrowers with up to 50% debt-to-income ratios

See full profile

Best for instant approval

Citizens Bank provides fixed- and variable-rate private student loans for undergraduate and graduate degrees, as well as parent loans. Borrowers can get approved for several years’ worth of student loans.

Lender Highlights

  • Loan types: graduate, parent, refinancing, undergraduate
  • Minimum FICO credit score: undisclosed
  • Co-signer accepted: yes
  • Better Business Bureau rating: A+

Best Features

  • Offers multiyear approval, meaning you won’t have to reapply each school year

  • Provides a 0.5% interest rate discount to Citizens Bank borrowers who sign up for automatic payments

  • Allows international students to apply with a U.S. citizen co-signer or permanent resident with good credit

See full profile

Best for minimal fees

Discover Bank has been operating for more than 100 years, and since 2010, it has offered private student loans to students attending more than 2,400 colleges and universities. Fixed or variable-rate loans are available to cover up to 100% of school-certified costs.

Lender Highlights

  • Loan types: dental, graduate, international, law, MBA, medical, parent, refinancing, undergraduate
  • Minimum FICO credit score: undisclosed
  • Co-signer accepted: yes
  • Better Business Bureau rating: A+

Best Features

  • Makes loans as small as $1,000 to help families bridge the gap between financial aid and out-of-pocket college expenses

  • Accepts co-signers to help students qualify for lower interest rates

  • Charges no origination, application or late fees

See full profile

Best for fair credit

Earnest is an online lender offering private student loans to undergraduate and graduate students, as well as refinance loans. Borrowers can choose their own loan terms from the company, founded in 2013, to fund up to the full cost of their education.

Lender Highlights

  • Loan types: dental, graduate, law, MBA, medical, parent, refinancing, undergraduate
  • Minimum FICO credit score: 650
  • Co-signer accepted: yes
  • Better Business Bureau rating: A+

Best Features

  • Charges no origination, application or late fees

  • Allows borrowers to choose a monthly payment and a repayment period

  • Permits co-signers on undergraduate or graduate student loans

See full profile

Best for good credit

Laurel Road, a brand of KeyBank, offers graduate student loans and refinancing for graduates and undergraduates.

Lender Highlights

  • Loan types: dental, graduate, medical, refinancing
  • Minimum FICO credit score: 660
  • Co-signer accepted: yes
  • Better Business Bureau rating: A-

Best Features

  • Offers loans from $5,000 up to 100% of a student’s school-certified cost of attendance

  • Allows full, interest-only, flat or deferred payments

  • Charges no application, origination, disbursement or prepayment fees

See full profile

Best for minimal fees

Founded in 2009, LendKey is an online platform connecting credit unions and community banks with borrowers seeking undergraduate or graduate student loans as well as student loan refinancing. LendKey has helped more than 99,000 borrowers by funding more than $3.1 billion in loans from partner lenders.

Lender Highlights

  • Loan types: graduate, medical, refinancing, undergraduate
  • Minimum FICO credit score: undisclosed
  • Co-signer accepted: yes
  • Better Business Bureau rating: A

Best Features

  • Allows borrowers to consider multiple lenders with a single application

  • Charges no origination or application fees

See full profile

Best for ACH discount

PNC was chartered in 1845 and operates in all 50 states. The bank offers student loan refinancing, with both fixed and variable rates, and neither application nor origination fees.

Lender Highlights

  • Loan types: dental, graduate, law, MBA, medical, parent, refinancing, undergraduate
  • Minimum FICO credit score: undisclosed
  • Co-signer accepted: yes
  • Better Business Bureau rating: A+

Best Features

  • Offers a range of loans for undergraduate, graduate and professional education

  • Makes loans as little as $1,000 in all 50 states

  • Provides interest-rate discounts for automatic payments from a checking or savings account

See full profile

Best for fixed APR

The Rhode Island Student Loan Authority, or Risla, is a nonprofit agency that helps students and parents finance college. A specialty is lending to Rhode Island students and residents, although not all Risla loans require residency.

