Five Steps to Student Loan Refinance
The idea of making fewer payments and possibly saving money on student loan repayment is appealing, but student loan refinance may seem complicated. Where should you begin? We’ve broken down what to expect in five basic steps to student loan refinance.
Take stock of whether you have federal student loans, private student loans, or a combination of both, and who your servicers/lenders are. Make note of the current balances, the rates, and whether you have a fixed or variable rate. It may be a good idea to create a secure spreadsheet with the information for easy access later.
Most lenders now offer an option to enter your information on their website to view potential rates and offers. By inputting some basic details, the lenders will perform a “soft credit check” which will not affect your credit score. While every lender is different, most will ask for items such as:
Your results will include a list of available terms (how many many years the loan is for); rates, which may be fixed or variable; and an estimate of your payments. Compare information from different lenders, and then select the offer that best suits your needs for terms and payments.
Just as you did for your original student loans, you’ll need to provide documentation of your identity and income. In general you will need to provide:
You will need the same information for a co-borrower if applying with one. Be sure to respond to any requests for additional information in a timely manner so the loan process isn’t delayed.
The new lender will notify you when the refinance process is complete, which may take several weeks. Until that time, you should continue to make any scheduled payments on your current loans.
Setting up automatic payments is an easy way to be sure your payments are made on time, and many lenders even provide a rate discount for automatic payments.
It’s important to remember that every student loan situation is unique. There are many factors to consider when refinancing student loans, including a possible loss of loan benefits for any federal student loans you currently hold.
In addition, the CARES Act was passed in response to events related to the COVID-19 pandemic and includes broad relief measures for federal student loan borrowers, which are set to expire after August 31, 2022. If you are considering refinancing your federal student loans, please make sure to review these measures at www.studentaid.gov/coronavirus to understand your options.