Here at The Student Loan Report, we aim to provide expert news and analysis surrounding the education finance industry. As part of our commitment to the more than 43 million Americans with student loan debt, we’ve decided to create a series of guides purposed to help borrowers better manage their debt.
Today, graduates are leaving campus with more debt than ever before. In fact, the average college graduate is holding a diploma in one hand, and about $17,000 in debt in the other. In America, educational debt is the second largest class of consumer debt. Unfortunately, our nation’s educational system, politicians, and students haven’t figured out a solution.
At StudentLoans.net, we don’t claim to have a solution to this $1.4 trillion problem, but we are going to give it our best shot. We’ve created this guide to help borrowers better understand the emerging student loan refinancing and consolidation industry.
In short, when you refinance your student loans, your new lender will pay off your old loans and issue you a new one. Your new loan typically has a lower interest rate, saving you money, or a lower monthly payment, making repayment more manageable.
Over the last few years, refinancing and consolidation has soared in popularity. For many borrowers, refinancing and consolidation has helped to reduce monthly payments, interest rates, and ultimately total loan cost. But is consolidation and refinancing for you? After reading this guide you should know how to consolidate student loans and how to refinance student loans, as well as the benefits, risks, and next steps to consider.
We estimate that it will take about 15 minutes to read this guide. If you have any questions, comments, or feedback, we would love to hear from you. At StudentLoans.net we strive to help every borrowers. Whether you have $10,000 in debt, or $200,000, we would love to help you better manage your debt and reach financial freedom.
Top Student Loan Refinancing & Consolidation Companies for 2017
2.345% - 6.270%
2.75% - 6.00%
2.21% - 5.84%
2.55% - 6.03%
3.375% - 6.740%
4.75% - 7.35%
3.25% - 7.26%
3.75% - 6.74%
5, 7, 10, 15, 20
5 - 15
5, 7, 10, 15, 20
5 - 20
Private & Federal
Private & Federal
Private & Federal
Private & Federal
*College Ave's maximum loan amount is $250,000 for medical, dental, pharmacy, and veterinary degrees. Citizen Bank's maximum loan amount is $225,000 for graduate degrees.
Top 4 Lenders to Refinance Student Loans With - Quick Reviews
- Variable Rates: 2.345% - 6.270%
- Repayment Terms: 5, 7, 10, 15, 20
- Minimum: $5,000
- Fees: None
- Application: 15 minutes, Can be done completely online
- Fixed Rates: 3.375% - 6.740%
- Fees: None
- Maximum: None
- Cosigner Release: Yes
- Benefits: Unemployment Protection, Career Support, Wealth Advising
2) College Ave
- Variable Rates: 2.75% - 6.00%
- Repayment Terms: 5 - 15 years
- Minimum: $5,000
- Fees: None
- Application: 3 minutes, Can be done completely online
- Fixed Rates: 4.75% - 7.35%
- Fees: None
- Maximum: None
- Cosigner Release: Yes
- Benefits: Interest-Only Payments for 2 Years, Instant Credit Decision
- Variable Rates: 2.21% - 5.84%
- Repayment Terms: 5, 7, 10, 15, 20 years
- Minimum: $7,500
- Fees: None
- Application: 2 part process, ~15 mins, Can be done completely online
- Fixed Rates: 3.25% - 7.26%
- Fees: None
- Maximum: $175,000
- Cosigner Release: Yes
- Benefits: Unique Credit Union Experience, Unemployment Protection
- Variable Rates: 2.55% - 6.03%
- Repayment Terms: 5-20 years
- Minimum: $5,000
- Fees: None
- Application: 2 mins to get estimated rate, Can be done completely online
- Fixed Rates: 3.75% - 6.74%
- Fees: None
- Maximum: None
- Cosigner Release: Yes
- Benefits: Temporary Deferment, Skip 1 Payment Every 6 Months
Best Student Loan Consolidation & Refinancing Companies - Full Reviews
You’ve made it this far into our new guide… we hope you are enjoying it so far. By now you should know the basics behind student loan consolidation and refinancing. Now, we would like to present unbiased descriptions of the eleven major student loan consolidation companies. Please note, from here on out, we consider "consolidation" and "refinancing" the same thing. All of these companies have been vetted by The Student Loan Report team for product quality, security, and customer experience. For more information about any one of these student loan refinancing lenders, look for the link to our full review and analysis of the companies.
1) SoFi Student Loan Refinancing Review
5, 10, 15, 20 year
As we mentioned earlier in the article, SoFi is the leading to refinance student loans with. To date, SoFi has been able to help thousands of student loan borrowers lower their monthly payments and total loan cost. Since a group of Stanford Business students founded the company in 2011, SoFi has refinanced over $6 billion in outstanding debt, and on average their members save about $17,000!
Rates & Terms
How did SoFi cement itself as the leader in the industry? Excellent product offerings. As of this writing, SoFi currently offers refinancing rates as low as 2.345% for variable rates, and 3.375% for fixed rates. The rates cap out at 6.270% and 6.740%, respectively. These are some of the lowest student loan refinance rates in the industry. Members can choose from variable and fixed rates with term lengths of 5, 10, 15, and 20 years. The above rates are all assuming you sign up for auto-pay. Without auto-pay, the rates would be 0.25% higher.
By becoming a SoFi member, which is completely free, you will get access to extra benefits including unemployment protection, career support, interview coaching, and resume review. If you are interested in becoming an entrepreneur, SoFi will support you through their entrepreneurial program. Entrepreneurial program benefits include delayed payments, and mentorship from successful entrepreneurs. In addition, SoFi charges no application, origination, or prepayment fees. Finally, SoFi has a great customer support team ready to help you with any problems that may arise!
SoFi is relatively strict in their requirements. SoFi only accepts people who have graduated and have good jobs and solid income. Typically, SoFi borrowers also have a great credit history and enough income to cover monthly expenses as well as student loan payments.
SoFi's minimum amount of student loan debt to refinance is $5,000.
Note: Students in Nevada are not eligible for refinancing.
