Student Loan Refinance Rates

Student Loan Refinance Rates

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Overwhelmed by student loan debt? You’re not alone. Some 40 million people still have debt to pay off from their college days.

Letting your student debt pile up year after year without taking action to pay it off is not a good idea. Ignore it long enough and you’ll eventually find your wages garnished and your credit destroyed. If your credit score drops too low, you’ll reduce your chances of being able to secure the car or the house you want.

You wouldn’t want any of that to happen. So what are your options? If consolidating your loans won’t improve your circumstances or you can’t qualify for any repayment plans – like the federal government’s Pay As You Earn Plan – you can always consider refinancing your student loans.

What Happens When You Refinance Your Student Loans

By refinancing, you’ll receive a brand new loan that’ll pay off another loan or a bundle of loans. You can refinance both federal and private student loans to get a new private loan. You can’t, however, refinance and end up with a federal student loan.

Usually, the point of refinancing is to lower your interest rates so that monthly payments are more affordable. In order to do that, you might have to extend your loan term from 10 years to 15 or 20. It’s important to remember, though, that even a loan with a lower interest rate can mean you pay more money in actual interest if the loan term is long enough.

As an alternative, you can also refinance to a loan with a shorter term so that you’re paying less interest over the life of your loan. In this instance, it’s important to remember that while you will pay less money overall, your monthly payments will likely be higher.

To qualify for a refinance, it’s a good idea to be prepared to share your credit report and your financial history with your lender. If your credit score is on the low end of the spectrum or you don’t have a job that pays consistently, refinancing might not be possible (especially without the support of a co-signer).

Average Student Loan Interest Rates

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If you’ve decided that a refinance is the best move for you, it’s time to find out where your rates currently stand before you look up any student loan refinance rates.

Congress has the final say on federal loan interest rates. Regardless of the kind of loan you have, interest rates are fixed. That means that the interest rate you had when you first began borrowing will be the same rate you’ll have years later.

Private student loan interest rates, on the other hand, can be fixed or variable. If you have variable rates, they’ll change relative to market fluctuations. Over time, those interest rates could end up being significantly higher than they were when you first took out your loan.

On average, student loan interest rates for private loans sit between 9 and 12%. Federal student loans are cheaper than they’ve been in the past. For the 2015 – 2016 school year, rates are set at 4.29% for undergraduate students with subsidized or unsubsidized Direct Loans.

Compare Student Loan Refinance Rates

Just like when you’re shopping for most things, it’s a good idea to compare options when it comes to refinancing your student loan. Researching what different lenders have to offer for interest rates and terms can help you pick the best option. Student loan refinance comparison tools (like ours above!) can show you a list of loans you could be eligible for based on the personal information you provide.

Since market rates are fairly low, refinancing could be a great way to curb some of your financial anxiety. Depending on your credit score, the amount of debt you carry and how much money you earn, you might be eligible for some of the best student loan refinance rates. Refinance interest rates also vary by lender.

The lowest federal and private student loan refinance rates are around 1.9% in terms of variable rates and 3.5% for loans with fixed rates. Can’t qualify for the best rates? Setting up automatic bill pay might lower your rates by a percentage.

You’ll have to think carefully about whether you’d prefer a variable or fixed interest rate. With a fixed rate, you’ll be able to budget and know exactly how high your monthly student loan bill will be. Variable rates are lower than fixed rates, at least in the beginning, but they’re riskier because the rates may rise over time. It can be hard to predict if you will be able to afford your monthly payments when that happens.

Sometimes lenders charge refinancing fees. Those are charges that you’ll want to look out for in addition to any prepayment penalties that come with paying off your loans prior to the date you originally agree upon. It’s important to factor these costs into your math when determining if refinancing your student loans will save you money.

Bottom Line

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Refinancing can lower your interest rates and potentially save you money in the long run, particularly if you switch over to a loan with a shorter repayment term. With the help of our comparison tool, you’ll be able to compare student loan refinance interest rates and find the loan that’s best for you.

It’s important to note, though, that refinancing isn’t suitable for everyone. It might not be in your best interest to refinance if you’re aiming for student loan forgiveness. And if you’re not working in a stable industry, you won’t be able to defer your refinance loan or have it placed in forbearance if you lose your job or become too sick to work.

Your decision to refinance will be a final one. Once you take that step, you won’t be able to back track. So it’s important to take stock of your financial situation and weigh all of your options (including consolidation) before pushing forward with a refinance.