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The Best Student Loan Refinancing Options

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Student Loans

Published March 11, 2020

Through refinancing, you could save thousands of dollars1 by lowering your rate or paying off your loans quicker with new payment terms. We’ll sort through the top reasons to refinance—to help you figure out what’s right for you.

Laurel Road has saved student borrowers thousands of dollars over the life of their loans through a relatively simple process called refinancing.1 Refinancing with Laurel Road is a great option for those with strong credit. More on that later.

Refinancing can achieve two common goals:

  • Consolidate and standardize your interest rate
  • Increase or decrease your monthly payments to change interest and term length.

Please note: Refinancing to a private loan comes with a couple of risks. For one, you won’t have the option to apply for public service loan forgiveness or participate in income-driven repayment plans (more later), which tie your monthly premiums to your salary. You could also end up paying more in interest, overall, with a private lender.

More about those refinancing options…

  • Consolidate and standardize your interest rate:

    This is perhaps the most common reason that borrowers refinance their student loans. To be clear, whenever a borrower refinances with a private lender, they are also consolidating. A borrower might notice that a private lender is offering a lower rate than federal rates, for those with excellent credit. As a peripheral benefit, consolidation combines a borrower’s multiple loans into a single loan, often making it easier to manage, track, and pay down—especially when this new loan comes with a lower interest rate. Federal loan consolidation, another option to combine multiple loans into a single loan, uses a weighted average interest rate of the loans being consolidated, which in most cases does not save the borrower money in the end (you may be able to save with some of the federal benefits like public service loan forgiveness).

  • Increase or decrease your monthly payments to change interest and term length:

    Another reason to refinance is to change your monthly payment to better meet your financial goals. Shortening your loan term could allow a borrower to pay less total interest on the loan as the debt is paid off faster. If a borrower opts for a shorter term, they’ll have to be able to pay more monthly. However, in comparison to the total interest they would incur over the original loan term, a shorter term may lead to significant savings.

    A borrower might also opt to lower their monthly payments if it becomes necessary for them. This will typically raise the interest on the loans as well as increase the amount of time it takes to pay off the loan. It could be the best option when the borrower’s financial situation requires their money be used for other necessary debts or expenses outside of student loan repayments, such as mortgage or credit card debt.

    Whatever your ultimate decision, refinancing is about choosing the best student loan option for you at that time. We understand that financial situations are fluid, and refinancing gives borrowers the flexibility to react to life’s changes and circumstances.

Income Driven Repayments (IDR) and Public Service Loan Forgiveness (PSLF)

IDR and PSLF may be available to you, and are increasingly popular today for good reason. With student loan debt pushing $1.6 trillion nationwide, more students than ever are seeking solutions that provide relief and sensible repayment plans tied to their earning potential. Be sure to explore both options to see what might be available to you.

How to choose the best student loan refinancing option for you

You can follow a few concrete steps to find the right lender:

  • Evaluate your budget: How much can you allot each month towards paying down student loan debt? This is the first step in determining what to focus on when refinancing.

  • Review your credit score/report: Do you have poor, average, good, or excellent credit? Credit scores could range from 300 to 850 depending on the model. 670 and up is regarded as good, around 740 is generally seen as very good, and 800+, exceptional.2 If your score is in the very good to exceptional range, you will likely get better interest rate options from most lenders. Focusing on who offers the lowest rate based on your score should be something to consider during your search.

  • Research options available to you: Use the web, search aggregators, and check your rate options with various private lenders. With Laurel Road, you can check rates in less than 5 minutes based on your inputs and a soft credit pull (that won’t affect your credit score).3

  • Make your selection: Ultimately, you’ll choose the best rate and best terms for your situation. There are many lenders out there offering great deals in accordance with your individual needs, so be sure to shop around.

Why Laurel Road?

If you are eligible to refinance with Laurel Road we offer several options based around your individual financial situation. We also offer loan terms to suit your repayment needs, and we can help borrowers refinance their Parent Plus loans into their own name, if desired. If you wish to pay off your loan quickly, or stretch it out over a longer amount of time—we can help.

As a leading lender for medical students and residents, Laurel Road also offers some specific benefits to the medical student community, including the ability to recognize non-standard income history. We also offer potential rate discounts and other benefits for members of certain professional associations, such as the American Medical Association and the American Dental Association.

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  1. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  2. Sources: https://www.myfico.com/credit-education/what-is-a-fico-score
  3. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.

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