SoFi aims to save you money and push you forward. If you are planning to submit an application, block off at least 20 minutes of time to complete it. After you’ve been pre-approved online, you will be asked to select your new loan options. Then, you will be required to upload supporting documents online so that SoFi can verify your income and education. SoFi is known for having the quickest turnaround time in the industry. Other lenders can take months to complete the consolidation process. SoFi can complete the entire process from end to end in as little as a month.
To read our full review of SoFi click here.
2) College Ave Student Loan Refinancing Review
5 - 15 years
Max: $150k undergrad $250k profession
College Ave Student loans was founded in 2014 by former Sallie Mae executives who wanted to start their own venture. Initially, College Ave only offered private student loans to students. Just recently, however, College Ave decided to enter into the student loan refinancing game. Though they are one of the newest lenders in the industry, College Ave has been able to separate themselves as one of the best. Find out why below!
Rates & Terms
College Ave offers some of the lowest rates in the industry - and if you are very qualified, you could cut your rate in half or more! Variable rates start at 2.75% and go up to 6.00%. Fixed rates, on the other hand, start at 4.75% and go as high as 7.35%. It should be noted that these rates are assuming that you sign up for auto-pay. Another great thing about College Ave, aside from their low rates, is that they let their borrowers choose a term length anywhere from 5 to 15 years. This means that you can look at your financial situation and determine the optimal amount of time for you to repay your student loans.
Like most other lenders, College Ave has no application, origination, or prepayment fees. One unique benefit that College Ave offers is the option to make interest-only payments for two years after refinancing. This allows borrowers some extra time to get their financial situation in line before having to start paying down their debt. It should be noted, however, that doing this will increase the total amount that you will spend over the life of your loan as compared to making payments right away after refinancing.
To be eligible for refinancing with College Ave, borrowers must be at least 18 years old, be a U.S. citizen or permanent resident, have graduated from a Title IV approved school, and have at least $5,000 in student loan debt. Additionally, applicants will have to meet College Ave's underwriting criteria. In order to be approved, you should have a solid income and good credit history.
Arguably the best thing about College Ave is the company's simple application process. The application only requires the name of your student loan servicer, your servicer account number, and the amount you want to refinance. College Ave says the application takes only 3 minutes to complete on average! Most lenders take at least 30 minutes. Furthermore, after applying to College Ave's refi program, you will receive an instant decision regarding your approval. Other lenders are notorious for taking weeks to months to give a decision! If you are looking for a smooth and speedy refinancing process then College Ave is the lender for you!
To read our full review of College Ave click here.
3) LendKey Student Loan Refinancing Review
5, 10, 15, 20 year
LendKey is a popular choice for student loan borrowers. LendKey works to match borrowers with not-for-profit credit unions offering educational debt refinancing and consolidation.
LendKey currently works with over 300 credit unions which means the that you can be matched with at least one lender, no matter where you live. Since inception, LendKey has helped over 40,000 borrowers find lower rates through refinancing. In 2015, LendKey expanded its products offerings dramatically.
Rates & Terms
Today, LendKey offers both fixed and variable rates with term lengths ranging from 5 years to 20 years. Variable rates start at 2.21% while fixed rates start at 3.25%. Additionally, borrowers approved for refinancing can choose from a repayment term of 5, 10, 15, and 20 years. These are some of the lowest student loan refinance rates of all the lenders!
On average, you will save about $12,500 by consolidating with LendKey. There are zero application, origination, disbursement, or pre-payment fees. LendKey even offers borrowers cosigner release as a benefit after 24 months of on-time principal and interest payments. For more information about LendKey’s cosigner release benefit, please read our full review.
Eligibility requirements vary based on the credit union that you are matched with. All borrowers who are considered are U.S. citizens. Also, the minimum amount to refinance is $7,500 while the maximum is $175,000. LendKey typically looks for a minimum credit score of 660 and an annual income of $24,000. The higher your credit score and income, however, the higher your credit score will be.
LendKey has really improved its technology over the last two years. Today, the company’s application process is very easy and the interface is friendly. From end to end, most borrowers should expect the refinancing and consolidation process to be completed in about four to eight weeks. During the application process you will be required to provide evidence of a driver’s license, proof of graduation, and pay stubs that verify your income.
To read our full review of LendKey click here.
4) Earnest Review
Earnest is one of the newest and fastest growing student loan consolidation companies. Earnest has competitive product offerings, unique benefits, and a proprietary pricing model. The end result is that more people are getting approved for refinancing and creditworthy individuals are saving tons of money.
Rates & Terms
Variable rates start at 2.55% and fixed rates start at 3.75% for very qualified individuals using auto-pay! These are very competitive rates and are very close to being the lowest student loan refinance rates offered today. Customers of the company save a whopping $17,936 through refinancing! That is the highest average savings that we’ve seen across all of the lenders in the market.
Earnest has a very quick and efficient application process. In just about two minutes, you can get an estimated rate and a calculation of your total potential savings. Once approved, you can choose any term length from 5-20 years. Both federal and private loans are eligible for refinancing through the company. And even, parents are eligible to refinance student loans from their child’s education.
Earnest lets you set your exact monthly payment, and even change your payment amount at anytime. Earnest is the only lender who allows customers to elect bi-weekly payments, and even skip a payment! And as crazy as this sounds, Earnest gives its customers the ability to switch between fixed and variable rates at anytime for no charge. There isn’t any other student loan company on the planet that gives its customers this much flexibility. Earnest offers these benefits to promote repayment efficiency which leads to savings. It is no wonder why Earnest has gained so much traction over the last couple years.
Earnest also, like most student loan consolidation companies, charges no application, origination, or prepayment fees. On the other hand, Earnest does not ship its customers off to a new servicer like most companies. If you refinance through Earnest, you will make all payments to them, and deal with them for customer service, through the rest of your loan's life. Speaking of customer service, Earnest's Client Happiness team is working 24/7 to help you out.
If you’ve tried to qualify for refinancing in the past, but you haven’t qualified, you should look to Earnest as a viable option. Earnest has a unique underwriting model that accounts for more than just credit score. Earnest uses a proprietary model based in data science. Earnest uses hundreds of different data points from your financial history to underwrite your loan. Just because you have a low credit score, you may still be able to qualify at Earnest.
