Student loan debt is a heavy burden weighing on the finances of millions of Americans, making it difficult for borrowers to save money to buy a home or start a family. Fortunately, it may be possible to lessen the load of college debt by refinancing to a lower rate.
Refinancing your student loans may help you reduce your monthly payments, get out of debt faster and save thousands of dollars in interest over time. And since student loan refinance rates are near all-time lows, it's possible for borrowers to save more money than ever before.
Student loan refinance rates set a new record low for the week of Nov. 22, reaching an average fixed interest rate of 3.35% for the 10-year loan term and a variable interest rate of 2.41% for the 5-year term. Although rates have risen marginally since then, there's still never been a better time to refinance student loan debt.
Keep reading to learn more about student loan refinancing, including how to calculate your potential savings. You can browse current refinance rates from real private lenders in the table below.
A student loan calculator can show you potential savings
Refinancing student loan debt at a lower rate is a proven way to save money, and it's possible to determine your potential savings in a few simple steps using Credible's student loan refinancing calculator. You'll need to provide the following:
- Your current loan repayment terms. You'll need to know your loan balance, interest rate and monthly payments, as well as the number of student loan payments you have left.
- Your new interest rate. View your estimated student loan refinance rate for free without impacting your credit score by getting prequalified on Credible.
- Your new loan terms. If your goal is to lock in a lower monthly payment, choose a longer-term loan. If your goal is to pay off your student debt faster, choose a shorter loan repayment period.
You can practice with the following example: The average student loan balance in the United States is $37,693, according to the Education Data Initiative, with borrowers paying a 5.8% interest rate on average. By refinancing to a 10-year loan term with a fixed rate of 3.40%, the average borrower has the potential to reduce their monthly payments by about $50 and save nearly $5,250 over the life of the loan.
How to refinance student debt in 5 steps
Student loan refinancing is a simple process that can be done completely online. Here's how to refinance student loans in just a few steps:
- Check your credit score. Private lenders determine your interest rate based in part using your credit history, meaning borrowers with good credit will qualify for low rates. You can request a free copy of your credit report from the three credit bureaus (Equifax, Experian and TransUnion).
- Review your existing loan terms. You'll need to know your current loan amount to determine how much you need to borrow. You should also look up your current student loan rate, so you can find a new loan with a lower interest rate.
- Compare rates across multiple lenders. Most private lenders let you see your estimated interest rate and loan terms without impacting your credit score, so you can shop around for the lowest rate possible for your situation.
- Formally apply for the loan. Once you've settled on the best repayment plan for your needs, you'll need to fill out an application through the lender. You'll need to provide information to confirm your identity and earnings, such as a W-2 and driver's license.
- Keep making payments while your loan is disbursed. The refinancing lender will pay off your current student loans within a matter of weeks. In the meantime, it's important to keep making on-time payments to avoid penalty interest and additional fees.
You can begin the application process by filling out a single form on Credible. This allows you to compare repayment options across online lenders, so you can rest assured that you're getting the lowest student loan refinancing rate for your financial situation.
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