Last Updated July, 2022
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01
Editor's Choice
Star Ratings
Reliable and versatile service for student loan refinancing
  • Very low rates
  • Wide network of lenders
  • Effective customer support
9.9
overall rating
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02
Star Ratings
Splash Financial features convenient and affordable refinancing
  • Fixed interest for repayment
  • No penalty for early payment
  • Discounts for auto-pay option
9.9
overall rating
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03
Star Ratings
The fastest and easiest way to refinance
  • 100% online app done from the comfort of your home
  • Apply in minutes and close in days
  • Get a lower rate with option to pull cash out today
9.8
overall rating
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04
Star Ratings
The best service in the market to refinance a piling student loan
  • Unemployment protection
  • Co-signing available
  • No hard credit check
9.8
overall rating
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05
Star Ratings
CommonBond provides feature-rich student loan refinance schemes
  • Option for Parents PLUS refinance
  • Offers education and employment services
  • Soft credit check doesn’t affect your score
9.7
overall rating
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06
Star Ratings
Hassle-free student loan refinancing with repayment customization
  • Flexible repayment plans
  • Precision pricing modeling
  • Can skip one payment every 12 months
9.7
overall rating
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07
Star Ratings
Hassle-free and flexible student loan and refinancing solutions
  • International students can apply with co-signer
  • Loyalty discount for existing customers
  • 12-month forbearance period
9.6
overall rating
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08
Star Ratings
Get the best fixed and variable rates only with Laurel Road
  • Refinancing for medical residents
  • No hard credit checks
  • Bi-weekly payments via autopay
9.6
overall rating
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09
Star Ratings
Get fast, simple, and affordable refinancing to manage your debt
  • Personal loan advisor
  • Affordable fixed and variable rates
  • Variable rates have interest caps
9.5
overall rating
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10
Star Ratings
Flexible and simplified refinance option to save on student loans
  • Quick application process
  • Flexible options
  • No signup or origination fees
9.5
overall rating
Read Review

Here’s what you need to know about Refinancing your student loan

Student loan refinancing is a great option for people who’ve incurred massive debts to pay for their education. It’s a new loan with a more favorable rate of interest and monthly repayment schemes issued in place of old debts from single or multiple sources. Note that refinancing is a good option only when the new loan features favorable and beneficial terms for repayment. Most federal and private banks as well as credit unions provide several different options for refinancing, each with their own criteria for eligibility and also offer unique perks and benefits. Let us understand and learn how student loan refinancing works.

Is there a need for student loan refinancing?

Student loan refinancing helps ease the financial pressure. Simply put, all the money you have borrowed to pay for your education can be converted into one single loan that has a lower rate of interest and more manageable monthly payments. You exchange your current student loan for a new one and then pay off your debt better under the revised terms. Considering the perks you get, it’s a good idea to opt for student loan refinancing.

What are the pros and cons of student loan refinancing?

On one hand, owing to lower interest rates, you’ll be in a better position to quickly pay off the loan. But once the loan is refinanced, you effectively convert all debt into a private loan. Private loans do not qualify for Federal Student Aid including Public Service Loan Forgiveness (PSLF). This means if a qualified professional under the PSLF scheme, like a teacher or nurse, won’t be entitled to the benefits. Another advantage is the lower rate of interest when you opt for refinancing.

Many also opt for a variable rate of interest as it enables a faster payoff. But it’s important to remember that variable rates are directly influenced by market conditions and can drastically change without warning. And this is quite a worrying drawback. Private student loans also don’t qualify for beneficial federal schemes, including the income-driven repayment plan. This means the monthly payments cannot be based on a fixed percentage of your income, which is a benefit you can otherwise avail of federal student loans.

What are the eligibility criteria?

Not everyone is eligible for student loan refinancing. Banks and financial institutions will assess the ability of an applicant to effectively pay off the loans under the new terms. For most refinance loans, you must have a credit score of 650 or better and must be currently employed or have an offer letter in hand. You should earn a stable monthly income to meet payment obligations. Banks will assess your debt-to-income ratio to decide the refinance terms under the new interest rate and accordingly modify the agreement. Also, in any previous debts or loans for education, there should be no prior defaults. A default can hurt the chances of approval as the bank deems the applicant not capable of meeting timely obligations.

These are just the basic criteria that you should meet before submitting an application. In case you don’t meet the requirements, you can still apply for a refinance with the help of a cosigner, who will take responsibility for payment in case you can’t meet the monthly due. To increase your chances of approval, always apply to multiple banks and credit institutions.

Are student loan consolidation and refinancing the same?

No, consolidation and refinancing are two completely different things. Under a loan consolidation, the bank will combine multiple loans taken into one single debt obligation. The amount of interest and monthly payments don’t change here. You’ll only pay a single monthly amount for the total debt. A refinance also consolidates all the loans taken into a single debt obligation, but the interest and monthly amount will be revised to ease the burden of debt repayment.

How do you refinance your student loans?

The refinance will completely depend on the type of debt you already have. In this case, it can either be a federal or private student loan. For federal loans, the refinancing is done by the government-sponsored programs like the Federal Direct Consolidation Loan Program. On the other hand, private loans are commissioned by private lending institutions like banks or credit unions. Note that any type of refinancing will dismiss the benefits you enjoyed under the previous scheme.

Student loan refinancing comes with its own terms and conditions that can be favorable, depending on several factors. Also, you must understand that some private lenders may be willing to combine both your federal and private loans for a new refinance scheme.

Is student loan refinancing worth it?

Research shows that, on average, people in the country carry a student debt of $35,000 or more. By the time you’re employed and start paying off the debt, the high-interest rate and heavy monthly payments can hamper cash flow. Student refinancing is beneficial in the long run, provided you’re eligible for it in the first place and are willing to integrate your debt into a new loan. Many lenders also waive any origination and application fees for the new loan. This effectively saves hundreds or even thousands of dollars. Considering the benefits you can avail, a refinance can play out as an effective debt management strategy. But it’s important to know the variable factors that influence the rates, APR, and terms of the refinance.

Top student loan refinancing companies

These lenders are the best in the business when it comes to student loan refinancing:

  • Citizens Bank
    Citizens Bank provides comprehensive and affordable refinance options. Some of the perks include no penalty for early payments, loyalty discounts, automatic payment discounts, and consigner release after consecutive payments.
  • CommonBond
    CommonBond features the best variable, fixed, and hybrid interest rates among the top lenders in the country for student loan refinance.
  • SoFi
    SoFi offers exclusive perks over and above the refinance schemes. These perks include career coaching, financial advice, referrals for friends, and even unemployment protection with a maximum payment postpone the period of 12 months.
  • Discover Student Loans
    Discover is one of the top credit institutions that charge no fees for student loan refinancing. You only pay the monthly interest accrued.
  • PenFed Credit Union
    This is one of the better options for married couples applying for spousal student loans. Couples can combine their debt to restructure payments to one loan provider