To qualify for Earnest, the company suggest that you should be:
- Have enough savings to cover a couple months of normal expenses
- Carry positive bank balances
- Have a history of making on-time payments
- Have enough income to support comfortable monthly payments
Based off customer feedback, we believe that Earnest has one of the fastest turnaround times in the industry. You can expect the entire consolidation process to be completed in about four to six weeks.
You can apply for refinancing with Earnest all on the company's website. To apply, you will need information about your current loans, your educational and employment history, information to access financial accounts, and some basic personal information.
Though the application process is fairly more extensive than other lenders, Earnest claims that is able to better analyze their customer's chance of repayment, leading to a better situation for both the borrower and lender.
To read our full review of Earnest click here.
Citizens Bank Student Loan Refinancing Review
5, 10, 15, 20 year
Citizens Bank is not your big traditional bank. That being said, you may notice that Citizens Bank is one of the only consolidation companies with actual branches! In fact, the company has over 1,000 branches and $130 billion in assets.
Within just a couple years, Citizens Bank has vaulted itself to the number two spot in the refinancing industry. Through the company’s education finance division, Citizens Bank created the Education Refinance Loan. The Education Refinance Loan was created to help students and graduates better manage their student loan payments. In fact, Citizens Bank reports that their average customer saves $1,764 per year by refinancing! We don’t know about you, but we think that is a lot money for the average student loan borrower.
Rates & Terms
Like SoFi, Citizens Bank offers both variable and fixed interest rate products to those looking to refinance student loans. Variable rates start at 2.38%, and fixed rates start at 4.74%. You can choose a new term length of 5, 10, 15, or 20 years. Both federal and private loans are eligible for refinancing and consolidation through Citizens Bank. And the company even offers an interest rate discount if you choose to make your payments via auto-pay, as reflected in the rates above.
As you would guess, Citizens Bank charges no application origination, disbursement, or pre-payment fees. For example, you would not be charged any fees for making extra principal payments each month.
One benefit that Citizens has that not every lender can claim is 24/7 customer service. Whether you are applying in the middle of the day or at 3 am, someone is there to help.
Finally, Citizens offers tons of educational resources on their website, including calculators for college savings and refinancing.
You must be a U.S. Citizen, or permanent resident alien, to qualify for consolidation through Citizens Bank. Furthermore, you must have at least $10,000 in debt to refinance. And, you must have made at least three on-time monthly payments post-graduation. Citizens Bank only allows refinancing of debt up to $90,000 for bachelor's degrees, $225,000 for graduate degrees (including MBAs), and up to $300,000 for professional degrees such as medical, dental, and law degrees.
Citizens Bank is one of the only companies that does not require you to have graduated in order to refinance. If you have not yet earned a bachelor’s degree, you can still qualify but you must have made at least 12 on-time monthly payments before applying. On-time payments are payments including both interest and principal.
In order to apply for refinancing with Citizens Bank, you will need to complete the quick application on the company's site. For the application, make sure you have proof of citizenship, proof of income, billings statements for your student loans, and proof of employment and housing payments.
This can all be done online and is a relatively straightforward and simple process, especially if you have all of the documentation nearby and ready to go. If you ever get stuck, there is even a chat box to speak with customer service right from your computer!
To read our full review of Citizens Bank click here.
You could say that U-fi is the new, and the old company on the block. U-fi launched in 2015 to help student loan borrowers save money on their student loan debt. While U-fi hasn’t even been in business for a year, the company’s parent has a long history in the student loan industry. NelNet, one of the largest servicing companies, launched U-fi through a partnership with Union Bank and Trust.
Recently, U-fi has partnered with Citizens Bank, and now offers the Citizen's product instead of its own.
Rates & Terms
U-fi offers some great rates and terms through Citizens Bank. U-fi offers rates from 2.38% for variable interest and 4.74% for fixed interest, and they have the longest available term lengths. Borrowers can select a term length from 5 to 25 years. As far as we know, U-fi is one of the only companies to offer a 25 year term length as an option.
Differentiation in the now very competitive refinancing market isn’t easy. U-fi has differentiated itself from the rest of the market through unique borrower benefits. Unlike most lenders, U-fi offers cosigner release. This benefit could be very valuable for borrowers looking to gain approval with a cosigner, but who don’t want to keep a cosigner for the life of the loan. Moreover, U-fi offers a cash back benefits for borrowers who make their payments on-time.
U-fi’s interface and technology isn’t as user friendly as some of the other lenders. That being said, U-fi makes up for a sometimes clunky interface with awesome customer support.
In order to be eligible for refinancing with U-fi/Citizens Bank, you must meet the following:
- Student loan must be in repayment (not in school)
- Must be U.S. Citizen or permanent resident/alien
- Must have at $10,000 in student loan debt
- Must have made 3 on-time full payments towards current loans
- Must not be on income-driven repayment plan
- If you did not graduate, you must have made 12 full on-time payments
U-fi's refinancing page redirects to Citizens Bank where you can apply for refinancing.
To read our full review of U-fi click here.
DRB Student Loan Refinancing Review
5, 7, 10, 15, 20 year
Darien Rowayton Bank is one of the oldest and most experienced student loan refinancing companies in the industry. Abbreviated DRB, the company has long been praised for offering the lowest rates on approved application.
Rates & Terms
DRB offers refinancing rates as low as 3.89% for variable loans, and 4.50% for fixed rate loans. DRB allows borrowers to refinance both federal and private debt. DRB offers term lengths of 5, 7, 10, 15, and 20 years in both fixed and variable rates.
Getting approved at DRB is difficult. To qualify, you must have excellent income and credit. We suggest only applying to DRB if you are currently making over $75,000 per year, and have a credit score above 750.
If you do qualify, expect the refinancing process to take a little bit longer. On average, we’ve heard that DRB’s process takes about 8 weeks from end to end.
To read our full review of DRB click here.
