Find out how much you could save

Use this calculator to quickly determine if refinancing is worth it for you.

Compare student loan refinance rates in June 2022

What is student loan refinancing?

Student loan refinancing is the process of taking out a new loan to pay off your existing student loans. When you refinance your student loans, you may qualify for a lower interest rate and a different repayment timeline, which could help you save money on interest or lower your monthly payments.

Refinancing is a good idea for people with a large monthly payment or a high interest rate, since refinancing into new terms can make loans more affordable in both the short- and long term. Borrowers with good credit, in particular, will qualify for the best rates and terms. You can refinance both federal and private student loans, though it's usually best to avoid refinancing federal loans, since they come with a number of perks that aren't available through private lenders.

How to refinance student loans

How to pick the best student loan refinancing company

To find the right lender for you, compare at least three student loan refinancing companies. Start by getting prequalified to see which lenders offer you the most affordable loan and compare repayment terms to ensure that the timeline works for your budget. Also check for hidden fees, including application fees and late fees.

While rates and terms are important, you should also consider any unique features or perks, like deferment options or available discounts. These features could help you decide between lenders that offer similar rates.

Best student loan refinance rates in June 2022

Details: Student loan refinance rates in June 2022

The best student loan refinancing companies offer competitive interest rates and fees for qualified buyers. These companies also offer helpful resources on their websites, as well as the ability to apply for student loan refinancing online. Compare each of these lenders' loan terms and limitations before you apply.

Summary: What you need to know about refinancing student loans

• Should I refinance my student loans?
• Pros and cons of refinancing student loans
• How to choose between a fixed-rate and variable-rate loan
• Can I refinance my student loan with bad credit?
• What are the requirements to refinance student loans?
• What is the difference between student loan consolidation and student loan refinancing?
• The most valuable college majors
• FAQs about student loan refinancing

Should I refinance my student loans?

Refinancing your student loans makes financial sense only if the loan you apply for has a lower interest rate than the current interest rate of your student loans. You can use a loan calculator to determine your current monthly payment versus that of the loan you're considering. While you may decide to refinance to a longer term in order to lower your monthly payments, keep in mind that both a longer term and a higher interest rate will increase the cost of your loan overall.

Whether or not you should refinance also depends on what type of loans you have. Refinancing could be a good idea if you have private loans, but you'll lose benefits if you refinance federal loans. These benefits include:

• Income-driven repayment plans.
• Loan forgiveness programs.
• Deferment and forbearance options.
• Waived interest and payments due to the coronavirus pandemic.

Learn more: Should you refinance your student loans now?

Should you refinance student loans during the coronavirus pandemic?

It's not the best idea to refinance your federal loans now, since interest and payments are currently waived on federal student loans through August 31, 2022; by refinancing your federal loans, you would be required to make payments with interest and lose the ability to take advantage of any future federal relief programs.

However, though payments are not required during this time, it may be smart to use the next few months as a trial period; even if you don't make the payments, set aside your usual loan payment every month to see how it affects your budget. If you find that your current financial situation does not support your federal student loan payments, you can reevaluate whether to refinance once payments start again in September.

If you have private student loans, there is little downside to refinancing if you can qualify for a lower rate. Interest rates are currently at record lows, and they're likely to only rise from here as the economy starts to recover – so locking in a fixed rate now could be a good option.

Learn more: Should you refinance your student loans during the COVID-19 pandemic?

Pros and cons of refinancing student loans

Before choosing a lender, consider whether refinancing your student loans is the best move for your current situation.

How to choose between a fixed-rate and a variable-rate loan

Most private lenders will let you refinance with either a fixed or a variable interest rate. With a fixed rate, your interest rate will never change, meaning your monthly payment will remain consistent. With a variable interest rate, your interest rate can fluctuate month to month based on market conditions.