Lender Highlights

  • Loan types: graduate, refinancing, undergraduate
  • Minimum FICO credit score: undisclosed
  • Co-signer accepted: yes
  • Better Business Bureau rating: unrated

Best Features

  • Allows students enrolled less than half-time to qualify

  • Charges no prepayment fee

  • Waives residency requirement for refinancing loans

See full profile

Best for flexible loan terms

U-fi offers private student loans for undergraduate and graduate programs as well as refinancing loans to borrowers in 49 states. The lender specializes in flexible repayment options.

Lender Highlights

  • Loan types: dental, graduate, law, MBA, medical, parent, refinancing, undergraduate
  • Minimum FICO credit score: 680
  • Co-signer accepted: yes
  • Better Business Bureau rating: A+

Best Features

  • Offers repayment terms of up to 25 years

  • Provides an interest rate discount for automatic payments

  • Allows full, interest-only or deferred payment options

See full profile

How Can You Refinance Student Loans?

Whether you consolidate or refinance student loans, you combine multiple loans into one monthly payment. The lender will pay off your outstanding loan balance and issue you a new loan for the total amount you owe.

You can consolidate federal student loans through the U.S. Department of Education. The consolidation will give you one monthly payment with a new loan term and fixed interest rate that is the weighted average of your previous rates.

Consolidating your federal student loans requires no hard credit check and could offer you access to more flexible repayment options or forgiveness programs.

Rather than consolidate your loans, you could consider changing repayment plans to extend your loan terms and get lower monthly payments. But this also won’t reduce the cost of borrowing.

When you refinance student loans, a private lender repays your loans – private, federal or both – and issues a new loan based on your creditworthiness. If you can qualify for a better interest rate, you could save money and get lower monthly payments when you refinance student loans.

Refinancing terms for your new private student loan are based on many factors, including your annual income, debt, employment and credit. In contrast, consolidating your federal loans neither changes the interest that accrues on them nor your ability to get more federal student loans.

A private lender will allow you to refinance student loans, ideally at a lower rate that will lower your monthly payments.

You can refinance federal student loans through private lenders, but it’s not always a good idea. That’s because you’ll lose access to flexible repayment options, including federal income-based repayment plans and student loan forgiveness programs.

Rest assured: You don’t have to choose between refinancing or consolidating your student loans if you have both federal and private loans. An all-or-nothing approach may not work for you.

U.S. News Survey: Student Loan Payments Can Hinder Retirement Savings and Personal Goals

Many borrowers don’t regret their student loans and haven’t explored refinancing them for savings, according to a U.S. News survey of consumers with federal or private student loans. They revealed how much they borrowed, whether their payments are affordable and other details about how their student loans have affected their lives.

Among the survey’s key findings:

  • About half of respondents said their student loan payments are reasonable.
  • Student debt can impede personal goals, including saving for retirement, increasing disposable income and setting aside money for a down payment on a home.
  • Although lenders typically offer hardship options, such as deferment and forbearance, only about half of borrowers said they’ve used them.
  • Just 12% of survey respondents have refinanced student loans, and 22% have consolidated federal student loans.
  • More than half of respondents said they didn’t research lenders before getting a student loan.
  • About 41% of student loan borrowers surveyed said they have regrets about taking out student loans.
  • Loan refinance rate, loan amount, and repayment or hardship options were the top factors student loan borrowers considered when choosing a refinancing lender.

Most student loan borrowers surveyed took out less than $50,000 in loans.

A little more than half of survey respondents said their monthly student loan payments are affordable.

Student debt can get in the way of personal goals.

Only about half of respondents have used hardship options, such as deferment or forbearance.

Most student loan borrowers aren’t consolidating or refinancing student loan debt.

More than half of student loan borrowers didn’t research lenders.

Student loan borrowers tried financial aid alternatives before taking out private student loans.

Survey respondents are somewhat split on whether they regret taking out student loans.

Respondents said interest rate was the most important factor when choosing a loan.

  • U.S. News ran a nationwide survey in April 2020 through Google Surveys.
  • This survey sampled 500 people in the general American population who visit desktop and mobile sites where Google conducts surveys.
  • The survey asked 10 questions related to student loans.

Are You Eligible to Consolidate or Refinance Student Loans?

Before you proceed with consolidating or refinancing, check that your loans are eligible and make sure your choice is the right fit.

