How to Refinance Student Loans

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College is all fun and games until student loan payments are due. If you want to know how to refinance student loans with tips and a checklist you’re in the right place.

There are 5 primary steps for finding the best refinance option:

  1. Know your current student loan and projected interest payments
  2. Use the student loan payment calculator provided to determine the benefits of refinancing
  3. Know what benefits you might lose if you choose to refinance
  4. Compare refinance companies to find the best overall loan package
  5. Apply to your top choices and choose your best option

If you just want the checklist, it’s at the end of the post.

And remember, you may be able to deduct your student loan interest from your taxes. If you’re curious about deductions, check out How to File a Tax Return (Like a Pro).

How to Refinance Your Student Loans with 5 Easy Steps

You can’t get rid of student loan debt easily. Not even if you qualify to file bankruptcy for free. But refinancing for a better interest rate is still an option.

The best way to refinance at a lower rate is by choosing a company that specializes in student loans. You want the lowest interest rate possible because that gives you the best options.

A lower rate not only immediately reduces your monthly payment, it also gives you the option to maintain your current payment amount and pay off your loan early depending on your loan company. Applying to multiple companies for pre-approval gives you the best options for the lowest overall rate.

Graduate student celebrating

To pick the best company for you, start with the 5 major steps to refinancing your loan:

  1. Know your current loan situation
  2. Use the student loan payment calculator to determine the benefits of refinancing
  3. Know what benefits you might lose
  4. Compare companies to find the best overall package
  5. Apply to several to get the best option

Calculate Your Current and Potential Refinance Payments

This handles steps 1 and 2 — know your current loan situation and the potential benefits of refinancing. You should know your current monthly and expected interest payments to know if a loan option works for you.

Before you choose a refinancing loan, make sure that the new interest rate you receive is low enough to have a real effect on your payments and interest over the long run.

You should already know the current principal on your loan (the amount you borrowed), your current interest rate, and your loan term in months. Principal and interest (P&I) is the total amount you will pay on your loan.

You can use a calculator to find your current student loan payments as well as your projected P&I. Calculate with some different interest rates to see how much money you might save by refinancing.

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Getting a lower rate on your loan can make a huge difference. The difference between an interest rate of 5.25 percent and 4.25 percent on a loan of $38,500 over 10 years is $2,242.65. With 5.25%, you’re paying $413.07 monthly, while a 4.25% rate requires only $394.38.

A reduced minimum payment gives you breathing room and the option to pay down your loan faster if your company provides no fees on prepayments.

In How to Retire Early, the first step in creating a plan for financial freedom is to destroy your debt. If you can afford to increase your monthly debt payments, you’ll reduce your overall interest paid as well as gain freedom from the burden of student debt that much sooner.

Make sure that the loan company you work with offers no-fee refinancing and no early payment fees. You don’t want fees like that eating into your savings. The best companies offer lots of benefits without additional fees that just slow you down.

Know the Benefits You Can Lose

If you choose to refinance a government subsidized loan, you could be giving up benefits you may want or need. Some examples are disability and death benefits which prevent responsibility for your student loans from being placed on your family.

If you think you will benefit from an income-based repayment plan, you may not want to refinance.

If you refinance while you’re in a payment grace period — for example, the first six months after finishing school if you have a federal loan — you may lose this benefit and start getting billed right away.

Finally, refinancing can cause you to lose options for deferment and forbearance which allow you to temporarily stop or reduce monthly payments for a period of time.

Remember that any time you choose to defer debt or pay a lower minimum without reducing the rate, you will pay more interest over time.

Many companies offer benefits similar to those listed above, so you may not have to give up anything to refinance.

Graduate student celebrating

Compare Loan Refinance Companies

Do your due diligence when choosing a company. One of the best options for comparing companies is to use the Student Loan Refinancing Reviews & Comparisons on SuperMoney. They offer loan rate estimates and compare benefits to make your research easier.

When it comes to companies that offer refinancing loans with benefits, you have several options.

Earnest, for example, offers death and disability benefits.

Both Earnest and LendKey offer flexible repayment options like the ability to skip 1 payment each year, which can be useful if you have an emergency bill or find yourself unemployed.

SoFi offers unemployment protection and will pause your loan payments if you lose your job. They also offer free career assistance and help with your job search.

Companies like SoFi, Splash, CommonBond, LendKey, and Earnest offer zero-fee refinancing and penalty-free early repayment.

Student loan companies are competing to provide you the best refinancing package. Use that to your advantage and find the best fit for you. Compare the benefits different companies offer. See who gives you the best interest rate and best overall benefits package.

