There are many reasons you may want to refinance your student loans. Perhaps you're looking to pay less interest, switch from a variable-rate to a fixed-rate loan, or change your payment term length.
The top student loan refinance companies offer a variety of terms and low interest rates. But keep in mind that refinanced student loans are always issued by private student loan lenders—so if you originally had a federal student loan, refinancing means you'll lose some key benefits. If your original loan was from a private lender, though, you may have nothing to lose by refinancing.
Best for Good Credit: Earnest Student Loan Refinancing
Earnest has some of the most competitive starting rates of any of the best lenders on our list, so if you have excellent credit, it could be a good choice for you.
Like Earnest's undergraduate and graduate new loans, its refinanced loans have a special perk: the ability to skip one payment every year. You can ask for your first skip once you've made at least six months of consecutive on-time, full principal and interest payments, as long as your loan is in good standing. However, interest will accrue during this time, and the lender will extend the final payoff date of your loan by the length of the skipped payment period.
One thing to watch out for is that this lender has higher maximum interest rates. While Earnest eagerly shares its minimum rates, the company doesn't disclose those on the maximum end anywhere. If you have a shakier credit history, you may end up paying more interest than you initially expected.
Best for No Fees: SoFi Student Loan Refinancing
SoFi is an excellent option for refinancing student loans because this lender does not charge any origination fees, late fees, or prepayment penalties. SoFi will let you check what rates they qualify for in as little as two minutes with a convenient online prequalification tool that won't hurt your credit score.
Borrowers should be aware that SoFi advertises low interest rates; however, these rates are only available to consumers with great credit who set up autopay and the SoFi Plus Discount.
Best Credit Union Option: PenFed Student Loan Refinancing
PenFed offers the lowest maximum fixed refinance rates of any lender on our list. If you have poorer credit and are still able to qualify for a PenFed refinanced loan, you might get a better deal with it than elsewhere.
You need to be a member of the credit union to get your loan. If you've served in the military or work at qualifying associations or organizations, you'll qualify. If that doesn't apply, you can easily join by opening a savings account with a $5 minimum deposit.
PenFed doesn't offer variable-rate loans, which often start at lower rates than fixed-rate loans — although they can overtake fixed loan rates over time. If you want a variable loan, you won't be able to get one with PenFed.
Best for Competitive Rates: Laurel Road Student Loan Refinancing
Laurel Road offers some of the best fixed rates of all of our lenders, but keep in mind that only 11% of applicants who applied between July 2019 and June 2021 qualified for Laurel Road's top rate, according to the company's website. Don't bank on getting it unless you have excellent credit.
If you sign up for a Laurel Road checking account, you'll receive an interest rate discount on your refinanced loan. You can redeem 2x cash back toward student loan payments with the Laurel Road Student Loan Cash Back credit card.
Borrowers need to watch out for late fees with this lender. Laurel Road's late fee is $38 or 5% of your payment, whichever is less. If you fall behind on payments, the total cost of your loan will add up.
Laurel Road Student Loan Review
Best for Comparing Multiple Lenders: Splash Financial Student Loan Refinancing
Splash Financial is a student loan marketplace, not a direct lender. A marketplace allows you to compare loan offers from multiple lenders at once. The marketplace allows you to check your rates with no impact on your credit score.
As a result, it's tricky to nail down the exact terms you'll receive with Splash Financial. For instance, some of the company's lending partners have no maximum amount you can refinance, while others have a cap. You may like Splash Financial if you want to compare a bunch of different companies all at once with one application.
You should also keep in mind that Splash Financial doesn't underwrite its own loans. As a result, you'll be dealing with whatever partner lender you choose and may have a different experience with them managing your loan than the one you expected.
Splash Financial Student Loan Review
Best Brick-and-Mortar Option: Citizens Bank Student Loan Refinancing
Citizens Bank's top loan amount of $750,000 is the highest of any lender we compiled that discloses a maximum loan amount.
Citizens Bank is also the only brick-and-mortar bank we have listed, which may be a good option for those who are more comfortable with traditional banking.
Citizens Bank's minimum of $10,000 is also the highest of any lender on our list. So, if you have a small amount of debt, another lender is probably a better fit for you.
Citizens Bank Student Loan Review
Best for Personalized Service: LendKey Student Loan Marketplace
LendKey is a marketplace, not a direct lender. A student loan marketplace allows you to compare loan offers from multiple lenders at once. The marketplace allows you to check your rates with no impact on your credit score.
LendKey partners with credit unions and community banks, so you may get a more personalized level of service than you would with a Splash Financial marketplace partner.
