How To Refinance Student Loans In 5 Steps

The first step you need to take before starting the process of refinancing your student debt is to look at your financial profile to check if you qualify. There are four key factors you need to consider: credit score, income, debt-to-income ratio, and current student loan terms

Factor 1: Credit score 

To be eligible, most private lenders require you to have a minimum credit score of 650, but many students need help to meet this requirement. You must be sure of your credit score before starting the application process.

How to check your credit score 

Most lenders perform a hard credit inquiry when evaluating your student loan refinance application. A hard credit pull is when your lender checks your credit report. A hard check might affect your credit score and stay on your credit report for an average of 2 years. You can check your credit from a credit bureau, including TransUnion and Equifax, for free, on credit-scoring websites such as LendingTree and Credit Karma, or from your credit card statement.

Factor 2: Income 

Your income also plays a crucial role in the repayment terms you will receive when refinancing student loans. Lenders require you to make a minimum of $24,000 to be eligible.

Factor 3: Debt-to-income ratio

Debt-to-income ratio is the amount taken out of your monthly income to pay for your debts. You need to know this percentage because lenders require you to disclose in your application a debt-to-income ratio of above 50% is often attractive to lenders.

Factor 4: Current student loan terms

It would be best if you determined who your loan servicer is and whether you have private or federal student loans. Further, you must know the loan amount you have left and whether your interest rates are fixed or variable.

How to review your current student loan terms

You can check your student loan terms on studentaid.gov. After logging in, you will see information such as repayment terms, interest rates, and federal student loan balances. You can also contact the Federal Student Aid Information Center.

The first step you need to take before starting the process of refinancing your student debt is to look at your financial profile to check if you qualify. There are four key factors you need to consider: credit score, income, debt-to-income ratio, and current student loan terms

Factor 1: Credit score
To be eligible, most private lenders require you to have a minimum credit score of 650, but many students need help to meet this requirement. You must be sure of your credit score before starting the application process.

• How to check your credit score
  Most lenders perform a hard credit inquiry when evaluating your student loan refinance application. A hard credit pull is when your lender checks your credit report. A hard check might affect your credit score and stay on your credit report for an average of 2 years. You can check your credit from a credit bureau, including TransUnion and Equifax, for free, on credit-scoring websites such as LendingTree and Credit Karma, or from your credit card statement.

Factor 2: Income
Your income also plays a crucial role in the repayment terms you will receive when refinancing student loans. Lenders require you to make a minimum of $24,000 to be eligible.

Factor 3: Debt-to-income ratio
Debt-to-income ratio is the amount taken out of your monthly income to pay for your debts. You need to know this percentage because lenders require you to disclose in your application a debt-to-income ratio of above 50% is often attractive to lenders.

Factor 4: Current student loan terms
It would be best if you determined who your loan servicer is and whether you have private or federal student loans. Further, you must know the loan amount you have left and whether your interest rates are fixed or variable.

• How to review your current student loan terms
  You can check your student loan terms on studentaid.gov. After logging in, you will see information such as repayment terms, interest rates, and federal student loan balances. You can also contact the Federal Student Aid Information Center.

When you have determined that you qualify to refinance your student loans, it is essential to compare different lenders to find one that has terms that match your needs. The key features you need to pay close attention to are interest rates, fees, and repayment terms as they determine whether it’s a good idea for you to refinance. Most lenders readily have information about fees and repayment terms on their websites. For interest rates, however, you will need to request an estimate. Some lenders conduct a soft credit check to give you an estimated rate, while with others, you’ll have to submit your application and go through a hard credit check to get the interest rate. Below are the four best student loan refinance options that may match your needs:

SoFi Student Loan Refinance

SoFi Student Loan Refinancing is the best option for parents with Parent PLUS loans. Parents take these loans to help their undergraduate dependent children successfully graduate from college. SoFi student loan refinancing requires a minimum credit score of 650, and you can get an interest rate estimate with a soft credit check.

