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Refinancing Student Loans – Top 7 Places to Refinance Your Loan

Last Updated: 08. June 2019
Refinancing Student Loans – Top 7 Places to Refinance Your Loan
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One of the things that make student loans so great and so dangerous at the same time is the fact that in most cases repayment will only begin after graduation. While this provides a false sense of tranquility, it is key to understand that life goes by fast. Before you notice, you can find yourself as a senior starting to feel the pressure of knowing that you need a job as soon as possible to cover for your loan and also your responsibilities.

Starting college can be a very stressful time, not only you will have to make all the decisions related to your University and your major, but also you will have to plan on how to pay for your education. One of the capital sins that many individuals commit when it comes to student loans is that they were not prepared enough. You need to be aware that the decision that you are making right now on how to cover the cost of your education will have strong repercussions on your adulthood and the rest of your life

Maybe you chose the wrong type of loan, or your credit score was not the desired one, whatever the reasons where you should focus on your current situation and on what you can do to make it better.

How can Student Loan Refinance Help? A loan refinancing if used properly, could be a second chance to select the right type of loan with the right institution.  I can stress enough on how important it is for you to take advantage of this opportunity to its fullest, and to avoid putting yourself back into another precarious situation later in your life.
A hundred wagon loads of thoughts will not pay a single ounce of debt-Italian Proverb

In this article, we will cover the best refinancing options available in 2019. Take your time to review them and to proceed with your investigation if needed. It is important to keep in mind that there are hundreds of other options available in the market, these are just a few of the most important names and also the best according to our investigation and also our perspective.

Why Should I Refinance Student Loan?

Before actively considering to refinance any debt, it is crucial to understand the benefits but also the consequences of doing so. Even though you might be stressed out by this debt, it is recommended to take your time to review the case and to also research for the best possible providers and plans. Rushing into decisions might help you improve your conditions today, but the risk of impacting your future is extremely high.

ProsCons
 

  • Lower Interests Rates: Maybe you got your loans at a time where your credit score was bad or simply not as good, chances are that after years from graduation, your score is way stronger. By opting for a refinance you will be able to search for a cheaper financing option to your current plan, this will allow you to save money, and it could also help you get a better monthly fee to what you had before.
  • Lower Monthly Payments: One of the main reasons why so many individuals become interested in refinancing their debt is to improve their liquidity by lowering the monthly payments on their loans. This lower structure is possible because either you got a better rate or because you might be expanding the tenure of your loan. In the following example, it is essential to understand that you will indeed have to pay more money in the long run, but you would be able to overcome your current situation in a more natural way. My best advice is not to sacrifice your future over your present.
  • Consolidate Multiple Loans into one: In 2018 almost 69% of all graduates had at least one student loan, and it is keen to do an emphasis over number one as the average of loans per student was of at least four. One of the Benefits of refinancing is being able to consolidate all your payments as one structure. Imagine how difficult it is to manage four different loans with different institutions and also different rates.
  • Cosigner Release: Depending on the type of student loan that you got and also the chosen provider, you might find yourself having to get a cosigner that will cover your back and your loan in case you default. Most plans in the US would allow for a cosigner release after a while or after a certain number of payments have been successfully covered, but like some institutions would allow for a release to happen, others won’t permit it ever. By refinancing your debt, you will be able to choose for a loan that would not require a cosign, and that will make you the only individual responsible for the repayment. It is incredibly common seeing individuals changing their loans to take their parents out of the responsibility of being cosigners.

