In the United States, student loans are a national epidemic. According to Experian, Americans carry $35,620 in student loan debt, on average. If your loans have a high-interest rate, your loan balance can quickly balloon out of control. 

Student loan refinancing can be a smart strategy to manage your debt. By working with a private lender to take out a loan for your existing debt, you can lower your interest rate, reduce your monthly payment, or even pay off your loans early.

We have careful research the best companies to refinance your student loans, and we have provided the necessary information in this article.

10 Best Companies to Refinance Student Loans
Is it Worth it to Refinance Student Loans?
Does Refinancing Hurt your Credit?

10 Best Companies to Refinance Student Loans

The best student loan refinance companies provide competitive interest rates, a wide selection of loan terms, inclusive eligibility requirements, and responsive customer service. Here are the companies that stands out.

1. Credible

Before refinancing your student loans, it’s wise to get rate quotes from several different lenders to ensure you get the best terms. While you can do that manually on your own, there’s a simpler way: you can go through a refinancing marketplace.

Read Also: 10 Tax Breaks for Students to Lower Tuition Expenses

With Credible, you submit your information just once and get quotes from multiple lenders, without affecting your credit score. You can compare interest rates and loan terms from up to ten top lenders and choose the best one for your needs. Once you choose a loan, you can complete your application online.

You can use Credible to get quotes to refinance federal loan, private loans, and even Parent PLUS Loans.

Credible offers a best rate guarantee. If, after receiving prequalified options for student loan refinancing, you receive an offer for a better rate from a lender not on the Credible website and refinance with that lender at a lower rate, you’ll get a $200 Best Rate Reward.

The service is completely free to use. Instead of charging users fees, Credible makes money through referral commissions if you for a loan through its website.

2. RISLA

The Rhode Island Student Loan Authority (RISLA) stands out from other student loan refinancing lenders because of its competitive rates and the substantial benefits it offers to borrowers.

Despite RISLA’s name, borrowers can refinance student loans used to attend colleges nationwide. You can refinance between $7,500 and $250,000. All refinancing loans have fixed interest rates, and, as of September 14, 2020, the lender offers the following interest rates:

• Fixed rates: 3.49 to 7.69% (including 0.25% autopay discount)

Benefits

RISLA’s student loan refinancing program has a wide range of benefits that go beyond what you typically expect from private lenders. Its protections include:

• Income-based repayment: If you can’t afford your payments, you may qualify for RISLA’s income-based repayment (IBR) plan. With this option, RISLA will base your monthly payment on your income and family size, potentially reducing your payments.
• Total and permanent disability: Private lenders typically don’t offer loan discharges in the case of disability; RISLA is an exception. If you are unable to work because of a physical or mental impairment, you may qualify for total and permanent disability discharge. If eligible, your loan balance will be forgiven upon submission of medical documentation.
• Graduate school deferment: If you decide to attend graduate school, you can defer your loan payments for up to 36 months.
• Forbearance: If you are unemployed or have another emergency, you may be eligible for forbearance. If you qualify, you can postpone your payments for up to three months at a time, for up to 12 months over the life of your loan.

3. Splash Financial

Out of all the lenders we reviewed, Splash Financial has the lowest interest rates for student loan refinancing. As of July 31, 2020, the lender offers the following rates (lowest rate includes 0.25% autopay discount):

• Variable: 1.99% to 7.10%
• Fixed: 2.88% to 7.27%

You can choose a loan term of five, eight, 10, 12, 15, or 20 years in length. You must have at least $5,000 in student loan debt to refinance with Splash Financial, and there is no loan maximum. The lender does not charge any application, origination fees, or prepayment penalties.

4. SoFi

If you want a refinancing lender that offers comprehensive benefits, consider SoFi. The company provides robust perks to refinancing borrowers, including: 

• Unemployment Protection: If you’re laid off from your job, you can postpone making payments for three months at a time, for a maximum of 12 months.
• Career Coaching: Get access to a career coach to get advice on asking for a raise, preparing for a promotion, or building your personal brand. 
• Referrals: Refer a friend to SoFi’s loan program. If they apply for a loan and are approved, you’ll get $300. 
• Financial Advice: Make an appointment with a financial advisor to get free personalized guidance on investing, saving for retirement, and budgeting. 

