If you’re like most college students, you may have graduated from school with student loans. Even if you took out federal student loans, interest rates can be high, causing your loan balances to grow over time. If you want to save money and pay off student loans as quickly as possible, student loan refinancing may be a smart strategy for you. However, there are literally dozens of refinancing companies out there, so how can you find the right one for you?
Why Consider Refinancing Your Student Loans?
When you refinance federal or private student loans — or even parent student loans — you take out a loan for the amount of your existing education debt. The loan you take out has different terms than your old ones, including interest rate, length of repayment, and minimum monthly payment.
When you refinance your debt, you can opt for a new loan term. You can extend your repayment term to up to 20 years to reduce your monthly payment and make it more affordable. Or, you can qualify for a lower interest rate and save money over the course of your repayment. You can even pay off your loans months or years ahead of schedule, freeing yourself from your debt.
How to Find the Best Student Loan Refinance Companies
When you’re shopping around for a lender, there are six steps you should follow before selecting a loan:
1. Think About Your Goals
Refinancing can help you save money and make your payments more affordable. Before shopping for a lender, consider what your goal is for refinancing.
If your goal is to save money and accelerate repayment, opting for a shorter loan term could be a good idea. Lenders generally give the lowest rates to borrowers that opt for shorter loan terms — usually under 10 years. A shorter term will raise your monthly payment, but you could save thousands of dollars over the life of your loan.
By contrast, if your goal is to free up money in your monthly budget, extending the loan term may make more sense. You’ll pay more in interest over the long run, but the tradeoff may be worth it to have more spending power each month.
Below is an example of how refinancing can affect your payments and total repayment amount:
| Original Loan | Refinanced to Shorter Term | Refinanced to Longer Term | |
| Loan Balance | $20,000 | $20,000 | $20,000 |
| Repayment Term | 10 Years | 7 Years | 15 Years |
| APR | 6.50% | 5.00% | 6.00% |
| Monthly Payment Amount | $227.10 | $282.68 | $168.77 |
| Total Interest Paid | $7,251.51 | $3,744.97 | $10,378.85 |
| Total Repayment Amount | $27,251.51 | $23,744.97 | $30,378.85 |
2. Decide What Loans to Refinance
You can pick and choose which student loans to refinance; you aren’t required to refinance all of your loans. For example, if you have private student loans with very low rates, you can opt to leave them out. Or, if you have federal student loans and plan on applying for Public Service Loan Forgiveness or want to keep access to federal loan benefits, you can omit those, too.
In general, refinancing makes the most sense for loans that have higher interest rates. If you have good credit (or a credit-worthy co-signer), you may qualify for a lower rate and have more flexibility with your loans.
3. Assess Your Loan Eligibility
Because refinancing loans are offered by private lenders, eligibility criteria can vary from lender to lender. You may qualify for a loan from one lender, but not another. At ELFI, borrowers must meet the following student loan refinancing requirements:
- You must be a U.S. citizen or permanent resident
- You must have at least $15,000 in student loan debt
- You must have a bachelor’s degree or higher
- Your income is at least $35,000
- Your credit score is 680 or higher
- Your credit history is 36 months old or older
- Your degree is from an approved post-secondary institution and program of study
If you don’t meet the minimum lending requirements on your own, you may need a co-signer to apply for a loan with you. A co-signer is usually a parent, relative, or friend with good to excellent credit and steady income. The co-signer is responsible for making payments on the loan if you fall behind.
4. Get Rate Quotes and Compare Interest Rates
Before submitting your loan application, it’s a good idea to compare offers from different lenders so you get the lowest student loan refinance rates. Some lenders — like Education Loan Finance — allow you to get a rate quote online in minutes without affecting your credit score.*
With the prequalification tool, you can explore your options and choose what repayment terms and interest rate types work best for you before applying for a loan.
When comparing rates, keep these factors in mind:
- Interest rate types: Some lenders offer fixed and variable-rate student loan refinancing. Fixed-rate loans have the same interest rate — and monthly payment — for the entire life of the loan. Variable-rate loans have lower interest rates at first than fixed-rate loans, but they can fluctuate over time, causing your payment to change, too. Variable-rate loans make sense if you want to pay off your student loans as quickly as possible because you can take advantage of the initial lower rate.
- Interest rate: The rate you receive will affect how much interest accrues on your loan during your repayment.
- Term: Refinancing terms usually range between five and 15 years. In general, shorter terms will give you a lower rate, while longer terms will have higher rates.
Learn More: Choosing Student Loan Repayment Terms
5. Look at What Borrower Protections Lenders Offer
When you refinance federal student loans, you lose federal benefits like access to income-driven repayment plans and federal forbearance programs, so it’s important to think about what you’d be giving up by refinancing.
Even with private loans, it’s wise to consider borrower protections. Hardship options vary by lender, so it’s important to read the fine print before selecting a lender. Otherwise, you could end up in a tough spot if you can’t afford your payments.
For example, if you’re unable to pay your loan because of a financial hardship or medical issue, you may be eligible for a temporary forbearance with ELFI. You could postpone your payments for up to 12 months, giving you up to a year to get back on your feet without worrying about your loans.
6. Research the Lenders
Refinancing lenders vary widely in terms of customer satisfaction and accessibility. Before choosing a lender, research reviews online to get an idea of what to expect as a borrower. You can use TrustPilot to view recent customer reviews and read firsthand experiences from borrowers. (ELFI has 4.8 out of five on TrustPilot, putting it in the “excellent” category.)
Tackling Your Student Loan Debt
Refinancing your student loans is a great way to save money, lower your payments, or pay off your debt early. But choosing the right lender is key. If you’re not sure if refinancing is right for you, use the ELFI student loan refinancing calculator to find out how much you can save and how it would affect your monthly payments.