I recommend picking a company that will offer you refinancing without charging an origination fee — a low percentage of your overall loan amount. The companies listed here offer the best benefits without adding fees that make it harder for you to get out of debt.

Apply for Refinancing

After you have done your research, apply to a few companies that offer you a great overall package — the lowest rates along with the best benefits.  Many companies offer pre-approval which can be done without pulling your credit. When you’re ready to apply, you’ll receive offers based on your loan amount, your credit score, and possibly some other assets and savings accounts.

Here’s a screenshot of the pre-approval request from Earnest:

Earnest Student Loan Refinancing Pre-Approval

You should definitely shop around a bit. One company may offer you an extremely low-interest loan, but their benefits and fee structure may not be your best option.

Try to balance a low interest rate with the benefits that matter most to you.

Student Loans Refinancing with a Checklist

If you’re feeling weighed down by debt, this checklist will help you take the necessary steps to refinance your student loans. After running your numbers in the student loan payment calculator, you’ll have a good idea of whether refinancing is worth it for you.

Compare companies and find the ones that will provide you a balance of the best rates and the best benefits. Once you have submitted your applications with all of your documents, it should take around 2-5 business days until you get a response.

How to Refinance Student Loans Checklist

  • Expect your credit to be pulled:
    • Are you okay with your credit score being affected by the refinancing process?
    • Is your credit score above 700? This will help you get the best rates.
    • Do you have any collections on your credit report? Even a small amount reported to a collection agency can lower your credit rating significantly.
  • Know what benefits you may be giving up if you refinance:
    • Are you okay giving up optional income-based repayments?
    • Do you want disability or death benefits? (Some companies offer these with their refinancing)
    • Are you okay giving up opportunities for deferment and forbearance?
    • Are you refinancing during a grace period? If so, you may lose this benefit and start getting billed right away.
  • Research the top refinancing companies (many of these offer benefits to offset losses):
    • Check out SuperMoney‘s student loan refinancing comparisons. They provide current rates on companies listed here as well as some others. They even list the benefits different companies offer to save you time.
  • Calculate changes to your loan repayment:
    • What’s the interest rate of your potential loan?
    • What’s the duration of the loan?
    • Does your interest rate and expected P&I decrease enough for your situation?
    • Does your refinance rate allow you to pay off your loan faster?
    • Does the loan offer a variable or fixed rate?
      • If offered a good initial variable rate, are you okay with accepting more risk for the benefit of potentially paying off your loan quickly? Depending on your financial situation, a low initial variable rate may be better for you than a higher fixed rate.
  • Know the benefits the company offers:
    • Does the company offer disability benefits?
    • Does the company offer death benefits?
    • Does your company provide a grace period?
    • Does your company offer penalty-free early payments?
    • Do they offer no-fee refinancing?
    • Do they have a minimum loan amount?
    • Do they offer unemployment protection?
    • Do they offer flexible payment options? LendKey allows you to skip 1 payment each year which can be good in case of emergencies.
  • Get your things together
    • Know the amount you’ll be refinancing
    • Gather your identification:
      • Driver’s license
      • Passport
      • Social Security
    • Gather your proof of residence:
      • Utility bills
      • Mortgage or lease
      • Home or renters insurance
      • Certificate of voter registration
    • Gather financial documents
      • Bank statements
      • Pay stubs from the previous few years
      • Tax forms
  • Apply for pre-qualification
    • Companies may do a soft credit pull (which won’t affect your credit score) to give you an idea of what your loan rates may be. Use this to your advantage and shop around risk-free.
    • Pay attention to any fees a company adds. Avoid origination fees and prepayment fees if possible.
    • See if late fees or missed payment forgiveness applies.
  • Apply to the best companies and compare loan offers
    • Once you’ve done the previous steps, this one is easy. Pick the best refinancing company for your needs and apply.
    • Choose the best student loan refinancing option for you.

Consolidation is an Option

If you’ve taken all the steps for picking a company and refinancing doesn’t look like a good option for you and you have multiple federal loans to keep track of, you may be eligible for a direct consolidation loan.

As with refinancing, there are benefits and drawbacks. While consolidation can simplify your life by giving you a single monthly payment, it may also extend your repayment period which will likely increase your interest payments in the long run.

One large benefit of consolidation applies to students who have high-interest variable rate loans — consolidating allows you to transfer from variable to fixed interest rates. A fixed rate loan enables you to project out your monthly payments until your debt is paid off without fear that your rate might suddenly (and significantly) increase.


Related: What’s the Best Way to Pay Off Student Loans


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  1. Thank you for posting this most useful post, which I am going to show to my stepdaughter who is in the process of repaying a student loan. Refinancing it sounds like a great idea and it may help her to make ends meet a bit better as she is also trying to pay off a car.