  • Lower Federal Protection: If you are refinancing a private student loan you won’t be missing any benefit, on the other hand, it is a Federal loan…. you should take two steps and reconsider if its worthy or not to refinance it as the structure will become private, and you will lose all the benefits from a Government Backed loan.
  • Lose of Forbearance and Deferment Options: Forbearance and Deferment allow you to utilize a stop button to the payments of your loans. Picture yourself losing your job or going back to school, and being able to stop any fees while doing so. Even though in both scenarios interests will be running in the back, you wouldn’t have to deal with the loan payments over a predetermined period. And the best part of this is that you would not affect your credit score in any way. You might not need any of these options, but it is always a good thing to have under your sleeve in case things go south, please be aware to understand the consequences of such a decision appropriately. Your self might not be needing them now, but it is always essential to think about a future scenario. Ask yourself how you would react in case of needing them?
  • Your Credit may Impact the pricing directly: After soliciting your first loan, you will realize how important it is to have a good credit score, and also how much money it will save you or will cost you. Financial institutions analyze your credit score to determine how creditworthy you are, and based on the result, they will give you a rate. If you have had problems paying credit cards and even your bills, you will immediately notice that your cost of borrowing is higher as you are categorized under a riskier category. Take care of your credit score; it will open you many doors and will also save you tons of money.
  • Lifetime: Extension of Loan Lifetime: Keep in mind that unless you have the means to refinance and be able to afford higher payments to finish the loan sooner, you will most likely be extending the longevity of your debt or at least will sustain the current schedule. It is common to see individuals being surprised and even upset when they realize that they might have lowered their rates and with that their payments, but the tenure was even longer than the initial loan. There are many different options that you can choose from, the best advice I can give you is to take your time to analyze all the scenarios before making any choice.
 

Best Student Loans Refinancing Options in 2019

 

1. LendKeyBest For Quoting with Smaller Banks

The first thing you need to understand about LendKey is that they are not a bank; instead, the firm acts as a network that connects financial institutions all over the US. The idea of this connectivity is for you to get the best possible pricing based on your credit score.

One of the perks of this firm besides better pricing is how fast things can be. Imagine being able to apply to more than 400 providers in the US and getting a quote on all of them in a matter of minutes.

Note that even though a third party institution would lift the heavyweight, your refinancing and your interaction would be direct with LendKey.

Another point worth mentioning is that the company offers access to smaller banks. You might be surprised by how much cheaper certain institutions in the midwest can be compared to the rest of international banks.

Pros and Cons about LendKey

Additional Information

APR:

  • Fixed: 3.64%  – 7.50% (with autopay)
  • Variable: 2.49%  – 7.41% (with autopay)

Loan Type Refinancing:

  • Private Loans
  • Federal Loans

Loan Amount: Minimum refinancing loan of $7,500

Length: 5 to 20 years

Pros

  • Unemployment protection: This is one of those benefits you should never take for granted. Even if you have a successful career and you are comfortable with your current employer, things can change in a blink, and you would not want to find yourself in a position where you would not be able to cover your payments because of being unemployed. This is simply insurance for your mind and also for your credit score. Note that the offer package will cover the payments for up to 18 straight months as long as you can prove that you are actively looking for a job and interviewing.
  • Interest Rate Discount: While offering an interest rate discount for automatizing payments has become the new norm in the market, Lend-key is going even further by providing higher and additional discounts based on credit score.
  • Cosigner Release: You will be eligible to release your cosigner after completing a minimum of 12 months. Keep in mind that this will be based on how responsible you are in paying your monthly fees on time. The advice I can give you is to aim for automatic payment. This will help you maintain a track record free of stains during all the period.

Cons

  • Strong Credit Scores: LendKey is a firm that truly pays attention to credit scores before even taking your case for examination. If your score is under 680, don’t even waste your time trying to apply with this company.
  • Middle Man: Lend key is not a lender, instead of the firm acts as the middleman between their reputable partners and the end customer. While in most cases, quotes are usually bellowed market due to the size they move, it is important to be aware that going directly to a bank can sometimes be cheaper.

2. Earnest – Best For Merit Based Lending

Earnest is another disruptive name of silicon valley joining the Fintec world. Instead of simply offering a traditional refinancing service where an individual is analyzed and then determined how creditworthy they are, the firm took a different approach by automatizing everything under a proprietary algorithm.

The idea of utilizing an algo and also artificial intelligence is to be able to look beyond what traditional parameters and ratios tell about an individual.

The whole approach of the firm is to prove that individuals could be evaluated as a whole and not solely on what their Fico score says about them. Things happen, life happens…. life is not linear, and it should not be evaluated that way.

