Did you know that it's possible to get a lower interest rate on your Great Lakes student loan? It totally is. The only catch: You'll have to say "so long" to Great Lakes.
To refinance your Great Lakes student loan to a lower interest rate, you'll need to apply for refinancing through a private lender. The good news is this whole process is pretty easy, and people do it all the time. In fact, 94,000 people refinanced their student loans last year.
Here's what you need to get a better deal on your own student loans.
What is refinancing?
Refinancing is the closest thing you get to a do-over on your student loan. You take out a new loan with a private lender, and that lender pays off all your other loans for you. What you’re basically doing is replacing your old loan, or multiple, different loans, with a single new one.
If you have federal loans, refinancing will mean you’re replacing those loans with a private loan.
Benefits of refinancing
Refinancing your federal loans with a private lender can help you:
- Score a lower interest rate, which can save you thousands of dollars over the life of your loan.
- Lower your monthly payment. Our data shows many people can reduce their payment by around $250 a month.
- Get out of debt faster, if you opt to refinance without extending the term of your loan.
- Simplify your payments, by consolidating several loans into one, with a single monthly payment.
The benefits of refinancing depend on your goals. If your goal is to lower your monthly payment, opt for paying over an extended term. If your goal is to get out of debt faster and save more money, opt for a shorter loan term.
See also: The 1 Thing You're Probably Not Doing That Could Save You Big-Time On Your Student Loan
What would refinancing mean for my federal loans?
When you refinance your federal loans, those loans are replaced with a private loan.
As we said above, there’s a big benefit to this: a chance to score a lower interest rate. Refinancing with a private lender is the only way you can reduce your interest rate on a federal loan.
That’s because federal loans aren’t set according to your credit score. Everyone gets the same rate, depending on the type of loan you have and when you took it out.
Depending when you graduated, you may be paying over 6% interest on your federal loans. Current refi rates are running as low as 3.14% for a fixed rate loan.
When you refinance with a private lender, that lender takes a look at your credit score and financial situation—and offers you a new interest rate based on what they see. If you have a high credit score, you could get considerably lower interest—some lenders, like Lendkey, are offering rates as low as 1.9% for variable rate loans.
So what's the downside? Well, you will lose access to federal protections like income-driven repayment and student loan forgiveness for public service employees.
See also: 9 Ways People Accidentally Sabotage Student Loan Forgiveness
The federal government does offer its own (partial) answer to refinancing with a private lender: consolidation. Under this program, you replace multiple federal loans (and only federal loans) with one Direct Consolidation Loan, and you keep your federal perks.
The downside is that you also keep your federal interest rate—and it may even go up. Interest rates for Direct Consolidation Loans are set based on the weighted average of interest rates across all your loans, rounded up to the nearest eighth of a percent.
See also: Everything You Need to Know About Student Loan Consolidation
What are the steps to refinancing my Great Lakes student loan?
1. Do some comparison shopping.
Every lender’s criteria will be slightly different, but you can get a ballpark idea of how much you could save by plugging your loan info into an online refinancing calculator. Ours is here, if you’d like to compare rates from several different lenders at the same time as a starting point.
2. Get a preliminary quote.
Once you've keyed in on a few lenders you'd like to consider, go to their websites and get some rate quotes.
Most will give you the option of a "soft-pull" quote, in which you can get a preliminary quote after answering a few questions. It's called a soft-pull because the lender won't pull your credit score.
3. Apply.
Most lenders have an online application process that takes about 20 minutes or so. The lender will ask you some questions about your financial life and existing loans. You’ll need info on your current student loans, plus your salary information and work history—so get those documents ready.
4. Review your loan offer.
After the lender has processed your application, they'll extend an offer that will include your interest rate, your monthly payment, and your loan term.
Once you pick a lender, they’ll handle all the communication with Great Lakes to take over your loan. However, it's important to continue making payments to Great Lakes until you have verified that your balance with them has been zeroed out.
How do I choose a new lender to refinance my loan with?
There are plenty of lenders out there—and you could go on a research binge to find a great one. But you don’t have to, because we’ve already dug into this question.
Here are some of our preferred lenders. All of these have low rates, great industry reputations, and something special that makes them stand out:
- SoFi: Offers networking events, classes, an entrepreneurial seed program, and career coaching for ambitious borrowers.
- CommonBond: This lender has made social responsibility part of its mission, with a program that funds the education of children in Ghana.
- LendKey: Connects you with over 13,000 community banks and credit unions offering very competitive rates—that you wouldn’t have found on your own.
Refinancing your Great Lakes student loan is a smart move if you want to save on interest. Use our free calculator to see how much you could save.