5, 10, 15, 20 year
CommonBond has been a player in the private consolidation market for a few years now. Like SoFi, CommonBond was founded by students looking to make student loans better. CommonBond was started by three Wharton MBA students in 2011 as project to tackle the student loan problem in the United States. Since 2011, the company has come a very long way.
Rates & Terms
CommonBond offers rates as low as 2.32% for variable interest, 3.50% for fixed interest, and 3.80% for hybrid interest. The company’s average users saves about $14,600 through refinancing. CommonBond is on the short list of lenders who allow parents to refinance PLUS loans. CommonBond does not charge any application, origination, disbursement, or pre-payment fees. In addition, the company will pause your payments if you lose your job.
Initially, CommonBond very particular about who was eligible. At first, CommonBond only accepted students from select top schools and degree programs. But over the last year, CommonBond has dramatically expanded its eligible school and degree list. Today, most applicants will be eligible to apply to CommonBond.
To read our full review of CommonBond click here.
Purefy (formerly CordiaGrad) Review
5, 8, 12 year
CordiaGrad is one of the newest lenders to enter the student loan refinancing market. CordiaGrad was launched in 2015 by the Bank of Virginia.
Rates & Terms
Variable rates start at 3.00%, and fixed rates start at 3.50%. These rates include a 0.50% discount offered for making auto-pay student loan payments from an eligible CordiaGrad Checking Account. CordiaGrad is unique by the fact that they only offer 5 year, 8 year, and 12 year term lengths. Parents are eligible for refinancing too.
To be eligible for CordiaGrad, you must:
- Be a US Citizen and at least 23 years of age
- Have a strong credit history
- Have at least $20,000 worth of debt to consolidate
- Have a minimum of two years of employment
- Have an annual income of at least $42,000 (or $25,000 with a cosigner)
The application is pretty easy to use. During the application process you will be asked to provide copies of your driver’s license, pay stubs, educational transcripts, and copies of your current account statements from your servicing company.
ElFI from SouthEast Bank Review
5, 7, 10, 15, 20 year
You’ve probably never heard of ElFI, and neither had we until recently. ElFI was actually just launched by SouthEast Bank in November of 2015. SouthEast Bank has a long history in the student loan industry. Throughout the company’s history, they’ve helped over one million families secure financing for higher education. Going back to its roots, SouthEast Bank decided that a refinancing and consolidation product could help a lot of its student loan borrowers payoff their debt.
Rates & Terms
ElFI’s refinancing products are very competitive. The company offers variable rates as low as 2.19%, and fixed rates as low as 3.49%. Be aware, at this time ElFI only offers 5 year, 10 year, and 15 year term length options. So, if you are looking for a 20 or 25 year term length you will need to look elsewhere.
It is too early to tell if borrowers will respond well to ElFI. If you’ve refinanced through ElFI already, we would love to hear from you! Over the next few months we plan to expand our ElFI review after we’ve collected additional feedback.
5 - 20 year
Simplefi launched its refinancing product in 2015. The company has been around for a few years now, but only recently has the company expanded into education finance. Simplefi’s website could be described as clunky from our first review.
Rates & Terms
With that in mind, Simplefi’s mission is clear. Simplefi was founded to help previously denied borrowers get approved for refinancing and consolidation. Simplefi is a little more lenient when it comes to its underwriting criteria. As a result, the company’s product offerings aren’t quite as competitive. Simplefi offers only fixed refinancing rates, starting at 4.99%. The company offers term lengths from 5 to 20 years.
In addition, Simplefi offers unique benefits including financial counseling and free credit report analysis. Parents are eligible to refinance and consolidate student loan debt too! Both federal and private loans are eligible for Simplefi’s program.
Keep in mind, Simplefi has a very strict eligible schools and degree list for refinancing. As of this writing, the vast majority of borrowers will not meet the eligibility criteria set forth by Simplefi. Furthermore, only borrowers in select States will be eligible for applying. Over time, we expect Simplefi will likely expand its eligibility list. More specific detail can be found in our full review of Simplefi refinancing.
What is Private Student Loan Refinancing & Consolidation?
Refinancing is the process of taking old debt, and restructuring that debt to a lower interest rate. For decades consumers have been able to refinance mortgage, credit card, and auto debts. However, it wasn’t until recently that consumers had the ability to refinance student loans. As of today, you can refinance old debt to as low as 1.90%. And, you can choose a new term length ranging from 5 to 25 years!
It all started in 2011. In 2011, a new financial institution named Social Finance was created by a few business students at Stanford University. These students had the incredible idea to create a system where students could obtain lower rates on student debt. Now SoFi wasn't the first company to offer refinancing, but they did ignite the industry for borrowers. SoFi had the simple idea to make refinancing easy. Unlike traditional financial institutions, SoFi decided to focus on simplicity, savings, and excellent customer service. Social Finance was eventually renamed SoFi, and since 2011 the company has refinanced over $6 billion in debt. As SoFi gained momentum, other began to take notice. Over the last few years, the number of companies consolidating educational debts has skyrocketed. Today, there are over 15 different companies offers private student loan consolidation to customers.
Can you refinance student loans? Can you consolidate student loans? How does consolidation and refinancing work? How can you consolidate student loans? How can you refinance student loans? Great question!
First off, both federal and private loans can be refinanced and consolidated together. These include Stafford, Perkins, PLUS loans, and virtually all types of student debt. When you refinance and consolidate, you are effectively paying off your old debt, and creating one new loan. When talking about refinance and consolidating with a private lenders, there is no real difference between private loan consolidation and federal loan consolidation - they end up with the same result.
During the consolidation process, your new lender will pay off your old debts and issue you one new loan. You can choose which loans you would like to consolidate…it isn’t an all or none deal. For example, you may choose to consolidate only your private debts, and not you federal debt. Alternatively, you may choose to refinance only your high interest debt.
During the application process you will be asked to provide information about your type of debt, your education, as well as your personal information. The lender reviewing your application will use this information to pull your credit file, and eventually pay off your old loans. Lender applications usually take about 20 minutes to complete. We recommend gathering your current student loan statements before you start to the application to save time. From end to end, the consolidation and refinancing process usually takes about 4-6 weeks to complete. It can take longer if your current servicing company is slowing down the process for your refinancing company.