If you believe that your credit score does not reflect the type of person you are, you should consider review what earnest has to offer and also where you would be ranked in their system. It is not uncommon to read reviews online about individuals expressing all the gratitude in the world for earnest as the firm believed in them when no one else did.

Pros and Cons about Earnest

Additional Information

APR:

  • Fixed: 3.50%(with autopay)
  • Variable: 2.49% (with autopay)

Loan Type Refinancing:

  • Private Loans
  • Federal Loans

Length: 5 to 20 years

Pros

  • Credit Score: Ever since its inception, the firm has always been known for being aware that there is more in an individual than just their credit score. Instead of only focusing on the number the pay close attention to the reasons that could have lower your credit and also if there is a red flag in terms of a completely pristine score. If you’ve had drawbacks in the past you might want to consider Earnest as a great option to refinance.
  • Skip Payments: This might be a gimmick type of benefit but it is still something you should know about. Every year the firm allows you to skip payment of your choice, this is a get out of jail free card as you would be deferring that payment later in time. If you find yourself in a bad financial situation or you are simply planning on another use for your hard earn dollars, you can take advantage of doing so without affecting your risk!
  • High Refinance Limits: This might sound crazy but you can find individuals whose student debt is easily over the six figures, and it can be extremely hard as not many institutions are interested in dealing with those customers. Earnest offers its clients to refinance up to $500,000 making it one of the highest in the US Market.

Cons

  • Not in Every State: Even though Earnest is not a small or a new company, the range and availability is not covered by all states.
  • Savings: One key element where the company adds extra steps is to make sure that you have enough savings to cover part of the loan and also your expenses as well. This might not sound like much but it is key to understand that no every American has $6,000 moving around their bank accounts without even purpose.
  • Rates: Even you were approved after your credit score revision, it is key to understand that there is a big chance that you would be charged a considerably high interest rate due to your credit score.
  • No Cosigner: With Earnest, you would be on your own. While many individuals are trying to get their cosigner released some others are doing as much as they can to be supported by someone of trust.

3. Sofi – Best For Competitive Rates

Sofi is a fully online platform that specializes in the refinancing of student loans, mortgages, and personal loans. The company was founded by a group of four students while they were still finishing their majors in Stanford.

It is worth mentioning that even though the firm has their own capital that it is utilized for refinancing purposes, many other financial institutions like international banks have invested in their funds and are acting as liquidity providers for the firm.

Due to their business model on which funding for the firm comes from multiple banks and also regions, Sofi can deliver exceptional services and very competitive pricing vs their key competitors.

If you are planning on refinancing your loans, you should take your time to review what this company has to offer. Without a doubt, SoFi is a name that we will start listening more often as they continue to grow in market share.

Pros and Cons about Sofi

Additional Information

APR:

  • Fixed: 3.69% – 8.07% (with autopay)
  • Variable: 2.43% – 6.65% (with autopay)

Loan Type Refinancing:

  • Private Loans
  • Federal Loans

Loan Amount: Minimum refinancing loan of $5,000

Length: 5 to 20 years

Pros

  • Unemployment protection: The company includes with every refinancing Unemployment insurance which will protect you in case you lose your job
  • Getting a Job: If you find yourself utilizing your unemployment protection, you will be offered by Sofi, access to their database of open positions and hiring managers around the US. It is truly incredible to see a company putting your loans in forbearance while giving you counseling and even actively helping you find a new job, proving how much the company cares about the well being of their clients.
  • Online Process: Refinancing requests can be made 100% online, this is great for individuals that don’t have a lot of time to spend going to a branch. This also enables individuals from states to apply with any type of hassle.

Cons

  • Initial Quoting: The company performs an incredibly deep inquiry about your credit record, this usually causes first quotes to change after the credit review has been completed. Even though this is a well-known practice, it is still very conflictive and it usually causes most individuals to aim for another option.
  • Not Colleges are Available: It is important to be aware that not all Universities and majors will be covered by Sofi.
  • Time: If you are rushing against time to get your loan refinance for an X reason, you might want to look after another option as the firm is known for taking their time. Please note that it is not that the company is not providing the level desired, but the fact that they really take their time to review and analyze anything before lending you $1.

