Should You Refinance Your Student Loans?


Drowning in student debt? You’re not alone. More than 44 million people have outstanding student loans worth a staggering $1.4 trillion altogether.

If you’re looking to lighten your load, refinancing may be for you. Here’s how to make sure you’ll really benefit from it.

1. Do the math.

If you’re shelling out a monthly $100 or less, refinancing may not make a big difference. But if you’re paying even $200 to $400 a month, you could potentially save thousands over the life of your loan by refinancing if you're able to get a good rate. 

If you refinanced $40,000 in debt from 6.8 percent to 4.37 percent, for example, you could save nearly $5,800 over a 10-year term. (Current rates vary from 4.45 to 7 percent for federal loans and an average of 7.99 percent for private loans; 4.37 percent is the lowest fixed rate offered by online lenders like SoFi for a 10-year loan.) 

And if you're paying $1,000+ a month, you could see immediate relief, plus thousands saved over the life of loan. Say you have $100,000 in debt at a 6.8 percent rate that you’re attacking with a hefty $1,151 monthly payment. Refinancing to 4.37 percent interest rate could lower your monthly payment by about $121 a month and save you nearly $14,500 in interest over a 10-year period. 

(Use a free online calculator, like the one on the Student Loan Hero or FinAid sites, to see how different interest rates would affect your payments.)

2. Check your credit.

As you might imagine, a smoking rate like that isn’t available to everyone. You need stellar credit—think a score of 750 or more—to benefit from the most attractive rates. Now’s a good time to check your credit report to see if there are any errors, or figure out other ways to boost your score, like upping your credit-to-debt ratio by paying off debt or requesting a credit limit bump.

3. Compare student loan refinancing rates.

Before committing to a loan, make sure you compare rates to find the sweetest deal. A good place to start is by looking at large online lenders like SoFi, Earnest and CommonBond, which all offer low rates for student debt refinancing. Take a few minutes to plug your particulars into each lender’s calculator to see what rates and payment terms you qualify for, and then make the best choice for your situation.

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