September 15, 2021

4 Essential Benefits of Refinancing Student Loans

Should you refinance you student loans, and what types of benefits doing so could unlock. Here's everything you need to know

10 min read

Guest Blog by Purefy

Purefy Student Loan Refinancing

@purefy

Student loan debt doesn’t have to hold you back. With student loan refinancing, you have the ability to take control of your student loans and make them easier to manage. Find out how refinancing can help you customize your student loan repayment plan to match your payoff goals – while even saving you money.

Overview of Student Loan Refinancing


A student loan refinance is a type of loan offered by private lenders – such as banks, credit unions, or other financial institutions. When you refinance student loans, you apply for a new loan with the company of your choice for the amount of your existing college debt. You can choose to refinance federal student loans, private student loans, or a combination. And upon approval of your refinance, the lender will pay off your student loan debts and combine them together – leaving you with a single brand- new loan. Going forward, you’ll have just one monthly payment with one company to worry about, and your new loan will feature an updated interest rate and repayment term of your choosing.

Common Situations to Consider Student Loan Refinancing


Depending on your own financial situation and student loan payoff goals, refinancing could be an effective strategy to better manage your debt. Here are some of the most common situations that may make perfect sense for student loan refinancing.


You Want to Save Money


Who doesn’t love saving money? If you have the chance to save extra funds, it’s almost always a good idea. And whether you’re looking to save on total interest costs with a lower rate, or create more room in your monthly budget with a lower student loan bill, refinancing could help with both.


You Want to Pay Off Debt Faster

You may want to wave goodbye to your student loans and leave them in the dust – as soon as possible. If that’s the case, refinancing provides customizable repayment
terms – sometimes as short as 5 years – allowing you to pay off debt on your schedule. Paying off student loans more quickly can also be a great way to save the
most money possible on total lifetime interest.


You Have Too Many Student Loans


Some people need to take out a variety of student loans to fund their education. That could include multiple federal student loans and private student loans – all with
different lenders. If you’re feeling overwhelmed with the number of monthly bills and payments you have to keep track of, refinancing can simplify your finances.


You Have Federal Student Loans and Don’t Qualify for Alternative Repayment Plans


The U.S. Department of Education offers a variety of repayment plans for federal student loans including Public Service Loan Forgiveness, Income-Driven Repayment
(IDR) plans, and forbearance and deferment programs. If you have federal loans, you may be interested in the eye-catching benefits of some of these plans including
forgiveness and low monthly payments. However, each of these options has strict eligibility requirements such as where you work or how much you make. If you have looked into these plans and can’t qualify, refinancing could be a smart alternative to accomplish many of the same financial goals.


You Have Private Student Loans and Feel Stuck


Unlike federal student loans, private student loans don’t usually feature many repayment alternatives. That’s because they’re owned by individual financial institutions rather than the federal government. Typically, private student loan borrowers may be trapped with the original interest rate and repayment length they qualified for when the loans were first taken out. Sometimes, based on financial need or other special circumstances, private lenders may offer some repayment options such as deferment – but it’s usually lender and borrower dependent. If you feel stuck with an old interest rate and term, refinancing could be a way to customize your student loan repayment to be a better fit for your current needs

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4 Great Reasons to Refinance Student Loans


Why bother refinancing student loans? If you fit into one (or multiple) of the situations above, you may be interested in pursuing a refinance to take advantage of these key benefits.


1. Get a Lower Rate

If you have good credit and steady income, you could qualify for a much lower rate and save money. A decreased rate means you could save thousands on total interest accrued over the course of paying back your student debt. Alternatively, if your credit isn’t in the best shape, you can apply with a creditworthy cosigner – such as a parent, relative, or close friend – to increase your odds of being eligible for the best rates and biggest savings.


2. Lower Your Monthly Payment


Student loan refinancing allows you to extend your term which can dramatically lower your monthly bills. For example, some lenders offer terms as long as 20 years.
It’ll take more time to pay off your student loans completely, but a longer term can be just what you need to have lower payments and more wiggle room in your budget – especially if money is tight.


3. Shorten Your Repayment Term


With refinancing, you can also choose to shorten your term. A decreased term lets you pay off your student loan debt much more quickly, and by ditching debt sooner, you can free up your finances for other goals while saving on total interest costs.


4. Consolidate Your Student Loans


Refinancing combines and simplifies all your student loans into one through a single loan servicer. Having just one student loan provides peace of mind with less bills to
keep track of, so you can easily stay on top of making on-time payments.

How to Qualify for Student Loan Refinancing


There are many excellent benefits of student loan refinancing, but it’s important to keep in mind that refinancing lenders often have stringent eligibility requirements. To qualify for a refinance and get the best rates, you’ll often need good to excellent credit, solid income, and a low debt-to-income ratio. However, if you can’t qualify on your own, there’s good news. You can always decide to apply with a cosigner who has strong credit. It’s a simple process to add a cosigner to a refinance, and a cosigner could make a big difference in the rates you’re offered.

Compare Your Student Loan Rates in Minutes With Purefy

Purefy makes it quick and easy to see if you qualify for a refinance and your rate offers from a variety of the nation’s top-rated lenders. Simply fill out some basic information about your student loans – taking less than 2 minutes – and view your best rates from Purefy’s lending partners including SoFi, Earnest, PenFed Credit Union, and more. It’s easy to customize your refinance to fit your needs and select your favorite combination of rate and term. From there, you can complete your refinance
application in under 15 minutes. Compare your prequalified student loan refinance rates today with no impact on credit, zero fees, and no obligations.

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