Looking at the latest bill for your MOHELA student loans and wondering if there's a way to lower your monthly payment and pay less overall?
Yes. There absolutely is. Refinancing helps the average borrower (including those with MOHELA student loans) save over $250 per month and more than $16,000 over the life of their loan.
Plus, it's actually pretty simple — believe it or not, you can complete the entire process in less than 30 minutes. Refinancing your Mohela student loans requires just a few steps:
- Researching lenders
- Choosing a lender, and
- Filling out an application
See also: MOHELA Student Loans: The Ultimate Guide
Let's talk about what you need to know before you take the plunge and then discuss the exact steps you'll take to start saving.
What is student loan refinancing?
When you refinance your student loans, you apply for a new loan with a new lender. That new lender purchases your old loans and provides you with new loan terms, including a new interest rate. What do they use to determine your new rate?
- Your income
- Your credit score
- your repayment history
- Current federal interest rates
One of the most important things to understand about student loan refinancing is that the interest rates on your federal student loans have nothing to do with you as a borrower (they're set by federal law) and cannot be changed—no matter how much money you make or how good your credit is.
That's why refinancing can provide such significant savings. For most borrowers, refinancing with a private lender provides an opportunity for a significant interest rate reduction.
And that lower interest rate can translate into serious cost savings.
See also: Everything You Need to Know About Student Loan Refinancing
What are the benefits of refinancing your student loans?
Of course, the biggest reason to refinance your student loans is saving money, but there are additional benefits worth mentioning:
- Paying a single monthly bill. When you refinance, you also consolidate any the loans you're refinancing into a single loan. If you have multiple loans, this can reduce your monthly hassle.
- Getting discounts. Many lenders offer discounts, like an interest rate reduction of .25% for signing up for automatic payments.
- Changing your loan term. Refinancing provides you the opportunity to extend your repayment term so you make lower monthly payments or shorten it so that you pay more each month but less over the life of the loan.
See also: The 7 Biggest Misconceptions about Student Loan Refinancing
Can you refinance federal student loans?
You can absolutely refinance your federal student loans. Thousands of borrowers do it every year.
But before you do, you should understand that you're refinancing with a private lender, not with your federal student loan servicer. Like we mentioned above, servicers can't offer you new terms because federal student loans are offered at rates set by the U.S. Department of Education.
When you finance with a private lender, you lose eligibility for federal loan benefits like income-based repayment or loan forgiveness. If you're relying on those, look carefully at the numbers before you choose to refinance.
See also: What is Direct Loan Consolidation for Federal Student Loans?
Many federal borrowers aren't eligible for or don't plan to take advantage of federal loan benefits, and those borrowers are good candidates for refinancing—and the cost savings that come with it.
Plus, whereas federal loan consolidation is only available for federal loans, borrowers with both private and federal loans can refinance those together with a single private lender.
Where to find the best deals on student loan refinancing?
If you're considering refinancing your student loans, then you definitely want to find the best deal for you. Fortunately, we've created a list of the best banks for student loan financing—these are well-established and innovative lenders with the best interest rates.
As you compare lenders, here are some questions to ask:
How much money will their interest rate save you?
Use a refinancing calculator. Most lenders have one on their website—and so do we.
Do they offer discounts?
Even seemingly small interest rate reductions can save you big over the long haul. Most lenders will reduce your interest rate by 0.25% if you sign up for automatic payments. Some provide additional reductions.
For instance, Citizens One knocks another 0.25% off if you have a bank account with them.
Do they provide perks?
Each lender provides their own particular package, along with useful perks. Find out which benefits are especially valuable for you. For instance, you could:
- Refinance while you're still in school.
- Apply with a cosigner.
- Release a cosigner down the road.
- Change your repayment term after you've refinanced.
- Get help if you lose your job.
How is their customer service?
If it's important to you to talk to a human being on the phone when you have a question, then read user reviews and find out how their customer service rates. If you prefer access to a chat function, check out their website to see if they have one.
Do they charge fees?
This one's important: Reputable lenders provide refinancing free of charge. An origination fee from a lender should be a red flag.
Do they have that special something?
If you need a tie breaker, consider the details of each lender. For instance, Splash Financial has special programs for doctors and medical residents; Common Bond contributes to a child's education for every loan they fund; and SoFi provides networking opportunities for its borrowers.
Ready to see how much you could save by refinancing? Use our calculator to find out.
