Here's a bit of good news: you can refinance your federal loans, score a lower interest rate, and pay off your debt faster than you can under the Standard Repayment Plan you may be on now.
Fortunately, it's not hard. All you need to do is refinance with a private lender. And we've put together everything you should know to make that happen.
The U.S. Department of Education contracts with several loan servicers to manage its loans, and FedLoan Servicing is the largest. If they’re your servicer, they collect and manage your payments. But you're not stuck with them.
Here's the deal: The federal government charges the same interest rate to everyone who takes out a certain type of loan at a specific time, regardless of their income or credit score.
If you have a good score, you could qualify for much lower rates with a private lender.
When you refinance your student loans, you replace your existing loans with a single loan through a new private lender. You get a new interest rate—hopefully a lower one—and new payback terms.
People refinance other types of loans—like mortgages—all the time to land a lower interest rate. And it works the same with student loans. The average borrower who refinances lowers their payment by about $253 per month and saves tens of thousands over the life of their loan.
Well, a lower interest rate is a pretty big win, and refinancing is the only way you can reduce the interest rate on a federal student loan.
The federal equivalent of refinancing—consolidation—generally won’t get you a lower interest rate. Instead, the government determines your interest by taking the weighted average of all your loan interest rates, rounded up to the nearest eighth of a percent.
The rate for federal Direct Subsidized and Unsubsidized Loans taken out after July 1, 2018 is 5.05%. Many private lenders offer low-end interest rates at less than half that. Since just a few percentage points can translate to hundreds of dollars in your pocket every month, that's a major benefit.
There are other advantages to refinancing too. You can adjust the terms on your loan to:
You can also replace multiple loans with a single loan, so you aren’t making payments to multiple lenders or servicers. It’s much easier to manage a single loan, and you're less likely to miss payments.
The federal loan disappears, and you replace it with a private loan (and a better interest rate).
There is one drawback to refinancing. If you're planning to use some of the benefits that come with federal loans, you may not be a good candidate for refinancing. You'll lose access to federal perks like income-driven repayment and the Public Service Loan Forgiveness program.
The benefit, though, is big: the chance to score a lower interest rate, especially for borrowers who aren't eligible for federal loan benefits.
These days you have lots of options for a lender. Here are a few things to take into account.
Most lenders let you get an estimated quote right on their homepage. You'll have to give some basic information, but just getting a quote doesn't require a hard credit pull and won't affect your credit score.
Pop the rate in our calculator here to find out how much you can save.
If you’re getting similar rate quotes from different lenders, consider what else makes them stand out.
For example, several of our highly vetted partner lenders have benefits that go beyond their low interest rate.
Do some digging before you link up with a particular lender. Check out online reviews or do a search for the company in Twitter hashtags. See what people praise—and what they complain about.
No lender has a perfect set of online reviews, but customer comments can give you a sense of what it’s like to work with this lender.
Refinancing your FedLoan Servicing student loan is a great way to save on interest—and to reset the terms of your loan. Click here to find out if you’re Refi Ready.
Special offers for medical resident and fellow refinance products
Splash Financial is a leader in student loan refinancing with new rates as low as 2.63% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.
Click here to see more of Splash's offerings and to see how you can save money.
Ability to apply for cosigner release after 24 consecutive payments.
Give Your Life’s Journey a Jump-Start.
If you’re ready to put student loans in your rearview mirror, Nelnet Bank student loan refinancing offers low rates and flexible terms to help you start getting ahead.
See How Much You Can Save: Estimate your savings with a student loan refinance from Nelnet Bank.
For every loan they fund, they contribute to the education of a child in need
CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.
Of all the companies we reviewed, CommonBond has some of the best customer service. The company prides itself on being easy to reach by email, phone, or live chat. It offers networking events, expert panels, insider newsletters, and even has a program help borrowers who lose their jobs to find new ones. CommonBond also makes you feel good about choosing to refinance with them by donating money to an education nonprofit for each loan they write.
Get a personalized review of your refinancing options with CommonBond today.
16 different loan term options – more flexibility to pay down your loan faster
College Ave Student Loans offers major help and minor stress. We’ll help guide you through the process to find the right loan term and interest rate for you and the family budget.
Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.
Click here to apply with Earnest and to see how much you can save.
SoFi is the leading student loan refinancing provider.
$30 billion+ in refinanced student loans. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, there's no maximum on the amount you can finance. Some state restrictions may apply.
Save thousands on your student loans and pay off your loans sooner. Find your rate.
Works with 300+ community lenders for higher approval chances
Connecting student borrowers to a network of over 300 community lenders with low interest rates. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.
Operates in all 50 states; 2nd largest student loan refinancing lender
Laurel Road is a national online lender with customers in all 50 states, the District of Columbia, and Puerto Rico. Many of our non-bank competitors are not able to lend in all 50 states.Laurel Road has grown to be the second largest player in the student loan refinancing space in large part because of our reputation as the go-to low rate provider.