Complete Guide to Refinancing Student Loans in 2021

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Kristen Kuchar

By Kristen Kuchar

November 5, 2021

Refinancing student loans can be an option to save money for some borrowers, change loan servicers or make student loan repayment easier to manage. However, there are pros and cons to refinancing student loans and it is not the best choice for everyone. Here is everything you need to know about refinancing student loans.

What is Refinancing Student Loans?

When you refinance your student loans you borrow a new loan to repay your existing student loans. Your new loan will have a new interest rate, a new term and a new loan lender. 

People often choose to refinance a student loan to lower their interest rate. A lower interest rate means you are paying less money in interest, which saves money overall. 

However, getting a lower interest rate may require a shorter repayment term, which can increase the monthly loan payments.Refinancing federal student loans means you’ll miss out on many benefits and repayment options. These include the potential for student loan forgiveness programs including Public Service Loan Forgiveness as well as potential widespread forgiveness. Federal student loans also include an option to pause payments with deferment or forbearance if you lose your job or have economic hardship. Federal loans let borrowers to make payments based on your income as well as the ability to discharge your loans if you die or become disabled.

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Use our Loan Refinancing Calculator to learn how much you can lower your monthly student loan payments or total payments by refinancing your student loans into a new loan with a new interest rate and new repayment term.

Student Loan Refinance Calculator

Should you Refinance your Student Loans?

There are pros and cons to refinancing student loans, so you should do your research and understand your loans to consider if it’s right for you. 

Take a careful look at your loans. 

Do you have federal loans or private loans? 

For federal student loan borrowers, refinancing means you’ll miss out on many great benefits and protections. These include the potential for student loan forgiveness, an option to pause payments if you lose your job or experience economic hardship, the interest subsidy on subsidized loans, the ability to make payments based on your income and the ability to discharge your loans if you die or become disabled.

Federal student loan borrowers have the ability to use a Direct Consolidation Loan from the U.S. Department of Education to consolidate student loans. After refinancing, borrowers can no longer use this option.

What is your current interest rate for each loan? 

Refinancing to a lower interest rate can save you money over the life of the loan. Refinance rates may be lower rates than what you’re currently paying. Borrowers can shop around for the best student loan refinance rates using a site like Credible or by applying with each lender individually.

How will refinancing change your payment term? 

Private lenders offer a variety of payment terms from 5 years to 25 years. With a longer payment period, you could have lower monthly payments, but you will end up paying more in total interest. This means you will spend more money on your debt. A shorter loan term will mean a higher monthly payment, but you’ll be out of debt sooner and pay less in interest overall. 

If you have multiple lenders, refinancing could help you manage payments better by streamlining into one monthly payment.

If you had a cosigner for your private student loan, but your current lender doesn’t offer cosigner release, refinancing would remove your cosigner from responsibility of the original loan.

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-Potential to lower interest rate, which saves money
-Potential to either shorten or lengthen your loan term
-Streamline loans into one payment
-Release a cosigner
-Lose the option for student loan forgiveness
-Lose the option for income-driven repayment plans
-Lose generous options for pausing monthly payments
-Lose your grace period
-Approval not guaranteed
-Miss out on subsidized loans

What is Required for Student Loan Refinancing?

The requirements for being approved for a student loan refinance vary on each lender. All lenders perform a credit check as part of the application process.

In general, a lender is going to want to see:

  • Steady income
  • Debt-to-income ratio under 50%
  • A solid credit score of 650 (some may approve lower, some may require higher)
  • Student loans not in default
  • A good credit history (such as no missed payments)

Many lenders also want to see you have graduated from your degree program. These lenders allow you to refinance without a degree.

If you don’t qualify, you could apply with a cosigner. Like with any loan, a cosigner is equally responsible for repaying the debt. The cosigned loan does show up on their credit report and does impact getting approved for other accounts or loans. 

Choosing a Lender for Refinancing Student Loans

Picking the right lender for refinancing student loans is important. Besides finding a good interest rate and loan discounts that will save you money, you want to consider the repayment term and other benefits. Here are some things to consider:

  • What are the requirements for approval? 
  • Do they offer any options if you lose your job, such as an option to temporarily postpone payments? 
  • If you are applying with a cosigner, do they offer an option for cosigner release? 
  • What fees do they charge, such as late fees or origination fees?
  • Do they offer a death and disability discharge if you die or become disabled?
  • Are there any perks available, such as an option to skip a payment or change your due date?
  • How much will you have to pay per month and in total?
  • Does the company have a good reputation? What do reviews day?

We have come up with a ranking of the best lenders for student loan refinancing.

How to Apply for a Student Loan Refinance

Once you have decided that refinancing student loans is right for you, now it’s time to apply. The items required for refinancing will vary between lender. 

Most lenders advertise that the application process is simple and does not take long.

When you are refinancing, you’ll also have the option of choosing a fixed interest rate or a variable interest rate. A variable interest rate is often lower, but keep in mind, this interest rate can increase dramatically. A variable rate could even increase monthly. A fixed interest rate will stay the same until you pay off the loan.

Other Options to Manage Student Loans

If you have decided that refinancing student loans is not the best option for you or you don’t qualify, there are still options to manage student loan debt.

The ChangEd app helps student loan borrowers pay down their debt faster. Link your credit and debit cards and with every purchase you make, the total is rounded up, and that “spare change” is added to your student loans. You can also earn points for potential free payments. Read our review to learn more.

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At, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn’t influence our evaluations. Our opinions are our own.

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