Don’t worry! There are no fees charged for refinancing. All of the major consolidation companies charge zero application, pre-payment, and origination fees. What you see is what you get. Increasing competition between lenders over the last year has made refinancing a borrower's market. Zero fees, low rates, and awesome benefits are offered by many lenders.
How to Refinance Student Loans & How to Consolidate Student Loans
Now that you know that you can refinance student loans, let's look at how you can actually go about doing it. Refinancing/Consolidation is a way for borrowers to lower their interest rates and often their monthly payment amounts. There are many options to refinance existing loans, whether they are federal or private to start with. However, all refinancing is done with private lenders. The federal government does not offer refinancing of student loans. They do offer consolidation through the Department of Education’s Direct Loan Consolidation Program, which is discussed in another section below. To save money with a better interest rate, though, borrowers must use a private lender. Are you trying to figure out how to refinance student loans or how to consolidate student loans? Keep reading below.
Comparison Shopping for Refinance Terms
The first step in refinancing and consolidating student loans is to shop for favorable rates and other loan terms. Finding the lowest student loan refinance rates will help you save the most money as possible. Most people look primarily at the offered interest rate, but there are other loan terms that may be important to you. For instance, some loans come with a prepayment penalty that imposes a fee on the borrower if they pay their loan off early. For borrowers that anticipate either paying their loan off early themselves, or refinancing it again in the future, they will want to avoid this loan term. In addition, some lenders charge origination fees on their refinances, while others do not. And if the borrower anticipates going back to school for another degree (or to finish the first one), they will want to find lenders that offer deferment on monthly payments when the borrower is enrolled again in school. Not all private lenders offer this benefit, and borrowers should not be shy to outright ask a lender about their terms and policies prior to signing. Shopping around is crucial when you are figuring out the best way to refinance student loans or how to consolidate student loans. It may take some work but it could save you tons in the long run.
Applying for Refinancing & Consolidation
There are many lenders now who offer student loan refinancing and consolidation. Discover and Wells Fargo are two well-known banks that both originate and refinance student loans. In addition to big financial institutions, many credit unions and online financial institutions have entered the student loan refinance market. And peer-to-peer lending sites such as Lending Club and Prosper, while not specifically targeting student loan refinancing, offer loans at attractive rates that can be used to essentially refinance existing loans. A borrower's experience applying for refinancing will be different depending upon where they apply, but some information will almost always be required.
Ready to learn more about how to refinance student loans and how to consolidate student loans? Let's go!
To start, all lenders should ask to run a credit report in order to determine a borrower’s credit score and credit history. To run this report, they will need a social security number and name, and perhaps ask for birth date and address. Some lenders might run a credit report and then, if you pass their credit requirements, ask for additional information in order to make a final determination of approval. Most will either approve or deny based upon the credit report or require the borrower to fill out a full application before running their report. Many lenders who allow borrowers to apply through their websites can give a decision approving or denying within seconds or minutes. Applications that are submitted in person or mailed in to the lender could take days or even a couple of weeks to be processed before the borrower knows if they’ve been approved.
Even when applying online, larger loan amounts will often need to be underwritten by someone within the company who checks a borrower’s documentation, other obligations, and debt-to-income ratio. Debt-to-income ratio is found by dividing a borrower’s monthly debt obligations by their monthly income. The lower the ratio the better of a credit risk the borrower is in the eyes of the lender. A higher ratio means that the borrower may be over-straddled with other debt. An underwriter will also look at a borrower’s credit history with a keen eye – any adverse history, such as past student loan defaults, may be grounds to instantly deny the application.
Approval guidelines vary widely between categories of lenders, and among lenders within any given category. Many big, traditional financial institutions are looking for only fairly well-qualified borrowers, or borrowers who apply with well-qualified cosigners. Often they will make public their minimum credit score and other requirements, such as minimum income, so that borrowers have an idea in advance of whether they qualify. For instance, Citizens Bank, a leading student loan lender offering refinances, requires a minimum credit score of 680 as well as $24,000 in annual income.
Borrowers with low credit scores or no annual income can obtain a cosigner who fulfills those requirements, or they can shop around at smaller, non-traditional lenders. Online-only financial institutions tend to have looser credit guidelines, and peer-to-peer lending platforms will categorize potential borrowers and match those with lower credit scores to investors who are willing to risk lending to them in return for a higher interest rate.
It’s likely that a majority of private student loans, including refinances, are obtained with the help of a cosigner. Those who use private student loans are overwhelmingly undergraduate students, many of whom do not yet have the credit history sufficient to get a loan using just their own name. If a borrower decides to refinance in hopes of a lower rate, but has not been out of school for very long, they will probably still require a cosigner for approval. Sometimes, a borrower can technically qualify for a refinance on their own, but will choose to have a cosigner in order to get a more favorable interest rate.
A cosigner can be any creditworthy adult, but usually it is a parent, other relative, or spouse who is most comfortable with this obligation. A cosigner is obligated on the loan until released or until the borrower pays off the loan completely. For this reason, it’s important that any potential cosigner is aware that if the borrower stops making payments, the default will go onto the cosigner’s credit report and they can even be sued personally for the debt. Being a cosigner is a long-term commitment that should be fully understood before signing on the loan.
Final Thoughts on How to Refinance & How to Consolidate Student Loans
As you can see, it isn't too difficult to figure out how to refinance student loans and/or how to consolidate student loans. It is a relatively straightforward process that you can master after an hour of research or so. Be sure to explore all of your options for refinancing and consolidation so you can find the lowest rates possible.
Risks to Consider Before Refinancing Your Student Loans
Loss of Federal Student Loan Benefits
Borrowers can refinance either private or federal loans. Unlike the typical private loan, federal loans come with guaranteed benefits such as deferment while the borrower is in school, forbearance during times of economic hardship, and in some cases a right to put the loan on an income-contingent repayment plan with a capped monthly payment. If a borrower chooses to refinance federal loans with a private lender, they will lose all federal benefits and gain only those offered by their lender on that particular loan. However, because federal loans have fixed interest rates that are determined by the federal government and are not contingent upon the individual borrower, refinancing these loans privately can often save borrowers thousands of dollars a year.