As a borrower, you should know that LendKey has the lowest maximum refinance amount of any of the best lenders on the list. This probably won't be an issue unless you have a significant amount of loan debt.
LendKey Student Loan Marketplace Review
Best for Flexible Payment Terms: College Ave Student Loan Refinancing
College Ave offers 11 repayment term lengths, making it among the most flexible student loan lenders with regard to loan terms.
You're able to take out a loan for five to 15 years with College Ave. Many other lenders limit your selection to four or five options — though some others do offer 20-year term lengths (which College Ave does not).
You should look out for College Ave's lower maximum refinancing amount. If you have a truly significant amount of debt (we're talking hundreds of thousands of dollars), you may not be able to refinance all your debt with College Ave. This won't be the case for the vast majority of borrowers, but it bears noting.
College Ave Student Loan Review
What Does It Mean to Refinance Student Loans?
Student loan refinancing is when a private lender repays your existing student loans and then gives you a single new loan to replace them. Depending on your credit score and income, your new loan could come with a lower interest rate, saving you money over the life of the loan. You can also choose new repayment terms, usually within 5-20 years.
With student loan financing, a private lender always provides your new loan – whether the existing student loans are federal or private. This makes student loan refinancing different from student loan consolidation. For instance, with student loan consolidation, multiple federal student loans can be combined into a single federal student loan.
Before you consider refinancing a student loan, know that private student loans — which all refinanced loans are — are not eligible for the same protections and benefits as federal student loans. These include opportunities for loan forgiveness and more flexibility with repayments.
Why Should You Refinance Student Loans?
Refinancing student loans can help you save money and simplify your finances. Your refinanced student loan could have a lower interest rate than your current loan — especially if you have good credit and a decent income. That means you'll pay less in interest as you repay the loan.
A refinanced student loan also allows you to replace multiple student loans with a single loan. That means you'll be responsible for making just one monthly payment, which could relieve financial stress and help you avoid missing payments.
Student Loan Refinancing vs. Consolidation
The difference between student loan refinancing and consolidation can be confusing, especially because people sometimes use the terms interchangeably. However, these are two different processes, and depending on your financial goals, one may be better for you than the other.
Student loan refinancing involves restructuring your current loan or loans and getting a new one with updated terms. You'll make a single monthly payment. You can refinance private and federal loans into one combined loan. When you refinance federal loans with a private lender, you'll lose some key borrower protections.
Consolidation is the process of combining multiple loans into one. You'll make a single monthly payment after consolidation. When you consolidate loans, your new loan consolidation rate is the weighted average of your old loans' rates, rounded up to the nearest eighth of a percent.
When to Refinance Student Loans
If you can get a lower interest rate on your loan, it might pay off to refinance. It could also be worth refinancing your student loan if you have a variable interest rate that's gone up significantly and you want a fixed interest rate so you have predictable payments.
However, federal loans have some unique benefits, so only refinance after assessing all of your options.
You don't have anything to lose by refinancing a private loan if you can get a better rate and save money. You won't forgo any federal protections such as income-driven repayment plans, deferment, or forbearance.
If you're unsure if refinancing makes sense for you, it's worth using a student loan refinance calculator to see how much you could save. You'll input your current loan terms, along with the terms of the loan you're considering refinancing into, and the calculator will show you both your monthly savings and your potential savings over the lifetime of the new loan.
How to Qualify for Student Loan Refinancing
Lenders consider several factors when deciding whether you qualify for student loan refinancing. Your credit score significantly impacts your eligibility to refinance a student loan. You can raise your credit score by paying your bills on time, paying off existing debt, and requesting higher credit limits from your credit card company.
Income and your debt-to-income (DTI) ratio are also important factors. That means earning a raise, getting a higher-paying job, and paying off debts could help you qualify. The lower your debt-to-income ratio, the better.
If you still don't qualify, you can consider applying with a cosigner.
How to Refinance Your Student Loans
Here are the steps to refinance student loans:
- Check your credit score. A score in the upper 600s or higher is usually necessary to qualify for student loan refinancing. The higher your score, the lower the interest rates you can hope to receive.
- Review your current loan agreements. You need to determine your existing loan balance. This is the amount you owe across your current loans and the amount you'll have to borrow through the new loan. Double-check the interest rates to search for refinancing options that provide a lower rate.
- Compare loan refinancing providers. Most lenders will let you get pre-approved online — which lets you see your interest rate without affecting your credit score. You should apply for these pre-approvals to compare rates and choose a lender.
- Gather your documents. To apply for a refinanced student loan, you'll likely need proof of identification, proof of income, and documentation of your current loan agreement.