Federal Student Loan Consolidation Eligibility

Private Student Loan Refinance Eligibility

Eligibility can vary by lender, but many private student loan refinancing companies look at these factors:

  • Minimum credit score. You’ll usually need a minimum credit score of 670 or higher, which falls in FICO’s good range. But even if you qualify for refinancing, you may not get a lower interest rate than you have now.
  • Credit history. Lenders typically review your credit history for derogatory marks, such as late payments, and consider this information to determine your creditworthiness. You can order free copies of your credit reports – now weekly through April 2021 – at AnnualCreditReport.com to monitor for errors and dispute them, says Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com, a resource for saving and paying for college.
  • Proof of stable work and income. Some lenders may have minimum annual income requirements.
  • Debt-to-income, or DTI, ratio. This is the percentage of your total monthly income that goes toward debt payments, and it can help lenders determine if you’ll have trouble making your loan payments. A lower DTI ratio is better because it indicates that you have more room in your monthly budget.

Most lenders don’t disclose their maximum DTI ratio for applicants, but among those that do, it’s often between 40% and 50%. You can reduce your DTI ratio by switching to longer repayment plans, Kantrowitz says.

Also, lenders may require you to meet other conditions for refinancing student loans. If you can’t qualify on your own, some lenders might approve you with a creditworthy co-signer.

Lenders could restrict refinancing to those who:

  • Complete degrees
  • Have certain types of degrees, such as law or medicine
  • Live in certain states

Parents can refinance student loans, too. Parent PLUS refinancing is available with private lenders. When you refinance Parent PLUS loans or private parent loans, you could lower your interest rate, transfer the debt to your child or both.

Kantrowitz says, “You don’t lose as many benefits when refinancing a federal Parent PLUS loan into a private loan since parent borrowers are not eligible for income-driven repayment plans and Public Service Loan Forgiveness.”

How soon can you refinance student loans? You’re not likely to get approved for refinancing while still in school, unless you have income. Once you graduate and find a job, you should be able to refinance.

Should You Consolidate or Refinance Student Loans?

Use this chart to compare consolidating federal student loans with refinancing private student loans.

Federal Direct Consolidation Loan Private Student Loan Refinancing
Are federal loans eligible? Yes Yes
Are private loans eligible? No Yes
Can you lower your monthly payments? Yes Yes
Is a hard credit check needed? No Yes
Can you lower your interest rate? No Maybe, if you have good credit
Can you use a federal repayment plan? Yes No
Can you qualify for federal student loan forgiveness programs? Yes No

Could You Save by Consolidating or Refinancing?

Congratulations! You just graduated and were hired for your first job earning $65,000 a year in San Francisco.

You have three federal direct subsidized loans: one for $10,000, one for $6,000 and the other for $5,000. To pay down your student debt under the standard repayment plan, you will spend 10 years and roughly $24,000, including interest.

Consolidating vs. Refinancing

Here’s how this scenario could change by either consolidating your federal loans or refinancing them with a private lender.

New APR New monthly payment Interest paid Total paid
Consolidate with a 20-year term 5.53% $145 $13,755 $34,755
Refinance with a five-year term 4.99% $396 $2,772 $23,772
Refinance with a 10-year term 5.25% $225 $6,038 $27,038
Refinance with a 15-year term 5.5% $172 $9,886 $30,886

Be sure to compare the monthly payment with the total cost when you are considering consolidating or refinancing student loans, Kantrowitz says. Your monthly payment could be lower – sometimes much lower – but you could pay thousands of dollars more in interest.

Of course, you’ll want to compare more than just your monthly payment and interest rate to determine whether consolidating or refinancing your student loans might make sense.

Is There a Downside to Refinancing Student Loans?

Refinancing student loans doesn’t make sense if student loan consolidation is a better choice. Consolidation does nothing for your interest rate, but it does make your loans easier to manage, says Travis Hornsby, founder of Student Loan Planner, a consulting firm that helps borrowers manage student loans.