4. Citizens One – Best For Individuals who did not graduate

The Citizens Financial Group is one of the oldest banks in the US, with almost 200 years of existence this RhodeIsland bank has become an example for the rest of the country.

The institutions might only be number 23rd in largest banks list in the country, but they’ve been able to grow a real name around something as negative as student loans.

One of the points where the firm excels the most is at allowing individuals who did not graduate or that are simply taking time off college to refinance their existing debt. While this might sound like something normal, it is indeed rare to see institutions lending money to those who did not complete their cursing major.

Transparency should be a key for all financial institutions, in the case of Citizens One, it is their priority. How many of you have been rejected of a student loan without been given an explanation or reason for it? With Citizens One you will know since the beginning what is it that they are looking for and also the requirements for you to successfully refinance your debt with them.

Pros and Cons about Citizens One

Additional Information

APR:

  • Fixed: 3.89% to 9.99% (with autopay)
  • Variable: 2.93% to 9.67% (with autopay)

Loan Type Refinancing:

  • Private Loans
  • Federal Loans

Loan Amount: Minimum refinancing loan of $5,000

Length: 5 to 20 years

Pros

  • Great Online Platform: The firm offers its proprietary application that allows you to manage your account as easy as possible.
  • Low Fees: The firm has always focused on delivering a process with reasonable or minimal fees. Since you won’t be charged for processing and application fees,  Citizens Bank might be one of the very best options in the market today.
  • DropOuts Refinance: One of the best things about Citizens One is the fact that the firm allows an individual who did not complete their college to apply for refinancing.  In reality, a large number of new students will never finish their career, but that does not mean that any money borrowed won’t continue accruing interests.

Cons

  • Limited Branches: If you are an individual who does not feel comfortable dealing with online banking services and fully free banking, then you might be better of choosing another option from this list. The reason for this being that the company offers a very limited number of branches across the US.
  • Quoting: If you are planning on requesting the quote for your refinancing online, it is very probable that you will end up being frustrated and even mad with the firm. Please note that this is a cumbersome process and their platform is simply not powerful enough for it to provide a smooth pricing process.
  • No Cosigner… No Deal: Disregarding of your income and your credit score, this is a company that will always request you to have an active cosigner to back your loan for a certain time. After the time has passed you would be able to release the cosigner out of their duties (36 months when their competitors only ask for 12).
  • Lack of Deferment of Forbearance: Keep in mind that in most cases individuals are not even aware that they could be being managed before they are fired. If you ever find yourself losing your job you will could be in a bad position as your credit score will be directly hit in case you can cover for the payments.

5. Common Bond – Best For Flexibility

Common Bond is a fully dedicated online firm focused on refinancing student loans. This is a firm that has been developed with the solely intention of helping students become financially free.

One of the key points that make Common Bond so great is that the company offers one if not the best forbearance program in the US, allowing their users to take up to 4 times the national average.

Part of the model of this company is to enable faster repayment, in reality, they are not interested in keeping hostage by refinancing your loans. Once you’ve paid they will say thank you and you can continue with your life as if you never had student loans in the first hand.

With so many students getting loans to cover their education every year, it is great to know that there are still companies that are not looking at students as zeroes with feet.

Pros and Cons about Common Bond

Additional Information

APR:

  • Fixed: 3.69% – 8.07% (with autopay)
  • Variable: 2.46% – 7.08% (with autopay)
  • Hybrid: 4.35% – 6.30% (with autopay)

Loan Type Refinancing:

  • Private Loans
  • Federal Loans

Loan Amount: Minimum refinancing loan of $5,000

Length: 5 to 15 years

Pros

  • Savings: The pride of the firm falls into allowing individuals to save in the fees and interests that are being paid. On average the firm has calculated that savings on refinancing processes is around $14,000 per student.
  • Autopay: The firms offer to their client’s access to a discount for automatizing the payments on their loans. Even though 0.25% is not much, it is key to understand that over a long time it could mean a lot of money.
  • Deferment & Forbearance: Just like having unemployment insurance can be a great thing to have, being able to simply utilize deferment or forbearance for any type of loan is one of the great advantages. Common Bonds also offers academic deferment for individuals who are hitting back the classes.