With SoFi, you can refinance as little as $5,000, and there is no maximum loan amount. To be eligible for a loan, you need to have graduated with at least an associate’s degree. SoFi does not publicly list its minimum income or credit requirements.

There are no application or origination fees, and the following interest rates apply as of Sept. 30, 2020 (autopay discount included):

• Variable: 2.25% to 6.09%
• Fixed: 2.99% to 6.09%

5. Discover Student Loans

While some lenders charge origination, application, or late fees, Discover is different. It charges no fees at all, even if you miss a payment. With no added fees, the only charge you have to worry about is the interest that accrues on your loan.

With Discover, you may qualify for a loan without a cosigner. As of Oct. 2, 2020, the following interest rates apply (rates include autopay discount): 

• Variable: 1.87% to 5.87%
• Fixed: 3.49% to 6.99%

6. CommonBond

If you’re looking for a lender that offers flexible repayment options, CommonBond is hard to beat. Two features make CommonBond stand out from other lenders: 

• Hybrid Loans: With a hybrid loan, the first five years of the loan have a fixed interest rate. After that, the loan will have a variable-interest-rate. This approach is a good idea if you want to take advantage of a low interest rate and pay off your loans as quickly as possible, but also want the security of a fixed-rate loan.
• Forbearance: If you’re dealing with financial difficulties after losing your job or receiving a medical diagnosis, you can postpone making payments on your loans for up to 24 months over the length of your loan—the longest forbearance option offered by any lender. Being able to skip payments without entering into default can give you time to get back on your feet.

As of September 9, 2020, CommonBond offers the following rates (rates include a 0.25% autopay discount):

• Variable: 1.99% to 5.61%
• Fixed: 2.98% to 5.79%
• Hybrid: 4.05% to 5.55%

7. Citizens Bank

If you didn’t graduate from school, you’d struggle to find a lender willing to work with you. Citizens Bank is the one of the few national lenders that allows borrowers to refinance without a degree.

Interest Rates

As of September 9, 2020, Citizens Bank offers the following interest rates (rates include 0.25% autopay discount and 0.25% loyalty discount): 

• Variable: 1.99% to 8.24%
• Fixed: 2.99% to 8.49%¹⁴

Benefits

Citizens Bank offers borrowers some useful perks: 

• Loyalty Discounts: If you have another account with Citizens Bank, such as a checking or savings account, you can qualify for a 0.25% reduction on your interest rate.
• Automatic Payment Discounts: Sign up for automatic payments and get another 0.25% off your interest rate.
• Cosigner Release: After making 36 consecutive, on-time payments, you may qualify to have your cosigner removed from your loan.

To qualify for a student loan from Citizens Bank, you must not be currently in school, and your loans must be in repayment. If you didn’t graduate, you need to make 12 on-time, consecutive payments on your loans before you can apply for refinancing.

8. PenFed Credit Union

If you and your spouse both have student loans, you may want to combine your debt together. It will streamline your payments, so you have just one monthly payment and one loan servicer to remember. 

While most lenders will allow you to cosign your spouse’s refinancing application, the only lender that actually offers spousal loan refinancing—where the loans are consolidated together—is the PenFed Credit Union.

To determine your eligibility and to set your interest rates, PenFed will look at your combined income. If one person is a stay-at-home parent, this approach can be beneficial and help you get a lower interest rate than you’d receive on your own.

With PenFed, you can refinance between $7,500 and $300,000 of student loan debt. Loan terms range from five to 15 years, and there are variable and fixed interest rates. As of July 31, 2020, the following rates apply:

• Fixed: 3.23% to 5.53%
• Variable: 2.59% to 4.99%

9. Laurel Road

If you took out student loans to pay for your child’s education, you might be stuck with a high-interest rate. Federal Parent PLUS Loans have the highest interest rate of any federal loan. If you have these types of loans, refinancing can be a smart decision.

Laurel Road is one of the few lenders that offers refinancing for Parent PLUS Loans and allows you to transfer your loans into your child’s name. By refinancing your debt into your child’s name, you eliminate your obligation to repay the loan, and your child is responsible for repaying it instead.

Laurel Road offers variable and fixed-rate loans for parent loan refinancing. As of September 14, 2020, the following rates apply on parent refinancing loans, including a 0.25% autopay discount:

• Variable: 1.89% to 5.90%
• Fixed: 2.80% to 6.00%

10. MEFA

Massachusetts Educational Financing Authority (MEFA) doesn’t just offer private loans to those in Massachusetts; residents from any state can apply.

