The 9 Best Student Loan Consolidation & Refinancing Companies

If you feel like you're paying too much on your student loans and want to save some money, refinancing and consolidation may be right for you!

College is getting more expensive every year. While going to college is surely something to be proud of, and is a great investment in your future, most students and their families are unable to pay for it out-of-pocket. After all scholarships and grants have been exhausted, the next option is student loans. Nowadays, 7 out of 10 college graduates have student debt and the average has over $35,000! If you took out a loan to pay for college, you are probably paying too much, and could potentially save thousands through refinancing!

Refinancing your student debt is just like your car or home mortgage. The new lender pays off your old one and gives you a new one with new, hopefully lower interest rate. By lowering your interest rate, less additional money will be added to your total balance each month, ultimately saving you money! Most lenders also allow you to refinance and consolidate multiple loans into one, making repayment much more manageable. In the following sections, we will go over the refinancing and consolidation lenders in the industry and what they offer.

student loan refinance consolidation

Lender

Rates (APR)

Loan Types

Terms

Eligible Degrees

2.50% - 4.74%

Variable & Fixed

5-15

Undergrad &

Graduate

2.13% - 3.50%

Variable & Fixed

5, 10, 15, 20

Undergrad &

Graduate

2.18% - 4.74%

Variable & Fixed

5, 10, 15, 20

Undergrad &

Graduate

earnest-logo-2016

2.13% - 3.50%

Variable & Fixed

5-20

Undergrad &

Graduate

Top 4 Companies for Student Loan Refinancing and Consolidation


1. College Ave - Top Rated Company for 2016

Apply quickly and easily.

Reduce the the total cost of your existing student loans! 


Get An Instant Decision ->

    • Federal and private student loans are eligible
    • Variable rates start at 2.50%
    • Application only takes 3 minutes
    • Choose any term between 5 to 15 years
    • Minimum of $5,000 in student loan debt to refinance
    • No application, origination, or prepayment fees

2. SoFi - Social Finance

The largest refinancing company.

Members save $18,936 on average!


Lower Rates Are Available ->

    • Federal and private student loans are eligible
    • Variable rates start at 2.13%
    • Fixed rates start at 3.50%
    • Repayment plans of 5, 10, 15, and 20 years
    • Minimum of $10,000 in student loan debt to refinance
    • No application, origination, or prepayment fees

3. Citizens Bank

Lower interest rates and payments are available.

Customers save $1,764 per year on average!


Refinance to a Lower Rate ->

    • Federal and private student loans are eligible
    • Variable rates start at 2.18%
    • Fixed rates start at 4.74%
    • Repayment plans of 5, 10, 15, and 20 years
    • Minimum of $10,000 in student loan debt to refinance
    • No application, origination, or prepayment fees

4. Earnest

earnest-logo-2016

Enjoy the most flexible payment plan on the market.

Average client saves $17,936.


Savings Start Today ->

    • Federal and private student loans are eligible
    • Variable rates start at 2.13%
    • Fixed rates start at 3.50%
    • Repayment plans anywhere between 5-20 years
    • Minimum of $5,000 in student loan debt to refinance
    • No application, origination, or prepayment fees
    • Bi-weekly payments option available

This post is the result of extensive research into the best options and compares the 9 most common online consolidation and refinancing choices. These companies are all reputable private or federal companies that accept online applications.

If I have missed any companies please let me know and I will add them to this comparison post. If any of the information gets out of date or is incorrect let me know and I will update it!

Should you apply to more than 1 company to consolidate and refinance your student debt?

Yes, according to FICO, all applications made in the previous 30 days does not impact your credit score and having a group of applications on your credit history gets grouped to minimize impact. There is no harm in applying to all.

Best Student Loan Refinance & Consolidation Company Reviews

1

SoFi-Social Finance Review

SoFi has recently become the largest provider of refinancing according to their website with $6,000,000,000+ in loans issued (that is a lot of zero’s!).


They are not exactly a peer-peer lending company but accept capitalization/investment from Accredited Investors which then gets lended to students in the form of refinancing loans.


What makes SoFi unique is both the company's size and unique programs including its 2 main community programs.


SoFI Entrepreneur Program

The Entrepreneur Program offers a 6 month “grace” period for graduates who are building a new business.

