How To Refinance Your Student Loans

Man counting college savings fund, tuition fee or student loan with calculator.
Tero Vesalainen / Getty Images/iStockphoto

There has been much discussion about whether or not the U.S. government will forgive some or all of the nation’s student loan debt, particularly with the Biden administration taking over in Washington. While that would obviously be a great boon to the nation’s student debtors, it’s not something anyone should rely on. Whether or not student loan forgiveness comes to pass, there are steps you can take right now to alleviate the burden of your student debt, the primary one being refinancing.

Read More: Americans’ Savings Drop to Lowest Point in Years

Can I Really Refinance Student Debt?

In a word, yes. A student loan is just like any other type of loan, issued by a bank, financial institution or the federal government. Refinancing a loan simply means you take out a new loan to pay off your existing loan. You’ll have to do the math to see if refinancing makes financial sense, but yes, you can refinance a student loan just like you could with a personal loan or a home mortgage.

Save for Your Future

Find Out: 20 Jobs That Aren’t Worth Their Education Requirements

What Are the Steps Involved in Refinancing Student Debt?

There are three primary steps involved in refinancing student debt: Shopping around for rate quotes, choosing a lender and finalizing loan terms and providing documents to complete your application. Here’s a quick overview of each of these steps.

In the News: Biden Wants to Shut Down Credit Bureaus – What Would That Mean for You?

Shop for Rate Quotes

Lending is a competitive market. A simple online search will reveal numerous refinancing options. Most lenders can run a soft credit check to determine your interest rate without affecting your credit score. This helps make student loan refinancing comparisons easy. Just remember that your interest rate isn’t the only cost involved in your refinancing. You should also factor in any fees or other administrative costs that may be attached to your new loan.

Plan Ahead: A Parents’ Guide To Saving for Education

Choose a Lender and Loan Terms

Your monthly payment isn’t everything when it comes to your student loan refinancing. The term of your loan is equally important. For simplicity’s sake, imagine that you currently have a loan that requires a $100 payment every month for 10 years. That amounts to $12,000 over the full 10-year term. If you refinance into a lender that only requires a $70 monthly payment, that may seem like a bargain; however, if that loan has a 20-year maturity, you’ll end up paying $16,800, which amounts to 40% more. Just like you’ll have to factor in all the expenses of your loan when you get your interest rate, you should also consider the total cost of your payments before you sign up for a new loan.

Learn More: Most and Least Educated Cities in America

Provide Required Documents and Sign Your Application

Once you’ve done all the math and found a lender with adequate customer service, it’s time to finalize your loan. You’ll likely need to provide various personal and financial documents to your prospective lender, and they’re likely to run your credit. Once all the I’s are dotted and the T’s are crossed, you can sign your application and enjoy your new, lower-cost student loan.

Did You Know: 15 Rich Influencers Who Didn’t Need a College Degree

Should I Refinance My Student Loans?

Whether or not refinancing your student loans depends on your personal financial situation. In a general sense, if you can move into a loan with lower total costs, it can make sense financially. However, you’ll have to factor in all aspects of your loan to make that determination, from your interest rate and monthly payment to the total amount you’ll pay over the duration of the loan. You should also consider the servicing capabilities of your loan provider. Consulting with a financial advisor can be a good idea since your student loan is likely one of the largest expenses in your life.

Save for Your Future

More From GOBankingRates:

About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.