Paying back your student loans can be an inconvenience at best and a suffocating burden at worst. You have some options when it comes to handling your student loans. Have you considered refinancing your student loans? Depending on the types of loans you have and your financial situation, student loan refinancing might be the way to go.
What is student loan refinancing?
When you refinance your student loan, a lender (typically a bank, credit union, or other financial institution) will consolidate your multiple student loans and turn them into a single loan with a lower interest rate. Even if you have a higher monthly payment, you end up spending less in the long run due to the lower interest rate. Refinancing student loans is an attractive option for people with high interest private loans, as these loans lack the breadth of repayment and forgiveness options that federal loans do. If you do decide to refinance your federal loans, they will be considered “private” and you will lose all of those forgiveness options.
Best Banks for Refinancing Student Loans
There are plenty of financial institutions that will refinance your student loans for you. Here are our top three choices:
Graduate school tuition is more expensive than undergrad, and there are less scholarship and grant opportunities. Many grad students turn to private loans to finance their degree. If you’re looking for a bank that specializes in graduate degree loans, including MD and JD degrees. The application is short and simple, and you can choose repayment terms of 5, 10, 15, and 20 year increments. APR ranges from 1.93% to 6.49%. Can’t find a job? CommonBond offers an unemployment protection program that will pause payments and help you find a job.
Earnest will refinance both undergraduate and graduate loans with a range of repayment terms. Choose a repayment term anywhere between 5 and 20 years and receive an interest rate that starts at 1.90% (for variable rates) and 3.50% for fixed rates. You can switch between fixed and variable rates and change payment dates whenever needed. If you’re having a tough time, you have the option to skip one payment per year and make it up later. You can only refinance with Earnest if you are employed or have an offer to start a job in no more than six months.
SoFi will refinance your undergraduate and graduate school loans as long as you’ve graduated. Their APR for variable rates ranges from 1.90% to 9.95%; their fixed rate’s APR ranges from 3.50% to 7.24%. Like the other lenders on our list, SoFi will let you pick a repayment term of 5, 10, 15, or 20 years. Unlike the other banks, SoFi boasts an entrepreneur program that has special perks for qualified borrowers, such as loan deferrals and mentorship programs.
When should you not refinance your loans?
If you have a lot of private loans with high interest rates, you might think about refinancing. While the lenders say they don’t have a minimum credit score requirement, people with FICO credit scores of at least 700 have the best chances of being approved. If you don’t have a reliable income or good credit, you’re at a disadvantage. People with federal loans should take advantage of loan forgiveness plans, not private student loan consolidation, and if you have low-interest student loans, you might not want to refinance either.