Sofi's Entrepreneur Program is a prime example of how SoFi is creating a supportive community for its borrowers.

Marc Weiser
Managing Director/RPM Ventures

SoFI Career Services

The Career Services program at SoFI offers career planning and job search assistance to borrowers.

This is a very novel idea that makes a lot of sense for the company since borrowers who have a job are more likely to be able to repay their debt. This is the novel kind of program that many traditional lenders would be unlikely to ever offer.

After I was laid off, I got a call from SoFi asking how they could help me find a job. I was completely blown away.

Catie Gould
Rensselaer

Loan Rates and Longest Term

  • 2.13% Variable Rates
  • 3.50% Fixed Rates
  • 20-Year Max Repayment Term

Eligibility

  • US Citizen or permanent resident (some states not accepted)
  • Employed or have an offer of employment
  • Graduated from a 4 year school 

Pro's

  • SoFi is a great all around option with some very low interest rates which also includes some beneficial social programs.
  • SoFi is a lender who refinances and consolidates both federal and private student loans.
  • Extras like career services and the entrepreneur program are great extras for people who can take advantage of these programs.
  • No Credit Check Required

Con's

Although SoFi presents a company with a strong customer support focus they seem to have struggles with their size and providing the customer support they promise. There are many complaints at CreditKarma involving…

  • Large and growing company (for good reason) sometimes has hiccups in communication

Best For…

  • SoFi is a great all around option which is evident by their rise to become one of the most popular lenders.
sofi-consolidation-review
2

Citizens Bank Review

Citizens Bank is one of the oldest and most trusted companies in this list. They have few of the social “bells and whistles” that the options above have, however with competitive interest rates and a broad acceptance criteria they are a good option to consider. Citizens Bank works with borrowers who have federal and private debt

Loan Rates and Longest Term

  • 2.18% Variable Rates
  • 4.74% Fixed Rates
  • 20-Year Max Repayment Term

Eligibility

  • Graduation is not a requirement
  • US Citizen or Permanent Resident
  • $10,000 Minimum to Refinance
  • Must have made 3-12 full on-time payments on all loans
  • 24,000 Annual Income Required
  • Credit Score, Income, and Employment History are all considered

Pro

  • One of the few companies that do not require graduation.
  • The long term fixed interest rate is very competitive!

Con

  • Slow application process and long 36-month co-signer release.

Best For…

  • Citizens Bank is best for any former student who did not complete college but has a history of making their payments in full.
citizens bank refinancing
3

Earnest Review

earnest-logo-2016

Earnest is arguably the most unique lender in this list. Their unique eligibility criteria is like no other!


Loan Rates and Longest Term

  • 2.13% Variable Rates
  • 3.50% Fixed Rates
  • Repayment term anywhere from 5-20 years
  • Co-signer Release Available
  • Interest-Only Repayment Available

Eligibility

  • US Citizen or Permanent Resident
  • Income of $24,000 per year

Pro's

  • Earnest offers competitive interest rates with some additional benefits including the interest-only option.
  • Earnest's unique criteria uses hundreds of data points, not just a credit score like many other lenders.

Con's

  • Earnest is a relatively new lender so there is not much of a track record to judge.

Best For…

  • Earnest is best for someone who is willing to handle a slightly more complex application process in return for a greater chance of approval.
earnest refinancing
4

LendKey Review

CU Student Loans or LendKey’s Grad loan is another non-typical lender which aggregates the best loans from many Credit Unions.


Loan Rates and Longest Term

  • 2.13% Variable Rates
  • 3.50% Fixed Rates
  • 15 year max term
  • Co-signer Release Available
  • Interest-Only Repayment Available

Eligibility

  • US Citizen or Permanent Resident
  • Income of $24,000 per year

Pro's

  • cuGrad s offers a competitive interest rate with some additional benefits including the interest-only option.
  • By aggregating 100’s of Credit Unions the risk profile of the credit unions will be different and you ability to get awarded a loan goes up.

Con's

  • You will need to become a member of the credit union that offers consolidation and refinancing. This can add some complexity and time to the process.

Best For…

  • LendKey is best for someone who is willing to handle a slightly more complex application process in return for a greater chance of approval.
5

Common Bond Review

CommonBond is another relatively new offering in the industry. They specialize in consolidating loans for graduates from select colleges with advanced degrees.


