There's never been a better time to refinance your student loans to a low interest rate. (iStock)
College debt is a burden for young adults who are working toward financial milestones, like saving up for a home down payment or investing in retirement. Fortunately, it's possible for college graduates to pay off student loans faster and save money on interest so they can achieve these personal finance goals.
With student loan interest rates at record lows, it's a good time to refinance your private student loans. For example, a borrower with $40,000 in student loan debt who refinances to a new 10-year fixed-rate loan, dropping their interest rate from 5.57% to 3.57%, could save more than $4,600 over the life of their loan.
Use Credible's student loan payment calculator to see how much you could save on your private student loans with a lower interest rate. And if you decide refinancing is right for you, compare rates from multiple student loan companies at once on Credible's student loan marketplace.
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How to refinance student loans with record-low rates
If you've been thinking about refinancing your private student loans, there's never been a better time to do so. Student loan refinancing rates fell to record lows during the week of June 7, 2021. Borrowers with at least a 720 credit score who refinanced student loans using Credible saw the following interest rates:
- 3.57% for 10-year fixed-rate loans, which matches the record low set during the week of May 17, 2021.
- 2.92% for 5-year variable-rate loans. This is down from 2.96% last week and is the lowest rate on these loans in all of 2021.
With that in mind, it's important to note the risks associated with refinancing federal student loans at this time, since doing so will result in loss of federal protections like income-driven repayment plans, COVID-19 forbearance and potential student loan forgiveness down the road. But since private student loans don't have these protections, it's a no-brainer to refinance private college debt. Here's how you can refinance your private student loans:
- Check rates across multiple student loan lenders
- Choose the best offer based on interest rates and other factors
- Formally apply to receive your new student loan
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1. Check student loan refinancing rates across multiple lenders
Just like you would shop around for the best deal on a new car or kitchen appliance, you should compare prices across multiple private student loan lenders to make sure you're getting the lowest interest rate possible for your situation.
You can visit an online loan marketplace like Credible to get prequalified through multiple student loan lenders by filling out a single form. Doing so will not affect your credit.
2. Choose the offer that helps you meet your financial goals
Borrowers with good credit may receive multiple student loan refinancing offers from different lenders. While some offers will help you lower your monthly payments, others may save you more money over the life of your loan. When comparing offers, consider the following factors:
- Interest rate. Since there are no fees to refinance your student loans, your interest rate is the most important factor when measuring the cost of refinancing. You'll want your interest rate to be lower than what you're currently paying.
- Length of the loan. A shorter loan term will come with higher monthly payments, but they'll cost you less in interest over time.
- Monthly payments. Make sure you can afford your new monthly student loan payments before you commit to a new loan.
You can use Credible's student loan refinancing calculator to see how much you can save over the life of your new loan.
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3. Put in a formal application and receive your funding
Once you've chosen a loan offer, you'll put in a formal loan application. During this step, you may need to submit to a hard credit check and provide the following:
- Proof of identification
- Proof of income
- Current student loan statements
Still not sure if you should refinance student loans? Get in touch with an experienced loan officer at Credible who can help you decide the best course of action to pay off your college debt.
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