How to Refinance Student Loans

Looking to refinance your student loans? Here are the general steps to take.

1. Check your credit

Private lenders base your interest rate on several factors, the most important being your credit. If your credit score isn’t strong, you won’t qualify to refinance loans.

If you have a history of paying your bills on time, you probably have nothing to worry about. If you're not sure your credit is high enough, check your credit history to see if you have any areas for improvement.

Your credit card company or bank might also provide a free monthly update of your FICO score. You'll need at least a 650 to be approved for refinancing in most cases.

2. Get your paperwork together

When you choose a lender, you’ll need to provide a range of documents, so you might as well get all the paperwork you need ready.

That said, many borrowers do a quick rate check within a couple of minutes and come back to finish the application later.

Your lender may require the following:

• Two years’ worth of tax returns (only for business owners. Physicians and dentists only need one year of tax returns).
• Recent pay stubs from your current employer
• Statements from your existing private and federal student loans
• Valid photo ID (such as a driver’s license)
• Bank account information (routing number and account number)

Keep in mind that each lender is different and may have other requirements as well.

3. Check rates with multiple lenders

To get the best rate on refinancing, I recommend checking your rate with several lenders. Each time you check your rate, the lender does what’s called a “soft credit check,” which doesn’t show up on your credit report.

Feel free to check your rate with as many refinance companies as you want without fear that it’ll negatively affect your credit. Credit bureaus know that you're rate shopping, which is normal.

4. Compare offers

Now that you’ve collected all of your quotes, it’s time to pick the winner.

Which lender you choose depends on what your goals are with refinancing. If you’re looking to save the most money, then pick the lender with the lowest rate quote. If you’re looking to extend your loan terms so that your monthly student loan payments are more manageable, pick the lender with the monthly payment amount that fits your budget.

When refinancing student loans, you'll also have the option of a fixed or variable interest rate loan. We suggest choosing fixed unless you have the capacity to pay off your loan in two years or less. In that case, consider variable if the rate is at least 1% lower than the fixed rate.

5. Run the numbers

Refinancing student loans can lower your interest rate and/or lower your monthly payment, but at what cost? For example, if you extend your student loan payments to 20 years, you might owe more interest over the life of the loan compared to your existing loans.

We’ve put together a simple refinancing calculator you can use to check any potential offers out for yourself. Do not refinance your loans if you plan to receive student loan forgiveness, as you cannot reverse it.

6. Consider refinancing bonuses

At Student Loan Planner®, you can get cash back when you refinance your student loan debt.

I don’t recommend choosing your lender based on a refinancing bonus. Choose a lender that has the lowest interest rate. That said, the refinancing bonus is nice to have since most other sites do not offer one.

7. Vet the lender

Do you care about getting top-notch customer service? Or would you rather just get the lowest rate possible?

Now that you’ve chosen a potential lender, it’s time to thoroughly vet the company before you sign on the dotted line. We've already reviewed all of these companies, so if you're concerned just read the reviews we've linked to below.

Also consider any special programs or repayment options that may help you. Some lenders offer forbearance options, for example, or programs like career coaching. Many refinance companies offer a 0.25% interest rate reduction when you sign up for autopay too.

8. Submit an application

The next step is to complete a formal student loan consolidation and refinancing application with the lender.

Since you’ve already gotten your paperwork in order from the earlier steps, applying online should only take a few minutes. Each lender has slightly different application requirements, so stay tuned to your email and phone in case the lender contacts you.

After submitting the online application, the review process could take a few weeks to complete. In the meantime, keep paying your current lender until you get the green light for your new lender to start making payments to them.