What makes CommonBond unique is the 3 following aspects of their company…

  • Their focus is on making the future earnings potential of advanced degree holders reflected in their refinancing.
  • The loans are funded through a peer-peer platform
  • For every loan funded on their platform they fund the education of one student in need for one year. This is funded through the Pencils of Promise charity.

Loan Rates and Longest Term

  • 1.92% Variable
  • 3.89 Fixed
  • 20 year max term

Eligibility

  • US Citizen or Permanent Resident
  • Must be have graduated from 1 of 700 schools/programs including (MBA, Engineering, Law and MD from select colleges)
  • Employment History, Credit History and Income are all considered as well

Pro

  • CommonBond offers some of the most competitive rates on the market.
  • If you are looking to work with a company that has a strong social commitment CommonBond is a great choice.

Con

  • CommonBond used to be very selective. The company used to only offer to 100 programs but continuously opening up to new people now offering loans for over 2000+ programs.

Best For…

  • Consolidating your debt with CommonBond is best for a graduate from one of their selective graduate school programs listed. Their competitive rates and social commitment make them a great choice (if you can qualify!).

common-bond-consolidation-review
6

Darien Rowayton Bank

Darien Rowayton Bank offers competitive rates for students from select programs and advanced degrees. Similar to Common Bond DRB offers competitive rates but it can due so by being very selective of the programs graduates come from. DRB also offers these refinancing and consolidation loans to parents who took out debt for their children. Graduate degree programs are not limited to MBA, Law, Doctor and engineers.

DRB is the second largest lender in the industry.

Employment and future earning potential is not the main focus of DRB. We look at a borrower’s credit and accomplishments. DRB recognizes that by completing your college or graduate degree and landing a professional job, you’ve earned lower student loan rates. We believe that working professionals with degrees have proven their ability to pay back student loans.

Loan Rates and Longest Term

  • 1.90% Variable
  • 3.50% 5 Year Fixed
  • 20 year max term

Eligibility

  • US Citizen or Permanent Resident
  • Graduate from Title IV eligible schools
  • Graduate from select undergraduate and graduate programs (engineering, MBA, Law, Doctor)
  • Employment and future earning potential is main focus of DRB
  • Credit Score and Employment History are Considered

Pro

  • Competitive interest rates and available for parents as well.

Con

  • Very selective based on the program you have graduated from and has one of the highest income qualifying expectations.

Best For…

  • DRB is best for Parents or Graduates who have graduated and started working from one of the qualifying programs. DRB and CommonBond should both be applied to if you have an advanced degree from a qualifying school.

darien rowayton bank consolidation review
6

Wells Fargo

If you are already a Wells Fargo customer Wells Fargo is a good option with both an existing customer and automatic payment discount of 0.25% each. With a competitive interest rate of 3.75% (absolute lowest) they can be a good private and federal refinancing option.

Loan Rates and Longest Term

  • 3.75% Variable
  • 7.24% 5 Year Fixed
  • 20 year max term

Eligibility

  • $12,000 annual income
  • One year of full time employment
  • Solid credit score is required

Pro

  • If you are a customer of WF then with the discounts the variable interest rate can be competitive. In addition the qualifying standards are lower than many of the other options.

Con

  • Slow application process 45-60 days and a high interest rate, especially if you are not an existing customer.

Best For…

  • WF is a good option if you are already a Wells Fargo customer and have lower gross income.
wells-fargo-consolidation-review
7

WSFS Bank

WSFS Bank is a medium sized bank located out of Delaware. Their interest rates, borrower forgiveness and extras do not make them competitive when compared to the other offerings. The only benefit I see going with WSFS Bank compared to other options is the fact that they have one of the lowest minimum limits of $5,000. The application process for WSFS is actually through the CU Student Loans platform.

Loan Rates and Longest Term

  • 4% Variable Rates
  • 6% Fixed Rates

Eligibility

  • US Citizen or Permanent Resident
  • Unknown – Credit Score, Employment History and Income will impact eligibility

Pro

  • There are few strengths to WSFS compared to other options that I can find. The biggest difference is that they have a $5,000 minimum which is lower than most others.

Con

  • Interest rates are higher and there are no additional benefits compared to other options.

