9 Best Banks to Refinance Student Loans

When you refinance student loans, you transfer your existing federal and private student loans to a new private lender for the purpose of lowering your interest rate, lowering your monthly payment or consolidating your loans (or sometimes for all three reasons).

This post explains how to find the best student loan refinancing deal and answers all questions related to student loan refinancing.

In the above list, I’ve highlighted the top three lenders based on the fact that they frequently offer the best deals (i.e. lowest interest rates) to the lawyers who read this site. Those readers refinance and consolidate millions of dollars of student loans through the site each month, so you’ll be in good company if you also decide to refinance your student loans.

Biglaw Investor deliberately generates less money from our refinancing referral links to get you a significant cashback bonus on top of the better interest rates you’ll also see when you refinance your student loans through the site.

Student loan refinancing during the Covid-19 pandemic

On March 13th, the president suspended student loan interest for federal loans. Later that month, the president signed the CARES Act into law which suspends all interest and student loan payments on federal loans through September 30th, 2020. The president has since extended the executive order to suspent all interest and student loan payments on federal loans through January 1, 2021.

The deferment of interest and payments does not apply to private loans, including loans that you have already refinanced.

During the federal loan suspension period, if you have federal student loans and are considering refinancing, it’s hard to make an argument for doing so since you are currently paying 0% interest. If it were me, I would keep my loans in the federal system and make the most aggressive payments I could on my loans during this time to pay down as much principal as possible. I would again explore the refinancing market in early December (assuming the 0% interest and $0 payments ends on January 1, 2021).

If you have private loans, during the coronavirus crisis it’s still a good idea to continue to check the offered rates to see if you can get a lower interest rate than you are current paying. Given the market instability, there is no right or wrong time to check your rates but instead I’d be looking at them fairly often because we’ve seen wild swings from one day to another.

How to compare the best student loan refinancing companies

Most people only check their rates with two companies or less. Because each student loan company has a different way of accessing capital in the market, you really need to explore your options to see what will get you the best rate.

Generally there are three types of student loan refinancing companies. Some companies, like Earnest and CommonBond offer refinancing by selling commercial paper in the credit markets. Others, like First Republic, Laurel Road and ELFI are backed by depository banks. The last type, such as Credible and LendKey, act as a marketplace of lenders and give you rate quotes from banks that you probably wouldn’t check on your own.

Finally, like all credit decisions, the rate you are offered depends on your credit score. If you have significantly improved your credit score over the past six months, it’s a good idea to check rates again to see if you can get something better. Since student loan refinancing doesn’t cost anything (other than your time), you should refinance if you can get a lower rate than what you are currently paying.

10 facts about refinancing

Refinancing your student loans is one of the best things you can do when you graduate assuming you aren’t seeking loan forgiveness. Why? You’re paying thousands of dollars of unnecessary interest each year. That interest is keeping you from paying down the student loan balance. And the student loan balance is keeping you from building wealth. So, refinance those loans and start paying them down!

Fact #1: You’ll save a ton of money

Compound interest is a wonderful thing. Compound interest in reverse will kill you. If you’re paying an average 6.8% interest on your student loans, you need $566 a month for every $100,000 you’ve borrowed just to cover the interest alone.

Fact #2: Refinancing is usually quick and easy

When I graduated from law school, nobody refinanced student loans. When the original refinancing players showed up in 2013, there were lots of problems handling applications and processing a deluge of professionals interested in refinancing their loans. Those days are over. You can get a preliminary quote within five minutes. If you have all your loan documents together, it might take you another 15 minutes to submit the application electronically. I recommend you check around with all the different companies (pretty easy once you have your paperwork together) to get the best rate.

Fact #3: You don’t have to refinance all of your loans

Sometimes a lawyer is worried about refinancing everything at the same time. Maybe you have an attractive fixed interest rate on an undergraduate loan? There’s no need to include it in the package that gets refinanced. Maybe you want to dip your toe into the waters but keep some of your loans in the federal program. There’s no requirement to refinance student loans in bulk. Refinance the portion that feels comfortable and keeping moving.

Fact #4: You get better service

There’s a reason the federal government sued Navient in early 2017. The federal student loan servicers have a history of customer complaints. Specifically, the government alleged that Navient “processed payments incorrectly; created obstacles by providing bad information and failed to act when borrowers complained.” Having seen them set such a low threshold, you’re likely to be impressed with a modern web interface, the ability to easily make extra payments and flexible policies. While no company is perfect, the student loan refinancing market is extremely competitive at the moment which means each company has to work hard to win your business.

