Student Loan Refinancing Still At Ridiculously Low Rates - Forbes

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Student loan refinancing is still at ridiculously low rates.

Here’s what you need to know — and what it means for your student loans.

Student Loans

Student loan refinancing rates are hovering near all-time lows, with variable interest rates starting as low as 1.74% and fixed interest rates starting as low as 2.44%. If you have student loans with a higher interest rate, it may be time to refinance student loans before interest rates increase later this year. With student loan refinancing, you can combine your current student loans into a new private student loan with a lower interest rate, lower monthly payment or both. This can help you save money, including up to thousands or tens of thousands of dollars on your student loans depending your student loan balance and student loan interest rate. Let’s explore.

How student loan refinancing works

When you refinance student loans, you can choose to refinance private student debt, federal student debt, or both. With student loan refinancing, your new student loan is used to pay off your old student loans. As a result, you will have one student loan with one interest rate, one student loan servicer, and one monthly payment. This simplifies student loan repayment and make your student loans easier to manage. You can also choose a fixed or variable interest rate as well as a student loan repayment term between 5 and 20 years. This provides flexibility based on your financial goals and circumstances. A fixed interest rate means your interest rate will never change, while a variable interest rate means your interest rate could increase or decrease over time. A shorter repayment term means higher monthly payments, but you can save more money over time with lower interest costs. A longer repayment term means lower monthly payments, but you may pay more interest over the life of your student loan.

Student loan refinancing is best for these borrowers

Student loan refinancing is typically best for these student loan borrowers:

high interest rate
large student loan balance
at least 650 credit score
currently employed (or signed job offer) with steady monthly income

There are no application, origination or prepayment fees when you refinance student loans. Most lenders allow you to check your new interest rate for free with no impact to your credit score. You can also refinance again to get a lower interest rate, even if you refinanced previously. There is no limit to the number of times you can refinance to save money. Since the federal government doesn’t refinance student loans, you can apply online with a private lender.

Lenders want to ensure you have sufficient monthly income to pay your student loans, living expenses and any other debt. Importantly, when you refinance federal loans, your resulting loan will be a private loan. So, if you need income-driven repayment or are pursuing public service loan forgiveness, for example, you would lose access to these benefits if you refinance federal student loans. However, you can still refinance private loans, since they don’t qualify for these federal benefits.

How much you can save with student loan refinancing

This student loan refinancing calculator shows how much you can save with student loan refinancing.

Let’s assume you have $100,000 of student loans, a 7% interest rate and a 10-year repayment term. Now, let’s assume you refinance your student loans with a 3% interest rate and 10-year repayment term. You would save $195 each month and $23,457 overall.