Best For…

  • Students with between $5,000 and $10,000 in debt.
WSFS-consolidation-review
8

Prosper

If you are struggling to refinance and consolidate your educational debt than true peer-peer lending sites are an alternative option. There are many downsides to this option however, if you are unable to work with other sources this is the lender of last choice. Do not refinance federal student loans here as both the interest rate and repayment terms will be harsher.


Loan Rates and Longest Term

  • 6.73% 5 Year Fixed
  • 5 year max term

Eligibility

  • Minimum 640 Credit Score

Pro

  • Does not require a cosigner or other employment, income history

Con

  • Higher interest rates and shorter term compared to the other options.
  • Requires a minimum of 640 credit score

Best For…

  • Recent grads with good credit, no cosigner and no current employment/income history should consider Prosper to see if the loan would have a lower interest rate than their current student loans.
prosper-consolidation-review

Benefit of Consolidating and Refinancing Student Loans

There are 3 possible benefits to consolidating and refinancing student loans.

  • Lower your monthly rate
  • Take advantage of low interest rates
  • Convenience of 1 montly payment

The main downside is extending the term increasing the total amount you will pay in interest.

For example if you owe a total 50,000 at 5% interest and a 10 year term with 5 

different lenders(10k/each) then consolidate to one lender and a 25 year term your monthly payments would go from $530/month to $292/month but the Total Interst Payable will go from $13,639 tp $37,688.51.
  • Owe – $50,000
  • 5 different lenders
  • Interest Rate – 5% Term – 10 years
  • TOTAL Monthly Payment – $530.33
  • TOTAL Interest Payable – $13,639.31

Consolidate 5 loans to decrease monthly payment by extending length of repayment

  • Owe – $50,000
  • 1 Consolidate lender
  • Interest Rate – 5%
  • Term – 25 years
  • TOTAL Monthly Payment – $292.3
  • TOTAL Interest Payable – $37,688.51
Student Loan Payments Over 10 Year Term

Student Loan Payments Over 10 Year Term

How To Consolidate Federal Student Loans

If you hold federal student debt with the government you have 3 options.

Option 1 – Direct Consolidation Loans

A Direct Consolidation loan is a way to combine multiple federal student loans into one. When you consolidate federal student loans you will reduce your monthly payments by extending the length of repayment and potentially reducing the interest rate. Furthermore, the interest rate on the new one will be a weighted average of the old loans. 

The benefit of a Direct Consolidation loan is that you can significantly reduce your monthly payments however you should also determine what the added interest cost over the life will be.

Option 2 – Consolidate and Refinance Your Federal Student Loan into a Private One

If you hold debt from the Federal Government and want to consolidate it you may be able to find companies that offer better interest rate than you can find from the Government.

The downside to consolidating a federal loan into a private one is that you lose the benefits and protections that come with federal student loans. These include forgiveness, eligibility for certain repayment plans, and deferment & forbearance protections. 

Make sure the benefits of refinancing federal debt into private debt.

Option 3 – Peer 2 Peer Lending

This is a relatively new option but with the growth of peer to peer lending sites there is the opportunity for students who don't qualify for traditional loans to get one through one of these sites. Lending Club and Prosper.com are the 2 most common ones.

How To Consolidate and Refinance Private Student Loans

When you get a private student loan it falls under some of the same rules as a federal student debt, specifically if you declare bankruptcy your debt will not go away.

When you consolidate private debt you achieve the most significant benefit of being able to combine multiple monthly payments into one payment to one company.

Combine your educational debt and mortgage – One option if you are a few years out of College and you own a home which has appreciated in value is to take out a Home Equity Line of credit and pay off your student debt. This is essentially consolidating your Student Loan with your Mortgage. The benefit is the ability to have the lower payments

Frequently Asked Questions

What is the difference between student loan consolidation and refinancing?

Consolidation is technically the combining of multiple federal education loans into one which takes the weighted average of the interest rate and lowers the monthly payment by extending it over a longer term.

Refinance is paying off your current debt and accepting a new one at a lower interest rate/longer term to create one that better suits our needs.

In this article I have used refinance/consolidate interchangeably.

Dan Macklin from SoFI has a great post at DailyWorth going into more detail – Should you consolidate or Refinance Your Student Loans.

Can I combine both private and federal student loans?

Yes, many of the lenders above offer opportunities to combine both federal and private student loans.

