Should You Refinance Your Student Loans?

Jen SmithDebt, Personal FinanceLeave a Comment

refinance student loans

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If you have more student loans than you know what to do with then you’re always thinking about how to get rid of them.

It always starts with looking into student loan forgiveness programs. Those programs suck. They either restrict you to low paying jobs for 10 years or curse you into paying the life of your loan plus taxes on whole other income, which inevitably leads to payments to the IRS which include more interest and fees.

Those programs are great for people who have no other options but they are a last resort and seriously limit your potential in life. And they’re only for federal student loans!

If you have private student loans you have no other option but to pay them. Load on your credit card debt and car payments there and it is overwhelming. I know it’s overwhelming because I felt it.

I had just graduated with my master’s degree and had $50K in high-interest graduate plus loans, $2500 in credit card debt, and a $10K car loan. I was drowning and no one thought I had a problem.

I knew I needed to become financially stable to accomplish the dreams I had. I’m also an only child and my mother has no savings. Without financial stability, my savings could quickly be drained if she had an emergency.

Thankfully I’m no stranger to hard work and telling myself no, and I married someone with those traits too. We worked for 23 months to pay off $78,000 of mostly student loan debt.

I knew the only way to become financially independent was to start with becoming debt free. Once I realized how limiting student loan forgiveness was, I considered student loan refinancing.

Consolidation vs Refinancing Student Loans


At first, I didn’t know the difference between consolidation and refinancing.

Student loan consolidation is combining multiple loans into one, the remaining interest rate is an average of the old ones. When you refinance you are consolidating at the same time but refinancing is taking out a new loan, ideally at a lower rate. That loan pays off all the old loans leaving you with just the new loan.

Interest is what kills most people when paying back their loans. Interest is so high they can barely pay that every month much less make a dent in the principal.

People wonder why they can’t make principal payments to lower the interest like you can on a mortgage. On all loans, you pay the interest first. The difference is in a mortgage the interest accrues once a month. So when you make an extra payment you’ve already paid the interest that month and that extra can go to the principal.

Interest on student loans accrues daily, meaning you never get the opportunity to make a principal payment. That’s why STUDENT LOANS ARE NOT GOOD DEBT. Student loans are a horrible financial product sold to 18-year-olds who have no experience with credit and debt. Student aid advisors are more like credit card sharks than advisors.

So the best method to pay less for your loan isn’t “forgiveness” it’s lowering your interest rate. And you do that by refinancing your student loans.

Since starting Saving with Spunk in 2016 I have answered more questions about student loans than I can count and other than “stop spending money and start working more” my second most given answer is “refinance your student loans.”

Where to Start to Refinance Student Loans


But where do you start in refinancing your loans? There are dozens of companies that refinance student loans. You could spend days filling out all their applications.

I recommend starting with a site called LendEDU.


LendEDU isn’t a refinancing company, they compare companies for you based on your qualifications. You put in your education and income information and they compare rates for all the top refinancing companies to show you which ones are best for or most likely to accept you and what your rate might look like.


The acceptance part is the big one. You’ve probably heard of SoFi. SoFi is the biggest student loan refinancer but also has the most rigid guidelines. The average SoFi borrower has a FICO score of 780 and income of approximately $150,000.

There would’ve been no need for me to waste my time filling out that one.

Early on in my student loan repayment, I applied to refinance with Earnest because they had the lowest rates. I wasn’t approved. When I poked around LendEDU they had in-depth reviews of all the refinance companies and in Earnest’s review it said:

“Because Earnest considers many different factors to determine eligibility, there is more likely to be something on your application that causes you to be rejected. In addition, the application process is more extensive and takes a longer time due to the variety of data points that are analyzed.”

Would’ve been nice to know that before I filled out that “extensive” application.

Student Loan Hero rated the best banks to refinance with and LendEDU checks all of them plus some.

So the point is, start with LendEDU, find out which company or two is best for you and go from there. You could save thousands of dollars so this is worth the few minutes of your time.

How to Get Approved for Student Loan Refinancing


Something to know before you start, most lenders require a minimum FICO credit score of 660, 40% maximum monthly debt-to-income ratio, and $24,000 in yearly gross income. The average approved applicant had a credit score of 757 and the lowest approved score was just below 600. Each lender has its own specific underwriting criteria, so you may have a higher chance of approval from certain lenders more than others.

Other Fun Facts:

  • The average refinanced loan has a 4.82% interest rate including auto-pay discounts
  • The average term length is 10.4 years
  • It’ll take about 28 days from application until the lender pays off your loans
  • Cosigned loans have 0.15% lower interest rates

One advantage to refinancing a student loan verses a mortgage is there are usually few to no fees associated with it. No closing costs or originating fees! You can also refinance both private and federal student loans at the same time.

The Process to Refinance Student Loans


If you’re ready to refinance then the form on LendEDU only takes a few minutes. There’s no commitment or obligation for applying and there’s no hard check of your credit meaning no dings or harm done. It takes 2 minutes, it’s easy and it’s free.


Am I being clear enough? The one thing you lose, if you can really call it losing, when you refinance federal student loans is the opportunity for deferment, income-driven repayment plans, and any loan cancellation.

Lenders do offer forbearance for hardship on a case by case basis so don’t let the fear of hard times keep you from refinancing.


But eliminating these other fallback plans forces you to get your income up and pay your loans off. Paying your loans off fast is what saves you real money. Lowering your interest rate is just chump change if it takes you 20 years to pay them off.

Once you’ve used LendEDU’s survey to figure out which companies will offer you the best rates using, pick the best one or two and apply.


To finish the full application for the lenders you’ll need basic background and education information and a few documents.

At this point, the bank or lender will do a hard pull of your credit score, income, the amount of savings you have, your educational background, and the number of on-time payments that you have made so far with your student loans. Generally, your credit score must be no lower than the mid-600’s (660 or higher) to qualify.

You’ll get your prequalification or denial immediately then an official approval/denial.

Use a good student loan payoff calculator to figure out who will save you the most money and get rollin!

The opportunity to refinance student loans is great, especially if you have graduate and private student loans. I hope you’ll at least head over to LendEDU and see what rates you can get but I hope even more so that you’ll pull the trigger!

Paying off your debt is the first step to financial freedom. Do it fast and it frees the rest of your life up to living your fullest potential.

I was so confused on whether to refinance student loans or consolidate student loans and now I understand!

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