How to Refinance Student Loans


As the total debt owed in student loans continues to skyrocket to a gargantuan high, student loan refinancing is becoming an increasingly popular option for graduates. In the Bay Area alone, a number of institutions have sprung up to help graduates refinance their student loans into a single, (usually) lower interest loan. The result? Greater potential for graduates with high student loan debt to lower their interest rates, save money, and speed up their student loan debt repayment.

That being said, it’s not for everyone. Depending on your specific circumstances you may or may not benefit from refinancing your student loans. In particular, if you already have a low interest rate or your debt is fairly low, the process may not result in huge savings. But for those who meet the criteria, it can shave time and money from the life of your loan!

So how exactly do you go about refinancing your student loans?

Step 1: Understand what it means to refinance your student loans

It’s important to remember that student loan refinancing is different than student loan consolidation. The terms are used so interchangeably, it’s easy to get confused when you first begin your research.

With student loan consolidation you are combining multiple loans into a single loan (thereby streamlining multiple due dates and payments into one). You may also have the option to lower your monthly payments by extending your repayment period. While this is appealing in the short term, you may end up paying more interest over the extended life of your loan. Many people pursue consolidation for the convenience of a single bill and the opportunity to lower monthly payments. Federal student loans can be consolidated with other federal student loans, but cannot be consolidated with private student loans.

Student loan refinancing also combines your multiple loans into new single loan but you will be given a new interest rate for your loan based on your credit score and how you meet other financial requirements. How does this work? The refinancing company essentially buys out your original loans, creates a new loan with new loan agreements, and begins servicing your loans. After you receive your offer you must choose a new repayment plan (many range from 5 to 15 years) based on the interest rate and then adhere to the new terms agreed upon. The lowered interest rate paired with the payoff plan may increase your monthly payments but ultimately save you money in the long run.

Step 2: Find an accredited student loan refinancing company

Once you’ve decided that student loan refinancing is the route you’d like to go, you’ll want to find the best company to suit your financial needs. There are several ways to go about this. You can go directly to the refinancing site (Like SoFi or Common Bond) or you can search for refinancers using an online marketplace like These are well known companies but it’s still important that you take precautions when entering information online. Search for reviews, look for contact information, and put in the time to verify that you’re engaging with a legitimate company.

Step 3: Apply for refinancing offers

It’s fairly easy to apply for offers and most applications only take a few minutes to fill out. That being said, the entire process is made easier by gathering the info you need before you begin your application. To apply to most refinancing services, you’ll need…

  • Your credit score

  • Your annual income

  • Total amount in loans

  • Social security number

  • Interest rates

Once you have your information in hand, visit the site of your choice to begin the application process. Most interfaces are fairly straightforward and utilize a simple online form. In the case of SoFi, you’ll be prompted to enter your information on different screens before you can submit your completed form.*

The purpose behind applying for offers is to share your financial info with the company so they can enter it into their own set of standards and requirements. Once they have the details they need, they’ll be able to communicate the ways in which they can work with you and and your loans.

Since you’ll be entering some sensitive information you’ll want to take precautions to protect your information. Connect with a secure server (or one that you trust), use a unique password when creating your account, and remember to sign out after you complete your application.

* For a more detailed look into the process, Shannon recently went through the entire flow!

Step 4: Choose the best fit based on your offers

Once you receive your offers, you can begin to assess which option makes the most sense for your specific set of circumstances. Some offers will drastically decrease your interest rate, but at the sake of raising your monthly payment. You must assess each and every offer and repayment plan to ensure that the new terms are feasible within your budget.

For instance, your lowest interest rate might be attached to the 5 year repayment plan. While great for those who have the financial flexibility to increase their monthly payments, you might not have the current financial bandwidth. It’s crucial that you calculate what an offer means for your student loan debt in accordance with your other financial priorities.

Step 5: Implement your new repayment plan

Once you accept an offer, you’ll be responsible for beginning your repayment according to the agreed upon terms. When you refinance your student loans you essentially create a brand new contract. This means you’ll want to keep up to date on all the fine print and check in regularly to make sure that you’re on track with your repayment. If you should ever encounter financial hardship, contact your refinancer to talk about what steps you should take! They’ll be able to walk you through your options.

Remember: Keep your end goal in mind

The decision to refinance your student loans shouldn’t be taken lightly. It’s essential that you understand your plan of attack since you’ll be altering the terms and timeline of your repayment (and potentially losing some of your original loan protections and benefits in the process). Ask yourself:

  • How will you approach budgeting for your payment (especially if it’s higher than your previous monthly payment)?

  • Are you able to save for other financial goals in addition to repaying your student loans?

Questions like this will give you the guidance as you set out your new path towards debt free. Additionally, keeping the conversation going can help illuminate the experience and the process for those considering student loan refinancing. Have you refinanced your student loans? If so, what was the process like for you?

NOTE: Some links in this article have referral codes that allow us to get paid a small referral fee when we send new users to a partner site. With that said, we never recommend any product or service unless we think it is trustworthy and has the potential to help our readers.

Image Credit: Sharyn Morrow

Receive updates:      
You can always unsubscribe by clicking on the link at the bottom of each e-mail.