When consolidating federal student debt be sure to think about your ability to repay it. Private loans have much stricter collection programs when compared to a federal student loan.

Can I consolidate my loans if I didn’t finish college and never graduated?

Yes, but your options are limited. Currently there are three options you can apply for with your best being CharterOne. If you don’t get accepted at Charter One than Prosper and Personal are options to consider.

Should I apply to all companies and how will applying to multiple companies affect my credit score?

There are 2 downsides to applying to all companies.

Your time – Applying to all can take a lot of time but if you really want to find the best option for you.

Your Credit Score – The more people who have looked at your credit score the more your credit score will go down…is the common “myth” in fact if you have many similar searches within the same time period it is clear you are shopping for a single product and this group of searches essentially gets treated as one search. Therefore, it does not impact your credit score applying to multiple loans. FICO ignores all student loan searches made in the previous 30 days according to their website here.

Does Sallie Mae offer refinancing or consolidation?

Sallie Mae does not offer this service…

“At present, Sallie Mae does not offer consolidation loans.”

However, if you have Sallie Mae debt, you can refinance or combine these loans with others.

Are there Chase student loan options?

According to their Student Loan Servicing website “We’re sorry, but we do not offer a private consolidation loan product”

If you have a Chase Student loan your options are the lenders listed above.

Are there CitiBank student loan options?

Does CitiBank offer a private educational debt refinancing and consolidation option and if so what are the rates?

Again, Citi does not have any options available according to their website.

Any of the lenders in the table can consolidate a CitiBank student loan if you have a Citi Student Loan.

How to calculate debt to income ratio (DTI ratio)?

Add up all your recurring debt obligations (mortgage payments, car payments, student debt payments and minimum payment on credit card balance) then divide by your gross monthly income.

If you want to see more details about how to calculate the debt to income ratio here is a great article - CommonBond – Student Loan Concepts Explained – Debt to Income Ratio

Which is better a fixed or variable rate loan?

A variable interest rate will be lower initially but depending on where the prime interest rate goes the rate will climb.

There are a lot of posts that analyze this question in depth including a great post at SoFI Fixed vs Variable.

The bottom line to me is if you are risk adverse then stay with a fixed loan while if you are more risk tolerant than a variable will on average cost you less in the long run.

Andrew Josuweit recommends

“Before you refinance your student loans or switch types, be sure to ask the right questions!

For example, does the variable interest rate have a cap? A cap places a maximum limit on how high a variable interest rate can go. This type of mechanism can be a great protection against rising interest rate risk.

Also, be sure to calculate the savings difference between variable and fixed interest rates. Are the potential savings worth taking a risk?”

Can a parent who took out a student loan for their child refinance?

Yes a parent can refinance educational debt that was taken out for their child. Often with the income and employment history parents can get some of the most competitive interest rates.

One of the lender that specializes in providing refinancing to parents is Darien Rowayton Bank (DRB).

Can an international student refinance?

If you are an international student you are probably sick of seeing “US Citizen or Permanent Resident” but unfortunately that is the case. You must be at least a permanent resident or get a co-signer who is a US citizen or permanent resident. If you are looking for more information on International Student Loans you can visit the experts at InternationaStudentLoan.com.

When is the right time to refinance/consolidate?

The right time to refinance is whenever you can save money at an acceptable risk level.

What I mean by that is if you can refinance your loans now and it will save you money without increasing your risk then it makes sense to do so. It may not make sense if you have federal student loans only and can save $100/year…you are increasing your personal risk due to more aggressive collections for minimal benefit.

However, the majority of students who qualify for consolidation would be better off financially consolidating as soon as they are eligible.

How Refinancing Works

Many students turn to refinancing to help them better afford their loans, but others who may find the program helpful do not know how it works. Below, we will discuss how exactly it works to give you a thorough understanding.

What is Refinancing?

Simply put, it is a way for you to restructure and re-work your student debt to receive a new interest rate, which lessens the amount you will pay over a set number of years. Students choose to refinance their student loans for a number of different reasons from wanting a lower monthly payment to shortening or extending the length of the loan.

The Process

Unfortunately, student loans are not just automatically refinanced and you will not just receive a new lower interest rate because it is there. You must apply and go through the entire process.