Borrowers who take out a MEFA Education Refinancing Loan get convenient online account access for loan payments as well as access to helpful videos and documentation.

• Fixed rates from (APR): 3.65%+
• Variable rates from (APR): 3.65%+
• Repayment terms (years): 7, 10, 15
• Repayment options: Military deferment, loans discharged upon death or disability
• Fees: None
• Discounts: None
• Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans
• Customer service: Email, phone
• Soft credit check: Yes
• Cosigner release: No
• Min. credit score: 670
• Max. undergraduate loan balance: No maximum
• Max. graduate loan balance: No maximum
• Offers Parent PLUS refinancing: Yes

Pros

• Offers variable and fixed interest rates
• Offers refinancing to borrowers who haven’t completed their degrees
• No prepayment or origination fees

Cons

• Doesn’t offer any discounts (such as autopay discounts)
• They don’t have a cosigner release available
• No forbearance or deferment options

Is it Worth it to Refinance Student Loans?

You should consider refinancing student loans if you find a lower interest rate and you want to merge some or all of your student loan payments into one.

While refinancing is a good idea in many cases, it’s not best for everyone—especially those who need to take advantage of federal student loan protections. Here’s how to know if you should refinance your student loans.

Who Can Qualify to Refinance Student Loans?

Refinancing is when you take out a new loan to replace an old loan or group of loans. When you take out the new loan, your old loans are paid off and you make payments toward your new one. You’ll have new terms, a new interest rate and sometimes a new lender.

When you refinance student loans, lenders consider:

• Credit score: Your credit score is the biggest determining factor in getting approved for student loan refinancing. Since you’re taking out an unsecured loan, lenders largely base your likelihood of repayment on a solid credit score.
• Income: You’ll need to prove you earn enough money to comfortably repay your loans. This also shows that if you have a financial emergency, you won’t fall behind on payments.
• Debt-to-income ratio: DTI is how much debt you have compared to how much money you earn. If you have a high DTI, you might not have enough money to repay your loan. A low DTI means lenders trust you’ll make on-time payments.
• Total student loan balance: Some lenders have a maximum loan balance they’re willing to refinance.
• Education background or type of degree: Depending on the lender, you might not be able to refinance your student loans if you didn’t graduate. Others require borrowers to have attained a specific degree, such as a bachelor’s.
• Whether you have a co-signer: If you don’t have a longstanding credit history, you may need to include a co-signer on your loan. Some lenders don’t offer the option to apply with co-signers, so this could limit your options.

Who Should Consider Refinancing Student Loans?

When you’re weighing your refinancing options, make sure your credit is in tip-top shape. To see if refinancing is worth it, consider:

• Your current loan interest rate: If you have high-interest private student loans, you may want to lower your interest rates to lower your monthly payments, as well as your total loan amount. “High” interest is relative based on what you’re paying; if you can stand to get a lower interest rate, refinancing might be worth it.
• Your savings: Refinancing might not be a good idea if you can’t significantly save on your interest rate, monthly payments, overall loan payment or a combination of them all. In your refinancing calculations, make sure you’ll be able to cut costs in some way.
• Your credit score: If you have a solid credit history, you’ll likely be eligible for more types of student loan refinancing. A good credit score is around 670, according to Experian, but the higher your credit score, the more lenders you’ll qualify to work with, and at the lowest rates offered.
• Your immediate credit needs: Since new credit applications trigger a hard credit inquiry, you’ll need to limit applying for new types of credit, like a credit card, an auto loan or a mortgage.

When Should You Avoid Refinancing Student Loans?

In the following situations, you may want to skip student loan refinancing and opt for an alternative to meet your needs instead.

You Have Only Federal Student Loans

Federal loans come with many benefits private loans don’t, including income-driven repayment plans that lower your monthly payments based on a percentage of your income. They also offer:

• Public Service Loan Forgiveness: PSLF is available for borrowers who work for nonprofits, government agencies or other qualifying entities in the public service sector. After 120 qualifying payments, the remainder of your loan will be forgiven.
• Generous deferment and forbearance: Student loan deferment and forbearance temporarily suspend your payments without penalty. Both accrue interest while payments are paused, unless you have subsidized loans, which the government pays the interest on during periods of deferment. When you opt for deferment or forbearance, your loan will still be considered in good standing, and federal loans typically provide more time to suspend payments than private loans do.