LendKey Student Loan Refinance

LendKey is a credit union that offers student loan refinance services. LendKey has flexible payment terms and no origination but requires a minimum credit score of 660. You can get an interest rate estimate with a soft credit check on the bank’s website. 

Earnest Student Loan Refinance

Earnest Student Loan Refinance is the best option for students who have yet to graduate. Most lenders will need a degree to qualify for student loan refinancing, but you can do so with Earnest if you have a minimum credit score of 680. You can get a rate estimate on the lender’s website with a soft credit check.

Laurel Road Student Loan Refinance

Laurel Road is a national bank that allows student loan refinance if you have an associate degree or are a medical or dental resident. You must have a minimum credit score of 660 and get a 0.25% interest rate discount if you are an existing customer. A hard credit pull is not required to check your rate options.

Before filling out the application form, it is essential to have all the required documents ready on your computer and in the correct format. If you don’t submit all the documents, your application will not be successful. Make sure you have digital copies of all your documents because most applications are online, then put them in one folder on your computer to ensure that you only submit what is required.

Below is a list of some of the required documents for the application: 

• Proof of residency
• Proof of employment
• W-2 Form
• Account Information
• Government-issued ID
• Social Security number
• Proof of degree
• Updated student loan statement

Once you have found a lender that fits your needs and gathered your documents, the next step is to fill out an online application and submit the documents we previously discussed. A hard credit check pull is required because the lender needs to look at your full credit report to evaluate your financial profile. Most lenders allow you to track the status of your application on their website with only the application reference and your phone number.

Before signing the refinancing agreement, read all the fine print. Ensure that the interest rates match the estimates you were given and that the repayment terms are what you selected on the application form. Furthermore, check if the company charges late payment fees and how flexible they are with payment terms in case you lose your job and can’t handle monthly payments on the new loan.

Refinancing student loans is a decision most students and parents take to make their debt more manageable. However, depending on your financial situation, it may not always the best idea, especially for those who don’t have good credit or a stable income. Taking the time to weigh the pros and cons will help you better understand how student loan refinancing works and make an objective and informed decision.

Here are the benefits and disadvantages of Student Loan Refinancing:

In the event that student loan refinancing does not suit your financial situation, consider any one of the following alternatives. 

The purpose of student loan programs is to give full or partial relief to students and parents who cannot pay their loans. Programs include Income-Driven Repayment Forgiveness, Public Service Loan Forgiveness, Perkins Loan Cancellation, and Teacher Loan Forgiveness. 

Student loan consolidation combines all your federal student loans into one new loan amount. Consolidation can be wise because you are still eligible for the benefits and security that comes with federal student loans, and it does not reflect negatively on your credit history. 

If your student loan deferment request is approved, you will be allowed to stop paying on your loan for some time while improving your financial situation. Deferment options include Parent PLUS borrower deferment, economic hardship deferment, unemployment deferment, and in-school deferment. 

It can take several weeks to complete the refinancing of student loans. Once the new lender approaches your application, the institution takes care of all the paperwork regarding the new loan and repaying your existing student loan.

There are no restrictions on how many times you can refinance student loans. Student loan refinancing has no additional charges, fees, or costs, so you can do it as often as you deem necessary. 

Your credit is slightly affected by refinancing. Although your credit score may drop by a few points after refinancing, it won’t last long and is likely to bounce back after a few months. Ultimately refinancing can result in potentially benefiting your credit score in the long run.

Student loan refinancing could be the key to a debt-free life. Following the proper process will ensure that you get a new loan at a lower interest rate, consequently reducing your loan amount. There are various student loan refinancing options that cater to all needs, from Parent PLUS Loans to students who have yet to graduate. If you don’t qualify for refinancing, do not despair – there are other options to look into such as student loan forgiveness, consolidation, or deferment. It all depends on what best suits your financial situation.