Cons

  • High Origination Fee: The firm currently charges an origination fee of up to 2% of the value of the loan.
  • Cosigner: This is another company who has truly been pushing hard on the request of a cosigner to become eligible for the refinancing loan.
  • Terms: The company currently only offered 3 types of terms ranging from 5, 10, and 15 years.

6. Laurel Road – Best For Health Sector / Dr, Nurses, Dentists

LaurelRoad is a an institution fully dedicated to student loans, both new ones and also refinancing of existing debt. Even though the firm has only been around for less than six years, they’ve been able to refinance more than $4 billion in federal and private debt since.

One of the key differences about this firm is that they are heavily focused on individuals from the Health sector, making it the best option for dentists, doctors and nurses to refinance as soon as they start their residency.

If you are planning on going back to school you might want to consider Laurel Road as their refinance products also allow individuals to deferment while in school.

Pros and Cons about Laurel Road

Additional Information

APR:

  • Fixed: 3.50% – 7.02% (with autopay)
  • Variable: 2.43% – 6.65% (with autopay)

Loan Type Refinancing:

  • Private Loans
  • Federal Loans

***Must have graduated***

Loan Amount: Minimum refinancing loan of $5,000

Length: 5 to 20 years

Pros

  • Limit: This is another firm that would allow you to refinance as much debt as you can pay. Keep in mind that certain universities are extremely expensive and the same happens with specific majors, this will allow you to refinance 100% of your outstanding debt.
  • Free of Fees Refinancing: This is not a very common benefit as most banks profit directly from these large fees.
  • Deferment Periods: If you’ve gotten a deferment with your current provider don’t worry, this firm will respect any standing deal you may have for up to 6 months of additional support and grace.
  • Checkings Account: If you are an already regular customer you should think about also refinancing directly with Laurel Road, this will allow you to get up to 0.25% of additional discount on the rates!

Cons

  • Late Fees: if you are not planning on making your payments automatically, then you should be aware that being late in a single monthly payment could get you paying up to 5% of additional charges over your regular payment.
  • Credit Score – Ratios: This is another name on the list that won’t be an option if you don’t have a shiny looking credit score, and to make things even better the company pays close attention to ratios like your outstanding loans outside student loans and also your current income.

7. PenFed – Best For Military Families

The name penFed derives from Pentagon Federal Credit Union, making this firm a members-only credit union. Following the credit union model, the firm offers its members access to numerous services and products like loans, mortgages and even several credit cards.

From a Student Loan perspective the firm is focused on helping their members become debt free, even if it’s a credit union, the company acts under a fiduciary structure where all decisions should be taken based on the client benefit and not the bank.

If there is a member of your family that has served in the military forces, then this might be your best option to refinance any type of loan.

Pros and Cons about PenFed

Additional Information

APR:

  • Fixed: 3.87% – 7.03% (with autopay)
  • Variable: 3.1% – 7.84% (with autopay)

Loan Type Refinancing:

  • Private Loans
  • Federal Loans

Loan Amount: Minimum refinancing loan of $7,500 to $300,000

Length: 5 to 15 years

Pros

  • Savings Account: By also opening an account as well as getting your refinancing loan you would get an additional discount over the rates and also a 2.00 APY on the funds in the account.
  • PenFed Credit Union Member: Part of the requirements demand that you become a client by opening an account with at least $5. After becoming a client you will be able to get your refinancing, but you will also get all the benefits from the credit union at a super low minimum deposit vs what they usually charge.

Cons

  • LongTerm Loans: If you are planning on repaying your refinance in the short period of time, you will soon realize that with a company like PenFed it could be more expensive to do it in the short term. This is a company that will lower the APR as the tenure rise.
  • Limited Eligibility: Don’t forget that this firm was created in order to help the families of those serving the country. For this reason, if you have a direct family member in the forces it will be pretty likely to get rejected.

