In the Press – Wall Street Journal – Should You Refinance Your Student Loans?


More student-loan borrowers can now refinance their loans.

A growing number of lenders are offering to convert borrowers’ existing federal or private student loans into a new loan with a potentially lower interest rate. Marketplace lender Social Finance, better known as SoFi, leads this space with refinances that top $3 billion since 2012. More recent entrants include CommonBond, another marketplace lender, Darien Rowayton Bank and Citizens Financial Group. Personal loan lender Earnest Operations and Navy Federal Credit Union began refinancing student loans this year.

Refinances are slowly rising as a share of new private student loan originations. They accounted for up to 4.4% of private student loan dollars given out during the first three quarters of the 2014-15 academic year, vs. up to 4.1% during the same period in 2013-14 and up to 2.9% a year prior, according to the latest data from MeasureOne, which tracks the student loan industry. Its figures include refinances from Citizens, CommonBond and Darien Rowayton Bank but exclude SoFi and other refinancers.

Borrowers stand to save tens of thousands of dollars. Refinancing makes most sense for borrowers with high credit scores and good jobs. The lenders are seeking creditworthy borrowers—with FICO credit scores generally not lower than around 660, on a scale ranging from 300 to 850—and often times borrowers with high incomes. They shouldn’t have blemishes on their credit reports, like missed loan payments, which would likely disqualify them for a refi.

Borrowers who don’t meet this criteria are generally better off sticking with their existing loans, especially if they are federal loans since they provide more repayment plans for those experiencing financial difficulties. Here’s more on what to consider before refinancing.

Read the full article here 

By Annamaria Andriotis

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