- Apply for refinancing. As part of the official application process, the lender will conduct a hard credit check, which can cause a brief dip in your credit score. Once the loan has been approved, it can take a few weeks for the new lender to repay your existing loans. Don't forget to continue making your old loan payments until the refinancing process has been finalized.
Student Loan Refinance Pros and Cons
Advantages
- Lower interest rates. If you've improved your credit or increased your income since you first took out student loans, refinancing could bring lower rates.
- Flexible repayment terms. A refinanced student could have a shorter term, saving you interest money. It could also have a longer term, lowering your monthly payments.
- Simplified loan repayments. You'll only have to make one monthly payment after replacing multiple student loans with a single private loan.
Drawbacks
- Loss of federal loan benefits. When you replace federal student loans with a private student loan through refinancing, you lose the benefits of having a federal student loan — including eligibility for student loan forgiveness programs.
- Difficulty of qualifying for a lower rate. There's no guarantee that refinancing will bring a lower interest rate. Your eligibility for a rate decrease depends largely on your credit score, income, and debit-to-income ratio.
- Possible fees or penalties. Most lenders don't charge an origination fee for student loan refinancing. Still, you could face late fees or penalties if you miss a payment on your existing loans during refinancing.
Choosing the Right Student Loan Refinance Lender
Don't just go with the first refinance option you come across; the best student loan refinance company for you will depend on what you're looking for and details like your credit score and existing loan terms.
If your main goal in refinancing your student loan is lowering your interest rate, compare the rates you qualify for with several lenders to find the lowest option. Note that the higher your credit score, the better the rates you'll generally be offered.
In this guide, we highlight the standout features of our top refinance picks. This can be a good starting place to evaluate what matters most to you. Beyond finding the lowest interest rate, you might look for refinance lenders without fees, lenders with the widest variety of repayment terms, or companies with brick-and-mortar locations so you can visit and discuss your options in person.
Student Loan Refinance Lender Trustworthiness
The Better Business Bureau, a non-profit organization focused on consumer protection and trust, measures businesses using information like their responsiveness to consumer complaints, truthfulness in advertising, and transparency about business practices. Here is each company's score:
All of our picks are rated A or higher by the BBB, with the exception of Laurel Road, but its parent company, KeyBank, has an A+ rating.
It's important to note that a good BBB grade doesn't guarantee you'll have a good relationship with your lender, nor does a bad BBB grade mean you'll have a bad experience. Read online customer reviews or ask family and friends about their firsthand experience with the company before signing on the dotted line.
FAQs About Student Loan Refinancing
The best time to refinance student loans may be after you've recently improved your credit score. That way, you'll be more likely to qualify for a lower rate and save on the overall cost of your loan.
There is no minimum credit score you need to refinance your student loans. However, you'll likely get a better rate with a higher credit score.
The risks of student loan refinancing include losing key protections such as federal loan relief programs like Public Service Loan Forgiveness. You also won't be eligible for specific repayment options like income-driven repayment plans, which take your specific income and family size into account when determining monthly payments.
Yes, you can refinance both federal and private student loans. You can also refinance a mix of federal and private student loans into a single private loan. However, be aware that you'll lose the benefits of having a federal student loan, including eligibility for student loan forgiveness.
The amount you save when refinancing student loans depends on multiple factors, including your credit score and income. If you qualify for a refinanced student loan with a significantly lower interest rate, you could end up saving thousands of dollars.
No, refinancing student loans doesn't hurt your credit in the long term if you stay on top of payments. When you apply for student loan refinancing, the lender will conduct a hard credit check. This can cause a temporary decrease in your credit score. However, if you consistently make on-time loan payments, the refinancing should ultimately positively affect your credit.
Why You Should Trust Us: How We Chose the Best Student Loan Refinancing Companies
Business Insider's personal finance experts aim to help you make the best, most informed decisions with your money. In picking the best student loan refinancing companies, we combed through lenders and compared interest rates, terms, and all the fine print. Our coverage of student loan lenders includes student loan refinance reviews, and these reviews inform our top picks in this student loan refinancing guide.
We looked for seven factors in determining the best student loan refinance companies, including:
- Interest rate (20% of rating)
- Fees (20% of rating)
- Term lengths (15% of rating)
- Repayment options while in school (15% of rating)
- Borrower accessibility (15% of rating)
- Customer support (7.5% of rating)
- Ethics (7.5% of rating)
The overall rating is a weighted average of these categories. Each category is assigned a weighting based on its impact on your borrowing experience.
Read more about how we rate student loans »
