Refinancing your student loan, step by step

Once you refinance your student loans, you can’t reverse it. Here are 4 steps you can take when considering student loan repayment.

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A few good reasons to refinance a private student loan

Say your credit score has gone up or interest rates have gone down. Refinancing may get you a better rate on your loan, which means you can pay less over the life of your loan. Refinancing might also be an option if you want to release a co-signer.

When is it not a good idea to refinance?

In general, the prevailing rates on federal student loans are lower than those on private student loans. Which is why it's usually not optimal to refinance from a federal student loan into a private one. Federal loans offer protections that private loans lack, like repayment plans based on your income level and the ability to postpone payments if you're having a tough time financially. It's rarely worth giving those up, unless you get a much better interest rate.

What if I change my mind?

Once you refinance, you can't reverse it, but you can always refinance again. So make sure you do your due diligence by shopping around for lenders. Here are 4 steps you can take.

Step 1. Shop around

First, find a lender. Terms and rates vary, so start by searching for "best student loan refinancing lenders." The online rankings you see should offer some solid options. Go to each lender's website and request an initial quote for refinancing a student loan. (If you like your current lender, you can get a quote from them, too.) They'll probably ask you about:

  • Where you live
  • Education level
  • Employment and income level
  • Monthly expenses
  • Credit score
  • The loan you want to refinance
  • Other debt

You might also check out websites that allow you to enter your information once and get quotes from multiple lenders. Each lender's quote will include ranges for fixed and variable interest rates, but it's wise to pay attention to the terms in the fine print in addition to the rates. Some may come with a personal loan advisor. Some will offer longer-than-average forbearance periods. Others won't let you go into forbearance while you're in school.

Step 2. Pick a lender

Everyone wants a low interest rate, favorable terms, and customer service perks. But you'll have to decide which of these is most important to you. Narrow down your list of potential lenders to the top 2 or 3. Then search their names, along with the words "complaint" and "fraud." It's normal to see a handful of consumer complaints. But rule out any lenders with serious allegations of fraud. Ultimately, pick the lender that gets closest to maximizing the elements (terms, rate, flexibility, customer support, convenience) that are important to you and suit your circumstances.

Step 3. Submit a full application

Check your lender's website for what docs are required for a full application. They'll likely need the following from you (and your co-signer, if you have one):

  • Social Security number
  • Identification, such as a driver's license or passport
  • Proof of income, such as recent pay stubs. If your pay varies from week to week, get a signed letter from your employer confirming your monthly or yearly income.
  • Statements from all your student loans. These statements should include the original balance, the disbursement date, and the repayment history. If you can't find them online, call your lender.

Once you have everything, upload it to the lender's website

The lender will contact you with offers or a request for more information. Review the details carefully. It's not fun, but reading the fine print is critical. Assuming the loan terms work for you, follow the lender's process to officially accept the offer.

Step 4. Keep paying off old loans while you wait

The entire refinancing process can take several weeks. In the meantime, keep making the regular payments on your original loan. Your new lender will provide documentation of the loan payoff and tell you when it's time to switch over. After the new loan kicks in, hang on to the records from your original loan. You may need them later if there's ever any confusion about how much you've paid off.

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