Why does student loan refinancing exist?
Refinancing exists because lenders are willing to give out loans to borrowers paying back their student debt that are superior to (i.e. at a lower rate), or at terms different than the original student loans.
The reasons this exists are threefold:
- Market interest rates have dropped considerably over the last few years.
- When a student graduates and gains employment and a work history, they are suddenly a better candidate because their chance of default is lower.
- Refinancing rates are based on the individual credit and financial situations of borrowers whereas federal loans are largely-one sized fits all with everyone getting the same rate for most loans.
What exactly is student loan refinancing?
Student loan lenders will buy out your loan from your existing servicer, allowing you to have a new loan at a potentially lower interest rate. This process will also consolidate all of the loans you refinance into one convenient payment.
How do you refinance your student loans?
You need to find a lender willing to refinance your student loans and borrowers generally want that offer to result in savings over their existing loans. Then, you submit your personal information to them (which often includes loan balance, income, credit score) to get a personalized refinancing offer. If you get an offer that you like, you then usually need to send them a few documents (e.g. a pay stub) to prove the information you provided is true and then sign on the new loan.
How can Credible Help?
Credible can make this process of finding out a refinancing offer easier and more efficient. We have a savings estimator on the front of our site that gives you an estimate of your potential savings from refinancing. We also will for free submit you to most lenders in the market after filling out our one simple form, saving you the time and effort of finding all the disparate lenders in the market and filling out each form separately. Finally, we will present each offer you get to you on a transparent easy to compare dashboard so you can choose the right loan.
Go ahead and compare your rate today!