Student loan refinancing is always at ridiculously low rates.
Here’s what you need to know and what it means for your student loans.
Student loan refinance rates are near all-time lows, with variable interest rates starting at 1.74% and fixed interest rates at 2.44%. If you have student loans with a higher interest rate, it may be time to refinance student loans before interest rates rise later this year. With student loan refinance, you can combine your current student loans into a new private student loan with a lower interest rate, lower monthly payment, or both. This can help you save money, including up to thousands or tens of thousands of dollars on your student loans depending on your student loan balance and student loan interest rate. Let’s explore.
How student loan refinancing works
When you refinance student loans, you can choose to refinance private student debt, federal student debt, or both. With student loan refinancing, your new student loan is used to pay off your old student loans. As a result, you will have a student loan with an interest rate, student loan service, and monthly payment. This simplifies student loan repayment and makes it easier to manage your student loans. You can also choose a fixed or variable interest rate as well as a student loan repayment term between 5 and 20 years. This provides flexibility depending on your financial goals and situation. A fixed interest rate means your interest rate will never change, while a variable interest rate means your interest rate could go up or down over time. A shorter repayment term means higher monthly payments, but you can save more money over time with lower interest charges. A longer repayment term means lower monthly payments, but you could pay more interest over the life of your student loan.
Student loan refinancing is best for these borrowers
Student loan refinancing is usually best for these student borrowers:
- high interest rate
- large student loan balance
- at least 650 credit points
- currently employed (or signed job offer) with a stable monthly income
There are no application, origination or prepayment fees when you refinance student loans. Most lenders allow you to check your new interest rate for free without impacting your credit score. You can also refinance again to get a lower interest rate, even if you have refinanced before. There is no limit to the number of times you can refinance to save money. Since the federal government does not refinance student loans, you can apply online to a private lender.
Lenders want to make sure you have enough monthly income to pay your student loans, living expenses, and any other debt. It is important to note that when you refinance federal loans, your resulting loan will be a private loan. So if you need income-contingent repayment or want government loan forgiveness, for example, you would lose access to those benefits if you refinance federal student loans. However, you can still refinance private loans, as they do not qualify for these federal benefits.
How much you can save with student loan refinancing
This student loan refinance calculator shows how much you can save with student loan refinance.
Say you have $100,000 in student loans, an interest rate of 7%, and a repayment term of 10 years. Now suppose you refinance your student loans with an interest rate of 3% and a repayment term of 10 years. You would save $195 per month and $23,457 in total.