After balancing the loss of federal benefits against the savings of refinancing, many borrowers still choose to refinance their federal loans. Each borrower is in a unique situation. If you don’t plan on needing any of the Department of Education’s offered benefits, then the risks of refinance are minimal.
How Refinancing Interest Rates are Determined
For those who are ready to refinance their student loans, it’s helpful to know how interest rates are determined before jumping head first into the process. This helps you find the lowest student loan refinance and consolidation interest rates, too. Rates in general will tend to rise and fall in response to financial market conditions. Many private student loan lenders have their variable interest rates tied to the prime rate of a financial index, such as the LIBOR, which is a measure of market conditions. Even their fixed rate offerings will change according to that prime rate, although then the rate is locked for the life of the loan. And of course, the rate offered to an individual borrower will depend upon additional factors specific to them and the loan product they select.
Fixed Versus Variable Impact on Interest Rates
Refinances come in two general types, fixed rate and variable rate. The borrower must decide which of the two types better fits their needs. Fixed rate loans keep their set interest rate throughout the term of the loan, while variable interest rates, as mentioned, are capable of rising and falling according to the prime rate used by the lender. At first glance, then, a fixed rate seems like a better option – and many borrowers do decide that it is. However, the catch is that variable interest rates are generally lower when first offered to the borrower. And if the market conditions are good, then they can save the borrower money over the life of the loan. If the market conditions are not good, then it’s possible for a borrower’s monthly payment to skyrocket from one monthly payment to the next. When market interest rates have been low for a long period but are expected to rise, financial analysts often recommend that borrowers with variable interest rates refinance quickly to lock in a new, fixed interest rate.
How Term Length Impacts Interest Rates
Lenders care a lot about the length of time they lend a borrower money, because it is safer and easier to predict short-term market and economy conditions when deciding what interest rate they must lend at to make a profit. This is why short-term loans generally have lower rates. On the other hand, when making long-term loans the lender must attempt to set an interest rate that accounts for factors such as future inflation and unknown economic conditions. If they make an incorrect prediction, and interest rates shoot up higher than the rate they have loaned money at, then they end up losing money on the loan overall. So long-term loans come with higher interest rates because far off conditions are hard to predict, and the increased rate helps to decrease the lender’s risk of losing money.
How to Get the Lowest Student Loan Refinance Interest Rate
It’s no surprise that the lowest, most favorable rates go to well-qualified borrowers. Therefore, it’s a great idea to check credit reports several months before searching for a refinance lender. Take the time to dispute inaccurate reporting and pay down other types of debt, such as revolving credit card debt. When it’s time to choose between a variable interest rate and a fixed interest rate, variable rates start lower. Of course, a borrower has to make an educated guess as to whether going with a variable rate, which is subject to change, will be more cost-effective in the long run than picking a fixed rate. The term of the loan also has the potential to impact what rate a borrower can get. The lowest initial interest rate option is usually the one tied to a short-term, variable interest rate loan. Borrowers don’t have any control over what an individual lender will offer them, but they do have the ability to shop around for the lowest offered rate.
Companies That Don't Offer Student Loan Consolidation or Student Loan Refinancing
Searching online for information on private student loan lenders will not differentiate immediately between companies offering refinancing and companies that strictly originate loans. It is a common mistake for borrowers to be confused about which is which. Many lenders will both originate and refinance loans, but some of the best-known student loan lenders do not offer refinancing, and many financial institutions that were well-known for their student loan programs at one point are no longer originating loans, either.
Started in the 1970s as a government-sponsored enterprise (GSE), Sallie Mae was essentially a financial services corporation created by Congress and originally named the Student Loan Marketing Association. However, since 2004, Sallie Mae has been a wholly private entity and the largest private student loan lender in the nation. One of the most recognizable names, Sallie Mae is almost synonymous these days with private student loans. Sallie Mae also safeguards its good reputation, boasting of its A+ rating with the Better Business Bureau. However, its sister company, Navient, was sued in January by the Consumer Financial Protection Bureau and several state attorneys general, over allegations that it pushed students into forbearance instead of enrolling them into money-saving income-contingent repayment plans.
There is no such thing as refinancing student loans with Sallie Mae. Also, you cannot consolidate your Sallie Mae student loans with the company either. Like many other private student loan lenders, Sallie Mae does not offer student loan refinancing or consolidation. You can, however, refinance Sallie Mae private student loans with another lender. Also, you can consolidate Sallie Mae student loans together via a different private lender.
It is a great idea to refinance Sallie Mae student loans as they typically have high interest rates, as most private student loans do, and you will most likely receive a much lower rate if you are eligible. Also, consolidating your Sallie Mae student loans makes them much easier to manage and repay. If you choose one of the lenders listed above, you can rest assured that your loans are in safe hands and will not be subject to any sketchy practices. Though there is no such thing as Sallie Mae student loan refinancing or Sallie Mae student loan consolidation, you do have plenty of great options out there to help you save!
J.P. Morgan Chase, better known as simply Chase or Chase Bank, used to originate student loans but no longer does. Chase continues to service loans from its Chase Private Student Loan program, but does not offer new student loans or refinancing of existing student loans. The decision to stop issuing student loans altogether was announced in fall of 2013, although by the spring of 2012 Chase had already limited its new student loans to existing Chase customers. In 2012, Chase made only $200 million in student loans, compared to the $6.9 billion in 2008. As with many other student loan lenders, the economic recession of 2008-2009 led them to eventually exit the student loan market altogether. At the time, a Chase spokesperson noted that after the recession borrowers were much more inclined to take out student loans from the federal government rather than private lenders. Chase student loans are still serviced directly by Chase in some instances, but can readily be refinanced on the open student loan market.
