Are you one of the 43.4 million college graduates with an average of more than $40,000 in student loan debt? A student loan refinance may be your best opportunity to get better control of that debt.
Our list of the seven best student loan refinance lenders for 2022 is designed to help you do just that, as each offers multiple refinance options at a wide variety of interest rates.
The table below provides a summary of the main features offered by each lender. You can then scroll down and read our summary reviews with more information on the ones that interest you.
$5,000 / no limit
Varies by lender
5, 7, 10, 15 or 20 years
1.99% to 5.79% APR
Starting at 1.74% APR
$7,500/$300,000
670
5, 7, 10, 12 or 15 years
3.97% to 11.89% APR
1.47% to 9.05% APR
$5,000 / $500,000
650
5 to 20 years
2.44% to 7.99% APR
1.74% to 7.99% APR
$5,000 to maximum amount of student debt owed
650
5, 7, 10, 15 or 20 years
2.49% to 7.24% APR
1.74% to 7.24% APR
Our Picks for Best Student Loan Refinance
Here’s our list of the seven best student loan refinance lenders for May 2022:
- SoFi – Comprehensive Financial Services
- CommonBond – Generous Forbearance Period
- Earnest – Option to Skip Payments
- Splash Financial – Online Marketplace
- College Ave – Low Minimum Balance
- LendKey – In-house Loan Servicing
- PenFed Credit Union – Low Variable Rates
Best Student Loan Refinance – Company Reviews
Minimum/maximum loan amount: $5,000 to a maximum amount of student debt owed
Minimum credit score requirement: 650
Loan terms: 5, 7, 10, 15, or 20 years
Fixed rates: 2.49% to 7.24% APR
Variable rates: 1.74% to 7.24% APR
Upfront fees: None
SoFi has become practically synonymous with student loan refinancing because that was the company’s original product. Despite adding additional services, it’s still at the top of the class. Refinances start at 2.49% and run as long as 20 years. You can refinance the full amount you owe on your current student loans.
SoFi now also offers almost every imaginable financial service. This can be important for young adults starting out in life, who need other services in addition to student loan refinances. That includes banking, investments, personal loans, credit cards, and insurance.
- No limit on the amount of student debt you can refinance
- Offers a wealth of other financial services, including banking, insurance, and investing
- You must become a SoFi member to take advantage of student loan refinancing
Minimum/maximum loan amount: $5,000 to $500,000
Minimum credit score requirement: 680
Loan terms: 5, 7, 10, 15, or 20 years
Fixed rates: 2.98% to 5.79% APR
Variable rates: 1.99% to 5.61% APR
Upfront fees: None
CommonBond is a direct lender, offering student loan refinancing of up to $500,000. The company offers student loan refinances to borrowers in 48 states (Mississippi and Nevada are the exclusions). It also stands out as having what’s probably the most generous forbearance program in the industry at 24 months (most lenders offer only 12).
However, you should be aware that, at 680, Commonbond has the highest minimum credit score requirement of the lenders on this list.
- Offers 24 months of forbearance, compared to the industry average of just 12
- Loan amounts up to $500,000
- Fairly high minimum loan balance at $5,000
- Has a high minimum credit score requirement at 680
Minimum/maximum loan amount: $5,000 / $500,000
Minimum credit score requirement: 650
Loan terms: 5 to 20 years
Fixed rates: 2.44% to 7.99% APR
Variable rates: 1.74% to 7.99% APR
Upfront fees: None
Earnest offers some of the highest refinance amounts in the industry. But what we like best about this lender is that it gives you the option to skip one payment every 12 months. While there are certain requirements to take advantage of this feature, it can be a good option to have available.
One limitation that you should be aware of is that Earnest doesn’t allow adding a cosigner. That can hurt your chance of approval, as well as the possibility of getting a lower interest rate.
- Provides student loan refinances for up to $500,000
- Has some of the lowest fixed rates in the industry
- Doesn't allow a cosigner
Minimum/maximum loan amount: $5,000 / no limit
Minimum credit score requirement: Varies by lender
Loan terms: 5, 7, 10, 15, or 20 years
Fixed rates: 1.99% to 5.79% APR
Variable rates: Starting at 1.74% APR
Upfront fees: None
Splash Financial is an online loan marketplace. After completing just one brief online application, you can get loan quotes from multiple lenders at once. Aside from being time-saving, this also allows you to easily compare offers, and select the best loan and interest rate.