    It is such a pity that getting a good education is so expensive, and these students often take years to repay their debts. It must feel like they are not working to earn a salary for themselves at all and it is very frustrating when you are trying to make a new start in life and equip yourself so that you can move out of home.

    • Michel,

      Thank you for commenting. I understand why we take out student loans — low-income young adults want to set themselves up for a great life with a great education — but loans become a huge burden to a large number of students. Refinancing becomes a good option for some, but, ideally, we change our mentality about taking out student loans in the first place.

      I usually advise people to take their first two years of college at a community college to minimize costs and give them time to explore their interests. After only one year at a relatively affordable in-state university, I was already $10,000 USD in debt and I didn’t even have a plan for my major.

      I hope your stepdaughter finds a great option for getting out of debt and setting herself up for financial freedom.

  2. Hello Lyle. Student loans could act like a bone in the throat, it could also be like an injury in the ass. Repaying back may not be easy and most painful is that it piles up very easily as the days, months and years pass by. I’m very excited to see you share this guide on how to refinance student loan with a lower rate. Thanks for the checklist.

    • Haha, you have a way with analogies. You’re right that student loans can be a pain. Best bet is to avoid taking out student loans. Second best option is to pay them off while you’re in school or as fast as possible. For those people weighed down by student loans and struggling to make progress paying down their loans, refinancing can be a great option.

  3. Although I have been out of school for some time, I found this article important because I have several kids that have educational loans.  You offer some good advice.  I think that my kids had not thought about searching around for a way to deal with their loans cheaply.  Your 5 steps are important information.  I am passing the link to this article on to my kids that have loans.  Thanks,

  4. Hey, Thanks for writing on this subject. You have done a grate work for students who want to get a Refinance Student Loan. I see you have done each thing step by step so it will become more easy to choose and compare the refinance companies. Thanks for creating the checklist.

    Thank you


  5. Hi Lyle, great article.  Student loans are often touted as an investment in your education, implying you have a choice in the matter – if you choose to get a higher education, then you should bear the burden of that cost, so the theory goes. However, according to the SoFI website, 65% of all jobs by 2020 (that’s within the next 12 months) will require a post-high school qualification and 91% of all jobs created today will require at least a bachelor’s degree.  Hardly a choice when you need a job – you will have to gain a bachelor’s degree or more if you want to be employed in the future.  And that’s not even taking into account the impact of automation and AI (artificial intelligence) on your employment prospects.

    All that aside, I’m curious to understand what you think are some of the biggest mistakes prospective college/university students make when applying for a student loan? Are there mitigating steps that can be taken early on to avoid having to refinance the loan at a later stage?

    • Thank you for the comment, and great questions.

      You raise an interesting point about the necessity of having a degree. I think we are fed large amounts of misinformation when it comes to what education is required to succeed in life. The first of those is that you need a college degree at all. You do in certain fields, like medicine, but others, like programming, allow for more flexibility.

      I have a friend who started programming on his own during the time I started working on my computer science degree. After building projects on his time off from a grocery store job, he got an entry level job as a web developer — immediate pay raise. By the time I left school (3 years later), he was making far above the average income. No degree. He built skills, built projects, and invested in himself.

      If you don’t have a scholarship and grants helping you attend university, my first recommendation to the vast majority of people is to take your first two years at a community college. Save your money. Gain some clarity. The problem is that sounds boring. Young people want the college experience, and some of them take loans they don’t fully understand in order to have that experience.

      My next recommendation to prospective college students is: if you must take out loans, plan to have a job while you’re in school to pay off as much of that loan as possible before you graduate.

      There is a lot more to say about this subject. You may have me writing another post soon.

  6. hello, i really want to first appreciate your effort in putting this great website together and writing this article. i got a loan sometime ago from Lendkey, it was indeed flexible but i think the comparison between SoFi and lendkey is arguably high. thanks for given this info and more options to choose from

    • Benny, I’m glad it helped. There are a lot of options, more than I can hope to cover, so people must do their research.

      I’m curious what you mean about the comparison between SoFI and LendKey. Do you recommend LendKey from your experience?

  7. You got me with the opening line because truth be told if I was informed in advance I would have turned down my opportunity to receive my degree. I am thankful for it but I would have done without it. It has me in more debt than I have ever been and the money I make from having it is not significant enough from what I was making without it. Thanks for the information.

    • I’m sorry to hear that’s your situation. It isn’t uncommon. It’s unfortunate that so many people think they’re making a good trade-off and end up being under enormous financial stress for years.

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