Unfortunately for those loyal to the company, there is no such thing as Chase student loan refinancing or Chase student loan consolidation. If you were hoping to refinance or consolidate your student loans with Chase, you are out of luck. There are many options, however, that you can look into. There are many great lenders towards the top of this page who you can with if you were hoping to refinance your student loans with Chase.
Also, though they do not offer refinancing or consolidation, you can still refinance your Chase student loans with a different lender. Also, you can consolidate Chase student loans together into one, easier to manage loan through a different lender. If you do not want to switch lenders, and prefer to stay with Chase, your only option is to wait and hope one day Chase offers student loan refinancing and consolidation.
The Student Loan Corp., a student loan division of Citibank, used to be the second-biggest originator of student loans in the country, second only to Sallie Mae. But in 2010, after their loan origination rate fell rather abruptly by more than 50%, Citibank sold its entire student loan business to Sallie Mae and Discover, both of which continue to be large players in the student loan market. The economic crash of 2008-2009 played a large part in the decline in new student loans and Citibank’s eventual decision to abandon the student loan market.
Not surprisingly, as they left the private student loan origination market, there is no such thing at Citibank student loan refinancing or Citibank student loan consolidation. You can, however, consolidate and refinance Citibank student loans, or student loans that used to be held by Citibank. It is a great idea to consolidate and refinance student loans that used to be held by Citibank. Like most private student loans, these most likely have very high interest rates and you could save tens of thousands by refinancing your Citibank student loans.
Alternatives to Student Loan Refinancing & Consolidation
As you may have seen in our brief lender descriptions, all lenders offer refinancing for both federal and private student loans, but sometimes, student loan refinancing is not an option for those without the proper credit history. As an alternative, you may consider taking advantage of the Department of Education’s Direct Consolidation Loan Program. The Direct Consolidation Loan Program allows federal Stafford, Perkins, and PLUS borrowers to consolidate federal debts together. Keep in mind, you cannot lower your total loan cost or interest rate by consolidating through the Department of Education. Instead, you will be issued one new federal loan with a weighted average interest rate.
The Department of Education's Direct Loan Consolidation Program
Federal student loan borrowers can use a Direct Consolidation Loan to combine (consolidate) multiple federal loans into one. This makes managing loans easier because the borrower only has to track and pay one monthly payment amount, instead of several. There are some potential drawbacks to consolidation, however, so it’s important for borrowers to understand what they gain and what they give up by trading in their old loans for a Direct Consolidation Loan.
How a Direct Consolidation Loan Works
A Direct Consolidation Loan is a new loan obligation that replaces multiple prior loan obligations. The main reason borrowers consolidate under this program is to simplify and decrease their loan payments. The consolidated loan will use a weighted average of the prior loans to determine a new interest rate for the consolidated loan, and so borrowers do not save money by consolidating. However, some parent borrowers under the Parent PLUS program chose to get a Direct Consolidation Loan because it will make their loans eligible for income-contingent repayment plans, which are otherwise not available to Parent PLUS borrowers. Other borrowers may choose a Direct Consolidation Loan to get their student loan debt out of default faster than would be possible if they rehabilitated the existing, individual loans.
Compared to the standard 10-year repayment plan, a Direct Consolidation Loan can extend payments over a period up to 30 years, and students with a consolidated loan can get on income-contingent repayment plans. For borrowers having difficulty making standard payments, this can be much-needed relief. The interest on an extended repayment plan will cause the borrower to repay more money over the length of the loan term, though, and this drawback should be weighed against the benefit of lowered monthly payments. Also, consolidating loans into a new Direct Consolidation Loan resets the clock on the 10-year forgiveness period under the Public Service Loan Forgiveness Program. Borrowers who have consolidated in the past and have accrued time toward loan forgiveness would lose credit for that time if they re-consolidated.
How to Apply for a Direct Consolidation Loan
There is no cost at all to apply for a Direct Consolidation Loan. Borrowers can apply one of two ways, either online through StudentLoans.gov or by sending in a paper copy of the application form available on the website. The application is called the Federal Direct Consolidation Loan Application and Promissory Note. Borrowers will also need to choose from a list of federal loan servicers. The servicer they choose to send their application to will be the company that services their consolidated loan.
The paper application has five pages for the borrower to fill in information concerning their existing loans, including noting the loans they want included and excluded from consolidation, and general information such as address, date of birth, and social security number. The application process is straightforward, takes around 20 minutes to complete, and allows the borrower to choose an income-based repayment plan on the application itself. If a borrower has questions, borrowers can use the “Contact Us” tab on the website or call the Loan Consolidation Information Call Center at 1-800-557-7392.
Be Wary of Scams and Companies Offering to Help for a Fee
Some private companies will attempt to get frazzled borrowers to pay them a fee for “help” obtaining a Direct Consolidation Loan, or charge a fee to submit the application on behalf of the borrower. The Federal Direct Consolidation Loan Application and Promissory Note costs nothing to submit and help is available directly through the website or over the phone. Once the application has been submitted to a servicer, the servicer can help a borrower by answering questions such as when their first payment will be due, what their payment amount is, and other inquiries.
Also be on the lookout for companies who say they offer their own loan consolidation that is similar to, or better than, the Direct Loan Consolidation Program. Many of these companies charge any one of a litany of expensive fees, such as a processing fee, administration fee, consolidation fee, or others, and simply hand the loans off to private lenders. These borrowers don’t end up with a Direct Consolidation Loan and won’t have access to the benefits of that program, which includes income-contingent repayment plans, forbearance, and deferment. On the other end, some companies will charge their fees but do nothing with the loans at all, so the borrower is still juggling multiple federal loans – plus, they have been swindled in the amount of the fee.
Just remember, all borrowers are eligible for the Direct Consolidation Loan Program, and there are no costs charged for submitting the application. If you are asked to pay for the Direct Consolidation Loan Program you are likely talking to an un-reputable company. We recommend reporting the company to the Better Business Bureau or the Consumer Financial Protection Bureau.
For more information on the Department of Education’s Direct Consolidation Loan Program click here!