The first step will be to apply through your lender. You can choose any lender that you want, but always make sure to research the company, read reviews, and look over the contract BEFORE you sign anything.

You will need to have a good credit score along with a low debt to income ratio to qualify. If you do not have this, you will be required to have a cosigner.

If your application is accepted, then your lender will pay off your current debt and then create a new loan for you with your new interest rate and agreed upon terms. You will make payments to the new lender from now on. You will no longer have to worry about paying your old lender and your student loan will show paid off on their end.

Can Refinancing Really Save Me Money?

Yes. Refinancing can actually save you a lot of money in the long run. When it comes to your monthly payments, depending on the length of the loan, you may end up paying more or less per month. If you choose to extend your repayment term you may end up spending more over the life of the loan; however, if you shorten or keep the term length the same, you will save money.

For example, if you have a current balance of $15,000 with a 7 percent interest rate and 10 years left to pay, you will end up owing $174.16 per month, but the total amount in interest you will pay over those 10 years is $5,899.53 and this will be added to the $15,000 loan balance for a total amount of 20,899.53.

If you were to refinance and keep the same $15,000 balance over 10 years, but with a 4 percent interest rate, you will find that you owe $151.87 per month and the entire interest paid will be $3,224.12 for a total amount of $18,224.12.

Who is Eligible for Refinancing

If you are new to the idea, we will go over some important requirements needed to be approved. Not everyone will be approved and if you know the requirements beforehand, you can decide if this is the right avenue for you to travel down.

Your Credit Score Matters

Your credit score comes into play when you want to refinance and if you do not have a good credit score, you will not be approved for refinancing. In fact, most lenders require you to have a minimum credit score of 690 – 700, but some may even require it to be higher. Now, if you have a credit core of 750 or higher, then you will likely be approved, but not all graduating students have this type of a credit score.

If you have a poor credit score and poor history, then you may want to consider another option as you will not qualify for refinancing.

Low Debt-to-Income Ratio

In addition to a good credit score, your debt-to-income ratio should be low. If you are unfamiliar with what debt-to-income means, it is basically how much debt you have in relation to how much money you make. For example, if you make $40,000, but you have a total debt of $90,000, then you do not have a good debt-to-income ratio since your debt outweighs your income.

Most lenders prefer you to have a debt-to-income-ratio of less than 40%. You will need to be able to show that you can afford the debt you in addition to the new loan terms when you refinance.

You Need a Job

If you are unemployed, then you are not going to qualify. This also plays into your debt-to-income ratio as well because if you have no job, then you have no income coming in and your debt will obviously outweigh your income.

Most lenders will require you to show that you have held your job for a certain amount of time and also show pay stubs to show how much you make on a regular basis. Your lender wants to know that you have a good employment history and you are not just working to get the refinancing and then you plan to quit. 

You Must Have a Minimum Loan Balance

Many lenders will require that you have a minimum balance as well. This amount will vary depending on the lender, but you can expect the minimum to be about $10,000.

Other Things to Consider

Some other things to consider include whether or not you will qualify for a forgiveness program. If you plan to apply for one, then refinancing may not be the best option for you. Typically, when you refinance, you void the number of qualifying payments you have already made and you will have to start over.

Lastly, if you do not qualify on your own, you can have a cosigner sign the refinancing application with you. The cosigner will need to meet all of the eligibility requirements though, so make sure you choose someone with good credit.

If you are interested in refinancing and you want to know if you are eligible, contact your chosen lender or speak with your servicer.

Here's Exactly How You Save Money Through Refinancing

If you owe a lot of money in educational debt, it may be wise for you to refinance your loans. The amount of money you save in the long run is significant and you will be shocked when you see the numbers. Below, we will go into some specific examples to help break it down for you.

Scenario One

For the first scenario, let’s say that your current balance is $45,000 and your interest rate is set at 8.5 percent. Your original term is set at 20 years and you still have 20 years left to go on your loan.

You go into a financial center to talk about your options and you are looking to refinance at $45,000 with a new interest rate of 4.99 percent over the same 20-year period.

Your original loan would require you to make a $390.52 payment each month with the total interest paid over 20 years total $48,724.91, which would mean your total cost is over $93,000 in the end.

With the new terms, your payment each month would be $296.73 and your total interest paid would be $26,215.57, which would make the total loan cost $71,000 over the 20-year period.