If you refinance federal loans, you will lose access to these options. That’s not so problematic if you don’t think you’ll need to use them in the future, but that may be hard to predict.

Only refinance federal loans if you believe your income will be stable throughout your loan term and you don’t qualify for forgiveness options specific to federal loans.

You Need a Co-signer

Some student loan refinancing lenders allow you to take on a new loan with the help of someone else. A co-signer is someone who agrees to sign onto your loan and vouches for your creditworthiness—usually someone with a good or excellent credit score.

If you can’t pay back your loan, your co-signer will be on the hook. If neither pays, your credit score will plummet, and so will your co-signer’s.

If you need a co-signer and can’t find one—or you found one, but their credit score isn’t so great—you might not qualify for student loan refinancing. Instead, focus your attention on improving your credit score so you can be eligible to refinance on your own in the future.

If you can only qualify by using a co-signer, make sure that person understands the potential risk they’re taking on. You can also consider opting for a loan that offers co-signer release after a certain number of on-time payments. That will ensure your co-signer isn’t responsible for payments until the end of the term if you can’t make them.

Your Potential Rates Are Too High

When you research lenders, many will offer the option to prequalify, letting you see within minutes what your potential interest rates and monthly payments would be. If you end up with a higher interest rate than what you have now, refinancing isn’t worth it.

You’re Behind on Payments

If you’re having trouble affording your student loans, and you’ve missed a few payments, lenders will notice. Payment history is the biggest determining factor in your credit score. So if you can’t afford your current loan, your credit score will reflect that, and lenders will hesitate to give you a new one.

The bottom line is—if you have multiple student loans, a good paying job, and decent credit (or a cosigner), refinancing your loans is probably the right answer. However, if you rely on one of the federal programs, such as income-based repayment, it’s best to stick with that until you’re in a stable financial place.

Does Refinancing Hurt your Credit?

Are you looking for a way to lower your monthly payments and free up more cash you can stow in your savings account, put into a retirement plan or simply use for living expenses?

One way to do this is by refinancing any outstanding loans to a new loan with a lower interest rate and lower monthly payments.

Before you explore this option, however, it’s important to know that refinancing a loan may have an effect on your credit by temporarily lowering your credit score. Here’s what to consider when deciding whether or not to refinance a loan.

Refinancing can lower your credit score in a couple different ways:

• Credit check: When you apply to refinance a loan, lenders will check your credit score and credit history. This is what’s known as a hard inquiry on your credit report—and it can temporarily cause your credit score to drop slightly. However, the money you save through refinancing, especially on a mortgage, usually outweighs the negative effects of a small credit score dip. And as you pay off your new loan over time, your credit scores will likely improve as the result of a strong payment history.
• Multiple loan applications: To find the best loan terms when refinancing, you’ll probably apply to several different lenders to see which one gives you the lowest interest rate. To keep all of these hard inquiries from hurting your credit score, make sure to submit all your loan applications within a short period. Most credit scoring models treat loan inquiries between a 14-day to 45-day period as one inquiry, minimizing the hit to your credit score. Applying for different loans over a period of several months, on the other hand, could have a lasting negative effect on your credit score.
• Closing an account: The loan you are refinancing will be closed, which can also lower your credit score because you are closing a long-standing credit account. However, some credit scoring models will take into account your payment history on the closed loan. As long as the closed account was closed in good standing, this lessens the hit to your credit score. In addition, as you pay down the new loan, your credit score should improve again.

Refinancing Your Mortgage

If you are refinancing a mortgage, make sure that you continue making payments on your old loan. Once your new mortgage loan is approved, it’s easy to get confused as to what payments are due, when and to which lender.

The new lender may tell you that you can skip your last payment on the old loan because the new loan will pay it off.

However, if the new lender’s loan payoff arrives after your last payment on the old mortgage is due, you could get dinged for a late payment, negatively affecting your credit score. Since it’s your credit score that’s on the line, it’s your responsibility to ensure that the final payment is made on time.

Refinancing Your Auto Loan

Refinancing a car loan may be worthwhile if interest rates have dropped or your credit score has improved since you took out the loan. You might also want to refinance your car loan if you simply need to reduce your monthly expenses.