Splash offers the lowest fixed rates of any lender on this list. It also has the advantage of having no maximum loan amount. Much like SoFi, it will enable you to refinance the full amount of your outstanding student loan debt.
- Online loan marketplace where you can shop among multiple lenders.
- No maximum loan limit.
- Does not publish a maximum variable rate.
- Specific terms and limitations will vary by lender.
Minimum/maximum loan amount: $1,000 / $150,000; $300,000 for medical school grads
Minimum credit score requirement: “Proprietary”
Loan terms: 5, 8, 10, or 15 years
Fixed rates: 2.99% to 5.09% APR
Variable rates: 2.94% to 4.99% APR
Upfront fees: None
College Ave provides student loans, but with lower maximum loan amounts than other lenders. The maximum loan term is also shorter, at 15 years. But where College Ave stands out is that it provides the smallest minimum loan balances. The company will refinance as little as $1,000 in student loan debt, whereas other lenders will not go below $5,000.
- Will refinance student loan debt as low as $1,000
- Lower maximum loan amount than its competitors
- Maximum loan term is 15 years, compared with 20 years from other lenders
- Doesn't disclose its minimum credit score requirement
Minimum/maximum loan amount: $5,000 / $125,000; $250,000 for graduate degrees
Minimum credit score requirement: 660
Loan terms: 5 – 20 years
Fixed rates: 2.49% to 7.75% APR
Variable rates: 1.90% to 5.25% APR
Upfront fees: None
Much like Splash Financial, LendKey is an online student loan marketplace, where you can get an array of quotes from multiple lenders. However, unlike similar marketplaces, the company maintains servicing of your loan once it closes.
Unfortunately, it has relatively low maximum loan amounts, which could potentially exclude those borrowers in the greatest need of refinancing.
- Receive loan offers from multiple lenders
- Low maximum loan amounts
- Not offered in Maine, Nevada, North Dakota, Rhode Island, or West Virginia
Minimum/maximum loan amount: $7,500 / $300,000
Minimum credit score requirement: 670
Loan terms: 5, 7, 10, 12, or 15 years
Fixed rates: 3.97% to 11.89% APR
Variable rates: 1.47% to 9.05% APR
Upfront fees: None
PenFed Credit Union is a credit union that offers low variable-rate loans through a partnership with Ascent, a company dedicated to providing student loans. Those loans are available for both undergraduate and graduate degrees.
An important limitation to note is that the student loans offered are consolidations, not refinances, which we will discuss further on in this guide. You should also be aware that the low-interest rates advertised, which are among the lowest in the industry, are offered to applicants with cosigners.
- Offer some of the lowest interest rates in the industry for borrowers with cosigners
- Offers student loan consolidations, rather than outright refinances
- Very high minimum loan amount, at $7,500
Student Loan Refi Guide
There’s much to know about how student loans work, including when they can be used, and when they can’t.
Even if you’ve chosen a lender from among the best student loans available, sometimes your circumstances change — and you may want to take advantage of a bump in your credit score to refinance for a lower rate.
What is student loan refinance?
A student loan is just like any other type of loan, except it’s designed specifically to finance school loans for higher education.
As the name implies, student loan refinances are limited to refinancing school-related debt only. You can include loans from public and private lenders, as well as parent plus loans.
You won’t be able to include non-student loan-related debt, such as car loans and credit card debt that you accumulated during your years in college. Further, most lenders will require that you have completed your degree, and it may be difficult to find one willing to refi associate degrees.
Fixed vs Variable rates
You’ll have noticed that the table at the top of this page (and each individual review) has information regarding both fixed and variable annual percentage rates or APRs. APRs represent the cost you spend each year to borrow money. While shown as a percentage, it’s a little bit different than your interest rate, since it also includes any fees you pay.
As the name says, a fixed-rate student loan has the same interest rate over the life of the loan, so you know exactly how much you’ll pay every month.