Consolidation could make sense if:

  • You’re having trouble making payments. Consolidating and increasing your loan’s term could give you a lower monthly payment. You’ll keep access to federal loan repayment plans as well as deferment or forbearance, which can offer a safety net.
  • You’re struggling to manage multiple loans. By consolidating, you will combine all of your federal student loans into one new loan and one monthly payment.
  • You plan to work in a profession eligible for student loan forgiveness. If you have federal loans that aren’t eligible for a federal student loan forgiveness program, consolidating those loans could make them eligible. But don’t consolidate loans that are eligible for forgiveness if you’ve been making payments on them because that will restart the clock on forgiveness.
  • You have a loan in default. You may be able to consolidate your loan and bring it out of default.

On the other hand, choose refinancing “if you’re trying to reduce your interest rate and you need to pay off your balance in full,” Hornsby says. Refinancing your student loans with a private lender could be a good idea, as long as:

  • You qualify for better terms. If you have good credit and meet the loan refinance lender’s minimum income requirement and other requirements, you may qualify for a better interest rate that can decrease your monthly payment and the cost of the loan.
  • You want to combine your federal and private student loans. You’ll have to refinance student loans with a private lender to combine private and federal loans.
  • Your income is stable. Refinancing federal student loans means you’ll no longer be eligible for income-driven repayment plans or federal hardship programs.
  • You don’t plan to use federal student loan forgiveness options or alternative payment plans. Private loans aren’t eligible for these federal loan programs.

How Can You Choose the Best Student Loan Refinancing Company?

You can select the right loan refinance company for your needs by reviewing eligibility requirements and these key factors:

Low interest rates are key. When you compare student loan refinance companies, look for competitive interest rates so you can pay the lowest annual percentage rate possible. You can choose between fixed rates and variable rates, depending on the lender.

  • Fixed-rates range. Loan refinance rates will vary based on your lender and credit as well as loan terms and market rates. Fixed-interest-rate loans have a rate and monthly payment that doesn’t change over the life of the loan.
  • Variable-rates range. Variable-rate loans may initially have lower interest rates than fixed-rate loans.

Student loan companies usually advertise interest rate ranges on their website, so that’s a good place to start. Some lenders offer a rate check option. This allows you to prequalify or obtain estimated loan refinance rates and terms using a soft credit check, which won’t hurt your credit. It’s a good idea to check rate options before you formally apply.

Loan and Refinancing Terms

Make sure a student loan refinancing company offers terms that meet your needs. Compare loan amounts and repayment terms to determine a good fit.

  • Maximum loan amount. Most people won’t need to worry about maximum loan amounts. Loan amounts range from $75,000 to $500,000. In some cases, lenders don’t have maximums. But this could be a concern for some borrowers with an exceptionally high student loan balance.
  • Minimum loan amount. Many student loan refinancing companies will require you to refinance at least $1,000, and some may expect you to refinance more. If you have a small amount of student debt, you might not be able to refinance it.
  • Loan repayment term. Most refinancing lenders offer loan repayment terms of 10, 15 and 20 years. Choosing a shorter repayment term could increase your monthly payment but reduce the interest you pay and get you out of student debt sooner.
  • Autopay deduction. Many lenders offer borrowers a 0.25% annual percentage rate discount if they sign up for autopay.

Repayment and Hardship Options

If you need flexible repayment or want hardship options available in case of emergency, find out what lenders offer. Some lenders may have flexible repayment options, perhaps allowing you to make interest-only payments for a certain period of time. Deferment, forbearance and other hardship options may be available, too.

Interest rate isn’t the only cost you’ll face. Refinanced student loans may come with origination, late or returned payment fees.

Learn about how well a student loan refinancing company does with customer service by reading student loan reviews. You’ll want to know what experts and other consumers have to say about a loan refinance lender before you sign on the dotted line.

Overall, interest rate and ease of refinancing are the most important considerations when refinancing, Hornsby says, and that can guide your decision-making. Also, take a look at how generous the forbearance terms are and which servicer the company uses.

“That said, student loan refinancing is really a commodity,” Hornsby says. “You’re looking for the lowest interest rate with the least amount of pain in the application process. Luckily, that process is generally pretty fast and easy.”

Advertising Disclosure: Some of the loan offers on this site are from companies
who are advertising clients of U.S. News. Advertising considerations may impact
where offers appear on the site but do not affect any editorial decisions,
such as which loan products we write about and how we evaluate them. This site
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