The choice between a fixed or variable rate comes down mostly to your risk tolerance. If you value predictability in your finances, a fixed rate is a better choice — particularly if rates are low. You do have the chance to save more money with a variable interest rate if interest rates fall, but the inverse is true as well; it's possible that interest rates could rise during your repayment term, costing you more money overall unless you can pay off your loan early.

Learn more: Fixed vs. variable rate student loans

Can I refinance my student loan with bad credit?

It is possible to refinance your loan if you have bad credit, though the process will be more difficult. Most lenders require a credit score in the mid-600s, and even if you do qualify, you'll likely see higher interest rates. If this is the case, refinancing ultimately may not be worth it. Before applying for a student loan refinance, check your credit score to know where you stand and compare that against lenders' listed credit requirements.

How to refinance with bad credit

If you're looking to refinance your student loan with bad credit, keep the following considerations in mind:

• Shop around: Shopping around with at least three lenders is the best way to determine which lender is best for your situation. You'll get higher rates if you have bad credit, but some lenders are more forgiving than others.
• Improve your credit: Where possible, work on improving your credit score before submitting your application. Try to pay off as much debt as possible, pay your bills on time and avoid any other loan or credit card applications prior to applying for your refinance loan.
• Apply with a co-signer: If you have a friend or family member who is willing to co-sign your loan with you, you could get a break on your rate — particularly if that person has excellent credit.
• Improve your cash flow: Lenders check your debt-to-income ratio when considering your application. To have a better chance at qualifying, pay down as much debt as you can before applying or find ways to supplement your income.

What are the requirements to refinance student loans?

Once you find a lender that best suits your financial situation, check the specific refinancing requirements. These can vary from lender to lender, but here are a few general criteria to be aware of:

• Debt-to-income ratio: Your debt-to-income ratio is a measurement of how much debt you've accumulated in comparison to your monthly earnings. You have a better chance of getting approved if your debt-to-income ratio is below 43 percent.
• Credit score: When you apply for any loan, your credit score has a large impact. Check your lender's credit score requirements before applying. If your credit score is in the mid-600s or lower, you may need to add a co-signer to your loan in order to qualify.
• Income: Lenders may impose a minimum income threshold, and they will likely want to see proof of employment — this tells them that you have the cash to make your monthly payments.
• Refinancing amount: You will likely need to have a minimum of $5,000 in student loans outstanding if you'd like to refinance. If you have less than that, most lenders won't work with you.
• Degree: You'll typically need a degree to be eligible for student loan refinancing, though some lenders accept borrowers regardless of degree status.

If the lender you're considering offers a prequalification tool, you can see your estimated rate based on your general financial history with a soft credit inquiry, which won't hurt your credit score.

Learn more: Requirements for student loan refinancing

What is the difference between student loan consolidation and student loan refinancing?

Student loan consolidation is the process of combining federal student loans into one federal Direct Consolidation Loan. This gives you a fixed interest rate based on the weighted average of your current loans' interest rates, and you won't lose federal protections.

Student loan refinancing is the process of taking out a new loan with a different interest rate and different terms to pay off your existing loans. You can refinance both federal and private loans, but the process must be done with a private lender.

Learn more: The difference between student loan refinancing and consolidation

The most valuable college majors

Paying off your student loans can be a challenge if you’re pursuing a career with a low income; according to a Bankrate study of the most valuable college majors, STEM majors top the list as the most valuable in terms of median income, unemployment rate and need for an advanced degree, while arts degrees come in at the bottom:

If your major doesn’t have a high return on investment and you’re struggling to make loan payments, refinancing could help you avoid falling behind. You can use a loan calculator to determine what term length and interest rate would get you the best monthly payment relative to your income.

Next steps

If you've decided that refinancing is the best option for your student loans, take the time to find the best deal. If you have a good credit score, you may be able to find rates as low as 2 or 3 percent, but all lenders weigh eligibility criteria differently. Because of this, it's wise to get prequalified with at least three lenders before moving forward.