Variable-rate loans, then, have rates that change according to the market conditions of whichever index the lender uses — and they’re only offered by private lenders, who add an additional percentage, called the margin.
Both types of loans have advantages and disadvantages. Fixed-rate loans are predictable and easy to plan your budget around. Loans with variable APRs often start at lower rates than fixed ones, but they always carry an element of risk, since your rate can always increase.
Requirements
Since it is a refinance, qualifying will generally depend on employment, credit and annual income requirements. However, many lenders do allow adding a qualified cosigner if you can’t qualify on your own, or you want to take advantage of your cosigner’s higher credit score.
If you’ve been wondering why check your credit report regularly?, you should know it’s always a good idea to stay on top of your credit. Since your score changes continuously, you’ll need to monitor it to know exactly where you stand before making an application for a refinance.
You should be aware that pplying for a refinance will require a hard credit check, similarly as for any other major financial commitment. While this will lower your score overall for about a year or so, if all your hard credit pulls are within a 14-day time frame, the credit bureaus will count them as one. Also see whether the lenders you choose offer prequalification, since this will give them an idea of your creditworthiness with just a soft check.
Credit scores are a major component of the student loan approval process and its eligibility requirements. When you apply, your lender will approve or deny you based, in part on whether they determine you have a good credit score, and your debt-to-income ratio. Each lender will set its own minimum credit score requirement.
Not only is approval heavily based on your credit score, so is your interest rate.
When you’re looking into different refinancing options, check if they offer any perks or loan benefits such as rate discounts, (autopay discounts for automatic payments are fairly common) or unemployment protection — and conversely, whether they have any prepayment penalties.
How to refinance a student loan
First, you’ll need to submit an application that includes information on your employment, whether you’re a U.S. citizen, your minimum income, assets, credit history, and other relevant financial disclosures.
Second, you’ll also need to submit a complete list of all student loan debts you want to include in the refinance.
The loan application process is similar to that for any other type of loan. But it’s naturally more complicated by the fact that many applicants have very large student loan balances to refinance, sometimes over 100K in student loan debt. A debt of that size may require you to add a qualified cosigner, unless your income is high enough to carry the loan by yourself.
Cosigner release. If you’re going to refinance your student loan, and you’ll be using a cosigner to help you qualify, be aware of the new lender’s policy on cosigner release. The policy will vary for each lender. They’ll typically require 24 to 36 months of on-time payments.
Student Loan Refinance Costs
Virtually none of the seven best student loan refinance lenders for 2022 we’ve provided in this guide charge upfront lender fees, such as application and origination fees. Since there are so many high-quality lenders providing no-fee refinances, you should be able to easily avoid any lender that charges them.
While legitimate lenders don’t charge upfront fees, they do typically have late fees for student loan payments that are behind. These can be based on either a flat fee or a percentage of the payment, or some other metric. Some lenders may also have prepayment penalties if you pay off some or all of your loan early.
Watch out for student loan scams! One of the very best ways to know if a student loan offer is a scam is when a lender insists on the payment of fees before your loan closes. It’s a strong indication the “lender” intends to keep your money, without providing the promised loan proceeds. Also, beware of overly generous promises, like a guarantee of a loan from a questionable source.
Never respond to an unsolicited offer to refinance your student loans. A typical red flag is being asked to provide sensitive personal and financial information, like your Social Security number, credit card information, or your bank account number. These are what are known as phishing schemes, and they’re designed to gain access to your financial accounts.
Student Loan Refinance during COVID-19
Due to the coronavirus pandemic, the federal government ordered a pause on student loan repayments. According to the latest update from the White House, President Joe Biden extended the deferment until May 1, 2022. There’s been no official announcement of an additional extension, or of student loan forgiveness initiatives.
If you’re unable to service your loan, most lenders do offer some form of forbearance options. You’ll need to apply for the program with your lender and demonstrate the cause of your hardship.
A common forbearance arrangement is a suspension of payment for up to 12 months. This will usually be granted in three-month increments, requiring you to prove the hardship each time.
Forbearance is not automatic upon application. In fact, the requirements can be quite strict.
