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 Great Lakes?
If you have a federal student loan, you also have a loan servicer. Great Lakes is one of the big ones and it's one of several companies the federal government uses to service student loans. Great Lakes was recently in the news because they were acquired by Nelnet, another big loan servicer.
A loan servicer is an organization that acts as the middleman between you and the federal government, administers your loan, and takes your payments. If you need to adjust the payment terms on your loan, you talk to your servicer.
You can't refinance your loan with your existing federal loan servicer, though. You have to switch to a private lender for that.
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.
Why should I consider refinancing?
The big benefit to refinancing is that you can score a lower interest rate. That equates to a lower monthly payment (most people who refi lower theirs by about $253 per month) or big savings over the life of your loan. In fact, our data shows that the average person who refinances can save around $16,000.
You can also replace many different loans with a single loan—which makes managing and paying off your debt easier.
In addition, refinancing gives you the chance to reset the timeframe of your loan—lengthening it if you want to reduce your monthly payment, or shortening it to pay less interest in the long run.
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.
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. The current rate for undergraduate Direct Subsidized and Unsubsidized Loans taken out on or after July 1, 2018 is 5.05%.
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 2.47%.
The downside to this is that you 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?
The first step is to pick a new lender and get a sense of the interest rate they would offer you.
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.
Most lenders have an online application process that takes about 20 minutes or so. You’ll need info on your current student loans, plus your salary information and work history—so get those documents ready.
The lender will ask you some questions about your financial life and existing loans, then do a “soft pull”—a credit check that doesn’t show up on your score. After that, they’ll make you an initial offer.
Once you pick a lender, they’ll handle all the communication with Great Lakes to refinance your loan.
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: It’s 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.