Conclusion

Refinancing your student loans might help you boost your finances and even your morale if you’ve been feeling pressured with your current conditions. Many individuals in the US simply took whatever the bank offered them in order to afford to finish their education, and it was not until after four years and graduation that they realized what they got themselves into.

If you are reading this article it means that you are already taking the first step forward gaining back control of your finances and your peace of mind. Even though it might sound tempting to simply refinance, lower the payments and aim for a longer term for the loan, I can’t stress enough on the fact that you should not let your present stole your future and vice verse.

There are many different options to choose from in terms of refinancing and providers, as long as you take your time to review all your options, it is very likely that you will be able to fulfill your expectations.

Don’t forget that even if you hate the idea, in certain scenarios your best option under the current conditions might be to remain within the same plan and not to refinance. This can be the most financially sound decision, but this does not mean it is the one that will truly help you emotionally, and this should be weighted equally at the moment of making any determination.

FAQs

1. What is the difference between Private Refinancing and Federal Consolidation ?

It is important to understand that refinancing is usually divided between Federal Loan Consolidation and Private Refinancing:

Refinancing with Private Lenders: A full refinance consist of getting a new loan that would pay your previous debt at a new rate. With this you would be effectively canceling all your initial loans for a new one, that should have a better rate and a better repayment structure. This type of model can be utilized for both federal and private loans. If you have multiple loans and different loan types, this might be your best option to get everything settled under one single formation.

Federal Loan Consolidation: If you have multiple federal loans you have the option of combining them into a new loan. With this consolidation, you will be able to get a fixed rate based on the average of all the consolidated loans. And the best part is that this is cost-free! Instead of having to deal with multiple loans and multiple payments every month you can focus on one single payment. This is a great option to simplify your life!

2. When should I Refinance my Student Loan ?

To refinance or not to refinance, that is the question! Jokes aside it is key to understand where you are standing with your current plan before making any decision. Many individuals commit the cardinal mistake of refinancing without looking at how the big picture would be affected.

For example, if you do not have any federal loans you won’t be missing any type of benefits with the refinancing. If on the other hand, your loans are fully federal, you might want to reconsider your options.

3. How soon can you Refinance ?

The required time to refinance is not a standard, this means that it will differ between financial institutions and loan types. Having said so, it is important for you to remember that you would not be able to solicit a refinance until you’ve graduated and all the money lent has been paid to the university. Is it at this point where most types of loans would allow for a refinancing structure!

This is another reason why a good credit score during college will help you get a better deal once you are able to apply for a loan restructuring or refinance.

4. When is it better not to Refinance?

You need to understand that market conditions influence loans and rates. If you have a loan that was initiated with an interest rate lower than what the market is currently offering, you might want to pass on the option and sustain what you have right now.

The same principle goes for your credit score. If things have been rough and your score has taken some hits you might want to avoid a refinance as it will only get things worse.

I can not tell when not to do it, but it is important for you to review all your options. You know your finances and also your possibilities of repayment. This is a call that will be on you to decide.

5. How much can I save by Refinancing my Loan(s)?

This is a question with an answer that will be different for each borrower. Keep in mind that the whole idea of refinancing is to save money. In most cases, borrowers can save up to 3% in interests rates if their credit score has improved since they took the loans the first time.

Getting an estimate will not take much time, with most online alternatives you would be able to calculate your savings online and in a matter of minutes. I actively recommend individuals to know at all times where they are standing and also if the circumstances are changing on their benefit or against them.

Don’t forget that under certain conditions it might be better to sustain the current plans as you would get affected in the long term of the loan. As mentioned before, avoid at all cost sacrificing your future for your gain today.

 

 

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Vidal Arias

Vidal is an experienced Strategist and Portfolio Manager with a keen interest and passion for the financial markets and also writing. During his career, he has developed excellent market timing skills, focusing mainly on the macro analysis of the US Equity Market and the overall US Financial Market. He started his career as a financial analyst for a major American bank and continued his way into the trading desk as a Sr. Trader and later as a Portfolio Manager for an Offshore Hedgefund in Europe. Linkedin: vidalarias Email: vidal@dojiventure.com