For example, SoFi requires that you must have lost your job involuntarily, which is a common requirement. They may also refuse forbearance if you’ve had any late payments on your loan. And in another common provision, the forbearance will be reported to the credit bureaus, which may affect your credit score.
If forbearance is required, you should know that interest will continue to accumulate on your loan, even while payments are not required. This means the principal amount of your loan will increase during forbearance.
Is refinancing better than consolidating student loans?
Refinancing is when you take an entirely new loan, at a new and hopefully lower interest rate, and with repayment terms that will fit comfortably within your budget and financial planning timeline.
Consolidating also involves a new loan to pay off all your existing education loan debts. But rather than giving you a new interest rate, the process instead applies the average of the interest on your existing debts to the new loan. Its main purpose is to enable you to consolidate multiple loans under a single loan, but without necessarily providing a price advantage.
For example, let’s say you have five student loans you’re trying to refinance. If the average interest rate on all five loans is 7%, the consolidation loan will pay off all five loans, with an interest rate that’s also 7%.
Whether refinancing or consolidating student loans is the better strategy depends on the cost of your existing debts.
If the interest rates on your outstanding loans are lower than current prevailing rates, consolidation will be a better strategy. The average of the rates you’re paying on the various loans will be lower than what you can get on a refinance.
But if current interest rates are lower than those on your existing student loans, refinance is a better choice.
How We Found the Best Student Loan Refinance
To come up with our list of the 7 best student loan refinancing companies for 2022, we considered the following criteria:
- Minimum/maximum loan amount: In most cases we included the lenders with the highest possible loan limits.
- Minimum credit score requirement: Though we prefer those with the lowest score requirements, the student loan space does require higher scores than some other loan categories.
- Loan terms: The more options and the longer the terms, the higher the rank.
- Fixed rates: Giving preference to those lenders with the lowest fixed rates.
- Variable rates: Giving preference to those lenders with the lowest variable rates.
- Upfront fees: As you can see from our list, we selected those lenders with no upfront fees.
As much as possible, you'll also want to refinance at a time when the current interest rates range is lower than the average you're currently paying.
Start by looking into a refinance. If you can get a lower interest rate – especially on multiple loans – and a shorter term, you may be able to pay the loan off in less time, without dramatically increasing the payment.
Along the way, stay in close contact with your loan servicer – especially if it changes. It's important to know what your balance is on a regular basis, to make sure it's going in the right direction and to avoid costly penalties.
If you're having difficulty making your payments, there are certain hardship plans available, at least with federal student loans.
One is the Public Service Loan Forgiveness, or PSLF plan. It enables you to have your loan balance forgiven after 10 years of on-time payments if you work for a government agency or certain non-profits.
Another is the Income-Driven Repayment Plan. The name represents a series of repayment options that enable you to find lower monthly payments of not more than 10% of your income.
You should be aware that these plans are available only for federal student loans. It's a major reason why you may not want to refinance federal student loans into private student loans.
Many borrowers do refinance their student loans multiple times, especially when interest rates fall. It also makes sense to refinance if your personal financial situation improves in a way that will result in a lower rate. That can include a substantial increase in your income, or in your credit score.
Concentrate on fixing errors on your credit report. Errors on credit reports are fairly common, and some can have a major negative impact on your credit score. Just by getting those resolved can increase your score quickly.
If your credit score is particularly low, you may need to go a different route. It may be necessary to engage the services of the best credit repair company to help you resolve multiple credit issues.
Summary of the Best Student Loan Refinance Companies
Here is a recap of the 7 best student loan refinance companies for 2022:
- SoFi – Comprehensive Financial Services
- CommonBond – Generous Forbearance Period
- Earnest – Option to Skip Payments
- Splash Financial – Online Marketplace
- College Ave – Low Minimum Balance
- LendKey – In-house Loan Servicing
- PenFed Credit Union – Low Variable Rates
The sooner you refinance, the sooner you’ll get the benefit of the lower interest rates that will make your monthly payments more comfortable, and enable you to get out of debt quicker.
The post 7 Best Student Loan Refinance Companies of 2022 – as of May appeared first on Good Financial Cents®.
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