As you can see, not only will you save money monthly, but you will save $22,000 over the course of the entire loan.

Scenario Two

For this scenario, we will run the numbers a bit different to give you an idea of how refinancing works. Let’s start with a balance of $25,000 at an interest rate of 7.9 percent. You are on a 20-year payment plan and have paid 10 years toward to loan, so you have 10 years remaining.

When you go to refinance, you are looking at the same balance of $25,000, but at a 4.99 percent interest rate for a 10-year period with all 10 years remaining.

With your original loan, you are required to make a $207.56 monthly payment and the total amount of interest paid at the end of the term is $24,813.64 for the 10-year remaining period.

With the new terms, your monthly payment is a bit higher at $265.04, but your total interest paid to the end of the term is $6,804.99.

Even though you will be paying more per month, you will save a significant amount of money overall.

Lower Interest Rates Help You Save

The lower interest rate will save you thousands of dollars over the course of your loan and sometimes, this amount is a HUGE difference. When you run scenarios with an even lower interest rate under the new terms, you save even more money. For example, take the same terms as scenario two, but make the new terms an interest rate of 3 percent, the total interest paid is $3,968.22.

Useful Refinancing and Consolidation Tools

There are tons of options out there to help those looking to save money through refinancing. With so many lenders to choose from, however, it can often be difficult to decide who to go with. Luckily for you, there are a few useful resources that can help you make sure you are making the right decision. We will go over them below.

LendEDU - A marketplace for student loan refinancing and consolidation

LendEDU allows its users to compare offers from up to 13 different lenders with just one application. What's even better is that the application only takes 5 minutes to complete and is free! The company utilizes a soft credit pull so your credit score won't be negatively impacted. This is very important as eligibility is for refinancing is often based on credit worthiness.

Bankrate's Student Loan Calculator​

Bankrate has a very useful student loan calculator that allows people to input how much they have left on their student debt, their terms, and interest rates. The calculator then tells you what your monthly payment will be and how many extra payments you have to make to pay off your loans.

Heather Jarvis - Student Loan Expert

​Heather Jarvis, a self-proclaimed student loan expert, has tons of tools and information on her website about saving on repayment and refinancing. She goes into federal programs, laws on student loans, and provides advice on how to save the most on your repayment.

Private Consolidation and Refinancing

Graduating college is a huge step. Upon graduating you feel really accomplished and excited for the new world. The only problem is your new world brings on financial responsibility especially for those student loans. Private student loans are a great way to pay for college. Usually upon graduating you will begin to make payments.

Consolidating all of your loans can really make things easier on you depending how many you have, how many payments you pay per month, and if you are already in a stable job. The best deal is always one with less interest and whatever is easiest with your pay scale. Beware of companies who are just after your money. An individual needs to go into private consolidation with knowledge of what they are doing and why.

Private Loan Consolidation Company

Let’s start off with private refinancing to lessen multiple payments per month. Write out a list of all your payments per month and their interest rate. You need to know also how long this is set for. Once you know how many loans you have and their individual interest rates its time see if consolidating would be best for you. Keep in mind you are only looking at your private student loans, not federal. Currently there are seven different companies that provide this service. There are other companies but they don’t have as good of ratings on the web. These companies could all have different opportunities so it is important to check out each one and which may be best for your situation.

    The other common reason to want to consolidate also has to do with your interest rate. If a person has graduated and been out of school a couple years it is possible to have a good job and in some cases even an amazing job. If your credit has gotten better over the period of time from when you applied for your private student loan then it is possible you could significantly lower your interest rate with just knowing your credit score and contacting some of the available companies that I listed above. Many places offer free credit reports if you do not know your current credit score. The easiest site I have found to check your credit score is here. Just follow the steps and enter all your appropriate information. If your credit score is up fifty points or more it is possible you may be able to consolidate your private student loans for a cheaper monthly amount due to less interest.

    As you can see consolidating your private debt can be very easy if you qualify. Make sure you have all the correct information and have it all sorted it out before contacting any company. Once you are sure of your numbers and what you are looking for then it is pretty easy to see if the option would be better for you and your loan situation.

    How to Get the Best Rate When Consolidating and Refinancing Your Student Loans

    Consolidating your student loans can lead to a better interest rate and lower payments. However, a bad deal can make you hurt in the long run. The determining factor in how easy getting a better rate will be is the type of interest you have.