Refinancing for a longer-term auto loan will lower your monthly payments, but depending on how long you stretch out the loan, it could increase the total amount you pay for the car. Make sure that the new interest rate is low enough that it doesn’t drastically increase your total cost.

To refinance, you’ll need a car that has held its value; generally, the car must be worth more than what you still owe on it for lenders to consider refinancing.

Refinancing a Personal Loan

You might consider refinancing a personal loan if your credit score has improved or interest rates have dropped since you first got the loan. You might also want to refinance to consolidate several personal loans into one, larger personal loan.

Like any other type of refinancing, refinancing a personal loan will cause a temporary dip in your credit scores due to the hard inquiries on your credit report. However, if you’re using a new personal loan to refinance more than one existing personal loan, you’ll have fewer open accounts with outstanding balances, which can help boost your credit score.

Read Also: The 10 Best and Most Creative Ways to pay off Student Loans Faster

Refinancing a mortgage, auto loan, personal loan or other loan can help lower your interest rates, reduce your monthly payment and give you more wiggle room in your budget. But because refinancing can negatively affect your credit score, it’s important to carefully weigh the benefits versus the costs before you start shopping for a new loan.

What are Some Refinancing Alternatives to Consider?

If you don’t qualify for student loan refinancing, or you’re looking for another route, there are a few alternatives that might help. Keep in mind that even if you’re not eligible to refinance right now, you can take steps to qualify in the future.

• Get up to date on your loans: If you’re behind on your loans, your first course of action should be to bring them current again. This not only increases your chances of getting approved for refinancing, but it also boosts your credit score and could help you secure a lower interest rate down the line.
• Make extra loan payments: If you have the means, start to pay your loans more frequently, such as every two weeks rather than once a month. You can also increase your minimum monthly payment to put more money toward your balance. That will help you reduce the amount of interest you pay over time without officially refinancing loans.
• Apply for an income-driven repayment plan: If you have federal student loans, look into income-driven repayment. Since these plans are based on your discretionary income and the size of your household, you won’t pay more than what you can afford. This is a good idea if you’re struggling to make the minimum payments on time every month and you’re looking into refinancing as an affordability strategy.
• Consider consolidation instead: While refinancing and student loan consolidation are similar, they’re not quite the same. Refinancing means you take out a new loan that replaces your old loan or loans. Consolidation is a strategy that combines multiple federal loans into one, giving you an interest rate that’s the weighted average of your previous rates rounded up to the next one-eighth of 1%. Consolidation is only available for federal student loans and there’s no credit check required. It’s a solid choice if you have federal loans and getting one monthly payment instead of multiple would help you stay on top of bills. But it won’t reduce your interest rate.
• Use a debt payoff plan: If you have many different student loans, consider paying them off through the debt avalanche or debt snowball methods. List out your loans including your lender, how much you owe, your monthly payments and your current interest rates for each. Using the debt avalanche method, you’ll tackle the loan with the highest interest rate first. You’ll make minimum payments on all your other loans, but put any extra cash on hand toward the loan with the highest interest rate. When that’s paid off, you’ll put all your cash toward the loan with the next-highest interest rate. You’ll do that until all your loans are paid in full. The debt snowball method is similar but tackles loans from the lowest amount owed to highest: Pay off the smallest debt first, then use that cash to pay off the next-lowest debt, until all your debt is paid off.
• Ask for alternative payment plans: Since most private lenders don’t have deferment or forbearance programs, you’ll need to talk to your lender about what it can do for your individual situation. If you’ve recently lost your job or you’re otherwise not able to afford making payments, ask about hardship assistance. Some lenders have payment-reduction options to lower monthly payments, the interest rate or both.

Conclusion

The three items to consider when deciding whether to refinance are financial history, interest rates and repayment goals.

First, identify whether you qualify; of the lenders that disclosed their minimum credit scores to Forbes Advisor, all had a minimum credit score of 650 or higher. You’ll also generally need to show stable income, a low debt-to-income ratio, and a history of on-time debt payments.

Eligible to refinance? Now look at your current loans’ interest rates. If they’re meaningfully higher than the rate you’ll likely get when you refinance—which you can check using lenders’ prequalification tools on their websites—refinancing might make sense for you.

But if you don’t stand to save much, or you are relying on federal programs like Public Service Loan Forgiveness that you’d lose by refinancing, it’s not worth it.