How to Refinance Discover Student Loans

If you've got Discover student loans at over 5% interest and earn more than you owe, you should take a look at your options and consider refinancing for a lower rate and better loan terms. Here are some things to consider when thinking about refinancing Discover student loans.

Editor's note: As of February 1, 2024, Discover is no longer accepting new student loan applications. You can still refinance your Discover student loans, but new loans aren't available.

Who has Discover student loans?

I've seen Discover private student loans show up for all kinds of different degree programs. Generally speaking, Discover doesn't like appearing in the middle of the private student loan market from my experience.

It either has a decent interest rate offer for a cosigner parent with a pristine credit score or it charges the most extreme student loan interest rate you've ever seen. There isn't much in between.

Unfortunately, Discover student loans show up most frequently for students who went to very high-cost institutions. In fact, I wouldn't be surprised to learn they are the biggest financier for quasi sketchy grad school programs in America based on what I've seen from the clients I've advised who have education loans with them.

What interest rate does a Discover student loan carry?

For some borrowers who got a special deal on the old federal student loan guarantee program, I've seen fixed interest rates down in the 3% to 5% range with Discover private student loans.

However, when Discover prices their own private student loans without government backing, they often set the interest rate much higher.

To top it off, many of these high-interest loans can go even higher over time. Nothing like borrowing private student loans for school at a rate that quadruples your mortgage.

Not sure what to do with your student loans?

Take our 11 question quiz for a personalized recommendation on whether refinancing is right for you.

Take the Quiz

What offers are available for someone with Discover student loans?

There are two kinds of folks with Discover student loans. One has a moderate cost of debt and a decent debt-to-income ratio. The other has a fairly high amount of debt relative to their income and their Discover student loans are at pesky interest rates.

For the borrower with manageable private student loans

If you're dealing with a Discover student loan between 4% to 6%, then standard refinancing rules apply. Shop around and see if you find something better.

Maybe your parent's name is on the loan, and you want to remove them as a cosigner. You might be able to refinance to a shorter repayment term and take the loan out in your name only if you've got an income and meet eligibility requirements. Just make sure you can afford the monthly payments. Going for a shorter term can mean higher monthly payments.

If you've got an interest rate below 4% with Discover, chances are you benefited from some sort of federal guarantee or a cosigner with pristine credit. I'd keep that debt around until you pay off everything else that has a higher rate.

For the borrower who owes a ton and has ridiculous Discover student loan rates

Usually, if you have an 8%+ Discover student loan, you graduated from a degree program carrying a lot of debt in general. Moreover, that debt-to-income ratio can make it hard to refinance and lower your interest rate.

However, there is some weird, good news. If you've got a ridiculously high interest rate, a lot of places will refinance you to a fixed rate in the 6% to 8% camp even if you already owe a bunch of student loan debt. However, with the pandemic, there have been some of the lowest rates in the 2% to 3% range.

While 6% to 8% still isn't that great, that could be a huge improvement for someone with a 10% variable interest rate on a Discover student loan.

Historically I've had the best luck with Credible for folks who have modest incomes and large debt loads with ridiculously high 8% to 12% variable rate loans. Typically, you need a good credit score, solid income, and to be a U.S. citizen or permanent resident.

If you use that link, you can get a student loan refinancing bonus, too, if you get a better deal and find a lower interest rate. All bonus payments are by gift card. See terms. With Credible, you can prequalify to see personalized prequalified rates from multiple private lenders without a hard credit check. However, the rate you ultimately get will depend on your credit score, credit history, and the three-month LIBOR index.

You might also score an interest rate reduction with autopay. Check out the various loan repayment options, customer service options, and rates to find the best deal for you.

You can refinance as many times as you want

My goal would be to get you on a lower rate than whatever you're paying on your Discover student loan. If you get a better debt-to-income ratio down the line, you might qualify for better offers in the future.

The two ways to improve your debt-to-income ratio? Earn more money and pay down debt.

It's staggering how few people actually take a look at other offers a couple of years after refinancing student loans with their first lender. As a matter of fact, most borrowers are better credit risks after a couple of years of monthly payments.

So don't worry that once you pull the trigger and refinance Discover student loans you're stuck. Assuming interest rates don't soar, you will probably find a better deal on a new loan later on after locking in some level of savings.

Why Discover often lends at such high rates for student loans

There's a big market for selling education and private student loans in the U.S.. That's because schools sell hope and, in many cases, a dream.

Why are there medical and vet schools in the Caribbean that charge $400,000+? Why do so many dental schools put students in more than $500,000 of student loan debt? These high loan amounts lead to crazy monthly payments.

There's a glut of qualified professors from all the law schools having layoffs. So why does law school cost so much when the main expense is just faculty salaries, and schools could be replacing retiring professors at a much cheaper rate?

Students want the degrees, so the schools charge a lot

A big part of the answer to why grad school is so expensive is that students want to go and get a graduate education. Moreover, many want to be a veterinarian, dentist, lawyer, doctor, etc. no matter what.

So, I think Discover made a conscious decision that since you can't bankrupt student loans, they could make big profits by lending at super-high interest rates to graduate students who didn't have any other options to get financing and already exhausted their federal student loan options.

Most people target high-interest debt to pay back first, so even if a borrower might be overburdened with student loan payments, Discover probably figured they'd get prepayments that would reduce their risk. But for the borrower, monthly payments can be tough to deal with over the life of the loan.

Got a Discover student loan? See if you can get a better student loan refinance rate

Student loan consolidation through refinancing can get you a lower interest rate and may offer more repayment options.

If your existing loans are over 5% with Discover, stop what you're doing and check out what the top refinancing lenders have to offer. Be strategic and earn a huge cash-back bonus by using one of our partner lenders below while securing the best rates.

Speed up your debt freedom date and toss those huge interest charges from Discover student loans out the window.