    Consolidating federal debt is a fairly easy process that can be applied for online through the Department of Education. When you consolidate federal loans, the interest rate you pay ends up being the weighted middle of your previous interest rates rounded up to the nearest 1/8th of a percent.

    The weighted middle on federal loan rates is calculated by first finding multiplying each balance by its respective interest rate. Doing this yields the “per loan weight factor.” For example, if you had a loan of $20,000 with an interest rate of 8%, the weight factor would be $1,600. After all these are calculated the sums are added together. The per loan weight factor is then divided by the total amount. If you had the $20,000 loan mentioned before and a $10,000 one with a weight factor of $1,000, the math would look like this:

    1. $1,600 + $1,000 = $2,600
    2. $2,600 ÷ ($20,000 + $10,000) = 0.087%

    Therefore when you consolidated your federal loans you would end up with a rate 8.7%. That is still a pretty steep rate, but fortunately the consolidated rate for federal loans caps at 8.25%. No matter what your weighted middle actually is, the applied rate will never exceed 8.25%.

    Unfortunately, the same is not true for private debt. Federal rules now stipulate that filing for bankruptcy does not discharge student loan debt. This gives you very little leverage with private companies as they know you can’t get out of the loan no matter what. Consolidation is still possible, but the rate you will get depends on a much larger set of factors. Check around with different lenders as some get better rates than others. Often smaller banks have better rates than large corporations. Be careful not to take a plan that just lowers your monthly payments without lowering your interest rates unless you are in a financial bind. The smaller payment amount will only lead to more interest in the future and ends up costing you more.

    Tips For Student Loan Consolidation

    Your rate will most likely be determined by your credit score. Before you go shopping obtain a credit report. If your credit is low, try to make some timely payments in order to up your credit score before consolidating.

    Look into bonus discounts you can get while consolidating. Many private lenders offer small reductions in your interest rate if you allow them to automatically deduct it out of your checking account each month. Depending on the private lender, this can be between 0.25% and 0.5%. Though that may not seem like a lot, every bit helps when you are trying to get your debt down. Some private lenders also offer a 1% discount if you faithfully make payments for between two and two-and-a-half years.

    There is no easy way to deal with consolidation. Just remember to take your time when making choices, as they can affect your future for decades to come. Consolidating your loans is not something to rush.

    Federal Refinancing and Consolidation Reviews

    what to look for when consolidating federal loans

    A lot of students who are gradating from college are then left holding a huge amount of debt. Regardless of whether you have a PLUS loan, a Stafford Loan, a Federal Perkins loan, or private student loan, there are a wide variety of consolidation services which are available to help consolidate all student loans into one single debt. By consolidating, this can result in a much lower interest rate, and in some cases this can also dramatically reduced monthly loan payments and help people pay off their debts much quicker. The good news is, many of the consolidation services will offer a fixed interest rates for the life of the loan, which allows you to lock that interest rate for as many years as it takes to pay off your student loans and you do not have to worry about the interest rates skyrocketing on you.

    What Should I Look For When Trying to Choose a Federal Student Loan Consolidation Company?

    • One of the first things you should look for when choosing a consolidation company is their cost of service. There are various services available and the type of service you may need will depend on your particular debt situation. The cost of the debt consolidating service will greatly depend on whether your bills are current , slightly passed due or if they have been past due for months, or even years. It is important to check into more than one debt consolidating company and to be as open with them about your situation as you can. By exploring more options, you will ensure yourself you are working with a company with whom you feel comfortable with and feel you are getting a great day with at the same time.
    • Another thing you should consider when choosing a consolidation company is the length of time it will take you to become debt free. The amount of time it takes will depend on your individual situation, so there is no set time frame which can be given up front. Once you have explained your financial situation to the debt consolidators, they will be able to give you an estimation of how long it will take to pay off the debt and for you to become debt free.

    Some Benefits to Consolidating Your Student Debt:

    • You can receive as much as a 50% lower monthly payment obligation.
    • There are never going to be any penalties for paying off early.
    • You are able to consolidate without having to run a credit check and without having a co-signer
    • If you choose a federal consolidation there is no fee.
    • Your consolidation loan interest is also going to be deductible on your federal taxes.

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