Fact #5: Consolidation and refinancing aren’t the same thing

Many people mix up these terms. Consolidation is combining all of your loans into one federal loan. Unfortunately (for you), the government averages the interest rates of all of your loans and then rounds them up to the nearest 1/8th%. Refinancing occurs when a private bank or lender repays your federal loans and issues a new loan to you, typically at a much lower interest rate. Refinance. Don’t consolidate.

Fact #6: Refinancing doesn’t eliminate your debt

Refinancing is the first step in beating back the interest rate monster. But don’t get confused into thinking that you’ve actually made progress in paying off your debt. Refinancing student loans is just the first step. While the $12,000 in annual interest kept you from making headway against paying down your federal student loans, it’s the $200,000 of debt that you’re going to have to pay eventually before you can build real wealth. To defeat the $200,000 debt, you’re going to have to make consistent monthly payments and throw any extra one-off “bonus” money that comes your way as you’re making payments toward your student loans.

Fact #7: You can refinance again later

If you’re just starting your career, you might not get the best rate due to your credit score and debt-to-income ratio. Or maybe you’ve paid off half your loan and are now convinced that a variable rate makes sense for the rest of the payoff. There’s nothing stopping you from refinancing your loans again. You’ll get the bonus money every time you do it and the refinancing companies probably won’t care, since their business model is based on selling your student loans into the bond market. There’s also the possibility that in the future we will see low interest rates (people have been saying for years that interest rates can’t get any lower, but then they do).

Fact #8: Don’t refinance if pursuing student loan forgiveness

Refinancing is not right for you if you plan on having your loans forgiven under Public Service Loan Forgiveness (PSLF) by the U.S. Department of Education or any of the income-driven repayment plans (e.g. IBR/PAYE/REPAYE). Forgiveness programs are only available to holders of federal loans. If you refinance, your federal loans are paid off and you now owe a private lender. Don’t refinance if you plan on seeking forgiveness.

Fact #9: Don’t fear the student loan debt monster

Many lawyers are afraid of refinancing their student loans. What are those lawyers really worried about? They’re worried they might not be able to make monthly payments. But if that happens, it’s not like the student loan companies can repossess your brain. Student loans are an unsecured debt. If you stop paying, the student loan companies have limited recourse. They’ll report you to the credit bureaus. But all the credit bureaus can do is lower your credit score. Your credit score is the least of your problems if you can’t make student loan payments. If you’re sure that you’re going to pay off your loans eventually (and forgo seeking forgiveness), then it’s time to refinance the student loans. Paying an extra $7,000 a year in interest so that you can return to REPAYE payments “just in case” is a very expensive insurance policy premium that doesn’t seem worth it to me. Most private lenders offer deferment loans terms and hardship options today anyway.

Fact #10: You get cash back and special service

You’re already going to save tens of thousands of dollars in interest when you refinance. But I’ve got an even better deal for you: extra cash in your pocket. I’ve negotiated a special deal with each of the main refinancing companies so that you get a little extra cash back when you do (and you help support this site). Plus, when you refinance through one of our links you’ll be part of The Biglaw Investor family. It’s hard for a student loan company to ignore a customer that’s literally refinancing millions of dollars in student loans (like us), so if you have questions (or need some extra help), you’ll benefit from being a “big fish”. We have dedicated contacts with each company.

Refinancing law school loans

Law school graduates typically start their career with an enormous amount of law school debt. If you’re looking to avoid this outcome, I’ve listed a bunch of ways to pay for law school. Loan repayment assistance programs (LRAP), scholarships, generous family members and part-time jobs are a few of the ways that law school students have been able to minimize their law school debt while pursuing a legal education.

If you’re a law school graduate who has now entered your repayment period and you’re specifically looking at how to eliminate your law school loans, you have a few options. One is to pursue an income-driven repayment plan, such as income-based repayment (IBR) or REPAYE. Obviously, many conditions apply if you’re pursuing forgiveness of the entire loan amount.

On the other hand, lawyers can often get great student loan refinance rates thanks to having a law degree since your large student loan balance and low risk of default is appealing to student loan refinancing companies that resell the debt in the public markets. The great thing about student loan refinancing is that there are no origination fees or prepayment penalities, so over the life of your loan you’re incentivized to refinance whenever you can get a lower rate (since even small decreases in your student loan interest rate can result in saving thousands of dollars.)

Typically a student loan refinancing company will look at your credit report and credit history in determining the student loan refinance rate they can offer you. You are also usually offered a small discount if you agree to automatic payments deducted from your bank account. In my experience, I’ve seen lawyers get better loan terms if they work in the private sector vs the public sector, but that is mainly a factor of having a higher starting salary if you work in the private sector. Either way, if you are able to lower your interest rate, you student loan repayment term should be shorter (less interest means you’ll pay off your loans faster) as your interest payments will be lower which allows you to reduce your principal balance faster.

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