The Benefits of Refinancing Student Loans

Lowering Interest Rates

One of the primary benefits of student loan refinancing is the opportunity to lower your student loan interest rate or adjust the type of interest rate you have. Private lenders offer interest rates based on a variety of lending criteria such as credit score, credit history, and income.

If you have good credit and stable income, you could qualify for a lower interest rate by refinancing your student loans. When refinancing, you also have the opportunity to choose between a fixed or variable rate loan. Learn about the difference between fixed vs variable interest rate student loan refinancing.

Consolidating Loans Into One Monthly Payment

Another benefit of refinancing is that it gives you the ability to consolidate your student loans into one simple monthly payment. Consolidating multiple student loans through a private lender like ELFI can help streamline the payment process and save borrowers money if they can reduce their interest rates or choose alternate loan terms.

While the federal government does offer student loan consolidation through the Direct Loan Consolidation program, this program rounds up your weighted average interest rate to the nearest one-eighth percent. Because of this, student loan consolidation and refinancing through a private lender can be considered more beneficial. Learn about student loan consolidation vs. refinancing.

Beyond the financial savings, refinancing is worth it for the peace of mind and simplicity of one monthly student loan payment. Going forward, you’ll have just one loan servicer and one monthly payment to remember.

Adjusting Your Loan Terms

When you refinance your student loans, you can choose a different repayment term that matches your goals. You could choose a loan term of 5, 7, 10, 15, or even 20 years. Choosing a longer repayment term may reduce your monthly payments, while a shorter repayment term may help you pay off your debt faster and save you money in interest over your loan term. For instance, if a borrower has already paid five years of a ten-year repayment term, he or she may be able to refinance the outstanding amount to ten or fifteen more years, thereby lowering their monthly payment amount.

Refinancing your student loans and paying a lower monthly payment could decrease your debt-to-income ratio which may make it easier to qualify for a mortgage or other large purchase. Borrowers should, however, avoid the temptation to extend the term too much, as longer terms generally increase the overall cost of the loan.

See how much you could save by refinancing with ELFI with our student loan refinancing calculator. Keep in mind that shorter repayment terms are typically associated with lower interest rates and longer repayment terms are typically associated with higher interest rates.  Learn how you can weigh your options by choosing the right student loan repayment terms.

Benefits of Adding or Removing a Cosigner

By refinancing your student loans, you have the opportunity to remove any cosigners on your original loans, including removing parent cosigners from student loan agreements. This can be beneficial if you no longer need a cosigner on the loan. Parent PLUS Loans are also eligible for refinancing, allowing parents to relieve their burden of debt.

Conversely, if you have a limited credit history or your income is insufficient to qualify for refinancing, adding a qualified cosigner who is willing to guarantee your loan could increase your chances of qualifying to refinance. Even if you already qualify, adding a more qualified cosigner could help you earn a lower interest rate.  Learn more about refinancing with a cosigner.

Transferring Parent PLUS Loans

In order to pay for their children to go to college, some parents will get a Parent PLUS loan to cover the cost. It’s important to note that there is no direct process to transfer Parent PLUS Loans to your child, but you can refinance them to your child. Refinancing Parent PLUS Loans may also offer you the opportunity to consolidate other debt associated with financing your child’s education. If you have Parent PLUS Loans and have also cosigned private student loans for your child, your Parent PLUS Loans and their private student loans that you cosigned can be consolidated together by refinancing with a private lender like ELFI.

Gain a Financial Advocate

Just as in any industry, the level of customer service among banks and lenders varies from one company to another. When considering refinancing with any lending institution, borrowers should research and compare each lending institution’s ability to help customers with any issues regarding their student loan refinancing package. In order to maintain a happy, working relationship, borrowers should talk to the company itself and look for customer reviews that describe the company as one that works for the client, is informative, hard-working, dependable, friendly, and flexible. The personal loan advisors at Education Loan Finance specialize in student loans, and we provide our borrowers with information so they can determine the best solution for their budgets.

Getting A Quote Without Hurting Your Credit Score

Another benefit of refinancing student loans is the ability to receive an estimated rate without affecting your credit score, which eliminates the risk of prequalifying. Getting a rate quote from student loan refinancing lenders like ELFI allows you to prequalify in minutes with only a soft credit check, which does not affect your credit score. This way, you can find out how much you can save before submitting a full application and receiving a hard credit check.