Should You Refinance Your Student Loans?

Student loans now account for 1.4 trillion dollars of U.S. personal debt. Student debt  will follow you for the rest of your life (even through bankruptcy) so it is definitely not something to be taken lightly. The fact that student loan debt can almost never be defaulted on is one of the reasons that students can receive relatively affordable interest rates.

Refinancing has the potential to save you 1000s of dollars: you could get a more affordable rate, a lower monthly payment, or both by refinancing your student loan. This becomes especially possible if you have already graduated and have a stable income.

What Is Refinancing?

Refinancing is essentially trading your old loan for a new one. The most common reasons for refinancing are either to receive a lower interest rate or a lower monthly payment by replacing the loan you have with a longer term loan. Refinancing can be used for almost any type of loan and is most commonly used for longer term loans like mortgages or student loans.

Why Would I Get A Better Rate Now?

While I should clarify that refinancing is not a guarantee, there are a number of reasons why a company would be willing to give you a better deal on a loan in order to earn your business.

  • Improved credit score/ credit history– In the case of undergraduate student loans, many people do not have a credit score when they graduate high school and go to college. If you have built up a solid credit history and credit score companies will likely see you as a lower risk and be happy to give you a better rate.
  • Improved income– One metric that many finance company’s use is called “debt-to-income.” Companyies like to get an idea of your cash flow before they will lend you money. This metric is basically looking at what payments you owe/ have to make each month, and how much money are you making each month. If you become employed or get a raise, then your debt-to-income ratio becomes more favorable. This makes you look less risky and therefore can help you qualify for a better rate.
  • Macro-Environment Changes– Economic policy can have an impact on the interest rates we see as customers. Being in an environment of “cheap money,” such as the one that we are in now, can allow for lower rates on loans.


Refinancing Your Student Loans Can Lead To Big Savings Over Time

Refinancing has the potential to save you thousands of dollars in interest payments over the lifetime of your loan and is worth looking into if you believe that your financial situation has improved since taking out your loan. If you have $100,000 worth of student loans and can drop your interest rate from 8% to 6% then you’ll have saved $2,000 on the first year alone. This could allow you to pay the loans down faster, or have a more manageable monthly payment.


LendKey is the ideal place to refinance your student loans. What most people with student loans don’t realize is that they are a sought after commodity in the finance business. LendKey turns the tables and has the lenders compete over you. After you fill out your information,LendKey will send it to their network of lenders, and return to you with only the companies who are willing to make you the best refinancing offers based on what you are looking for.

Student loans suck, but hopefully after reading this you understand refinancing a bit better as a potential option to reduce that burden. Even if you are just curious check out LendKey. The worst that happens is you find out you already have the best option for you.

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