Federal Student Loan Refinancing Initiatives
The national student loan debt is well over a trillion dollars, and counting. After mortgages, student debt is the largest debt load Americans carry. While student defaults continue to make headlines, politicians at both the national and state level have proposed everything from bailouts to national debt forgiveness as a solution to get student debt under control. Although both Democrats and Republicans can agree that mounting student debt is a significant hurdle to the economy, no clear winning idea has emerged as a solution to curbing the problem. Attempts to introduce legislation targeting student loan refinancing at the federal level have been repeatedly blocked.
Senator Warren’s Student Debt Bills
Over the years, Senator Elizabeth Warren has steadfastly kept student debt a political priority. In 2014 and 2015, she tried to get a federal student loan refinancing bill introduced and passed that would allow borrowers to refinance both their federal and private loans at then-current interest rates, which amounted to around 4.5 percent for undergraduate loans and 6.4 percent for graduate loans. The bill was titled the “Bank on Students Emergency Loan Refinancing Act” (Senate Bill 2432). Had this bill passed, it could have meant significant savings to both private and federal borrowers, and would have set the interest rates for the remaining life of the loans. It also would have required the government to purchase student loans from private lenders, in order to refinance new rates for borrowers. However, the bill was blocked by Republicans, many of which were opposed to the raising of income tax on people earning between $1 million and $2 million (the proposed method to pay for implementation of the bill). Federal student loan refinancing seemed to be on the horizon for sometime, and many attempts to implement such a policy gained steam just to lose momentum on the congressional floor.
In 2016, Senator Warren collaborated with others to announce a new three-part legislation package that would tackle the long-term issue of student debt. Nicknamed the RED Act, it was split into three proposals. The first would waive resident tuition for two years of community college, thereby cutting back on students’ initial need to borrow. The second would tie the federal Pell Grant program to inflation in order to grow the size of its grants, and provide guaranteed funding for the program. And the third was an attempt, again, to introduce federally directed refinancing of the national student loan debt. This three-part proposal of legislation encountered opposition similar to that introduced in 2014.
Considering the direction of President Trump’s administration, as well as a Congress with a Republican majority in both the House and the Senate, odds do not look favorable for federal student loan refinancing—at least, not within the next four years. However, Trump did discuss student loans briefly while campaigning, including an idea of capping monthly repayment obligations at 12.5 percent of a borrower’s monthly income, with loan forgiveness after just 15 years. Despite this announcement, he did not dwell on any plans for refinancing. It seems fairly certain from past remarks that his administration will make changes to the current system, but what those changes will be are anyone’s guess so far. As far a student loan refinancing goes, the chances of a stronger private refinancing market appears to be the most likely scenario.
State Refinancing Efforts
Various states have introduced or attempted to introduce their own legislation relating to government student loan refinancing. For example, in 2016, Democrats in Virginia proposed two bills that would have assisted approximately 600,000 state residents in refinancing their student debt. The proposed state legislation would have created a Virginia entity specifically to help with refinancing, but the bills never made it to the Virginia House floor for a vote. They were blocked by a Republican-led subcommittee this January.
Other states have successfully passed such legislation, although many are in the very early stages of implementing it. In spring of 2015, Connecticut passed a law allowing the Connecticut Higher Education Supplemental Loan Authority to refinance student debt for Connecticut residents. Among the other states that have passed refinancing legislation are Rhode Island, California, Iowa, Maine, North Dakota, and Minnesota. Most states require borrowers to be citizens in order to refinance through their agency, bank, or other entity named in the legislation. Surprisingly, Rhode Island offers refinancing on PLUS, Stafford, and private student loans to qualified borrowers regardless of their state citizenship. The Rhode Island program is administered by the Rhode Island Student Loan Authority, and borrowers can qualify online in a matter of minutes at www.risla.com/refinance.
These state programs are similar to private refinancing options. Generally, though, they are able to offer interest rates that are competitive or beat those offered by private companies. In addition, some of these programs are able to offer borrowers access to free student loan counseling and other perks. Additional states have introduced legislation currently in the works to create their own entities and programs.
Student Loan Refinancing & Student Loan Consolidation FAQ
Can You Refinance Student Loans?
Yes! See above for more information about how to refinance your student loans.
Can You Consolidate Student Loans?
Yes! You can consolidate student loans in two ways. Either with the government through a Direct Consolidation Loan or with a private lender (also known as consolidation and refinancing). See above for more information about how to consolidate your student loans with a private lender or with the government.
What is the Best Way to Consolidate Student Loans?
If you simply want to combine your federal student loans and don't want to refinance with a private lender, then a Direct Consolidation Loan is the way to go. If you are looking to save money, you should consider refinancing and consolidating your student loans with a private lender. See above for more information about both of these.
What is the Best Way to Refinance Student Loans?
The best way to refinance your student loans is to compare different lenders to see where you will receive the best interest rate, if you are eligible. See the detailed comparisons at the top of the page for your best options.
Should I Refinance & Consolidate My Student Loans?
If you are hoping to apply for federal student loan forgiveness or depend on an income-driven repayment program, you may not want to refinance and consolidate your student loans with a private lender. You should note that most people will not be eligible for forgiveness, however. For more information about student loan forgiveness, check here. For more information about income-driven repayment programs, check here. If you are not depending on your federal benefits, you may be able to save tons of money through refinancing and consolidation, in which case you should apply.
Can You Refinance Federal Student Loans?
Yes! You can refinance federal student loans with a private lender.
Can You Refinance Already Refinanced Student Loans?
How Can I Consolidate My Student Loans?
If you want to consolidate federal student loans into one federal student loan, speak with your servicer. If you want to consolidate your student loans and refinance at the same time - typically saving you money - you should compare the lenders at the top of this page.
How Can I Refinance My Student Loans?
To refinance your student loans, you should compare the lenders at the top of this page and apply to one that looks like they will work the best for you.
Can I Refinance and Consolidate My Student Loans at the Same Time?
Yes! When you refinance you can also consolidate multiple loans into one.
What are the Lowest Student Loan Refinance Rates?
See the table at the top of this page to see the lowest student loan refinance rates.