How to Get The Best Interest Rate When Refinancing Student Loans

If you’re dealing with student loan repayment, you might be thinking about refinancing. There are plenty of reasons to do this—the most prominent being to lower your interest rates. Let’s look at how to get the best interest rate when refinancing student loans. 

What Does It Mean to Refinance Student Loans?

If you have student loans (or most kinds of loans, for that matter), you’ve probably heard of the term “refinancing.” While this might sound like a big, scary thing, when you get down to the nuts and bolts of it, it’s not so intimidating. 

One of the reasons why refinancing is so much better in reality than many think is because it can actually end up saving you a substantial amount of money. When you can potentially reduce how much you’re forced to repay on a loan—and sometimes by a substantial amount—it makes sense to investigate further. 

Refinancing is, in essence, just taking out a new loan in order to replace a current one. While this might sound sketchy or like some kind of risky move, this isn’t the case at all. People refinance their loans all the time. In fact, it’s generally considered a highly prudent financial decision when you’re able to get a much better loan. 

There are generally two main things borrowers will be looking at when they’re thinking about refinancing student loans: interest rates and repayment terms. Some will also want to refinance to add or remove a co-signer from their loan. 

The interest rate of a loan is exactly what the name implies—the ongoing costs you pay for the ability to borrow money, as a percent function of the remaining principle owed on the loan. For federal student loans, these rates currently range between 3.73% for Direct Subsidized and Direct Unsubsidized Undergraduate Loans, up to 6.28% for Direct PLUS Loans. 

For the most part, private loans aren’t going to be able to beat Direct loans for undergraduates in terms of interest rates—though some may offer attractive refinancing opportunities. Refinancing for a better rate is going to make most sense if you have private student loans or federal PLUS loans. Another thing you should know about a student loan refinance when it comes to interest is that while federal loans all come with fixed rates, some private loans offer variable interest rates. While fixed rates won’t change once you refinance your student loans, a variable rate will go up or down based on market conditions. Make sure you understand how this could affect you over the long term before refinancing student loans. 

All else equal, a lower interest rate is always better. This is because higher interest means you’ll end up repaying more additional money over the course of the loan. Cutting down on interest as much as possible can be hugely beneficial to your finances. 

Other Reasons to Refinance Student Loans

The other reasons people typically want to refinance—to change the repayment term or add or subtract a co-signer—are also things you need to think about beforehand. The main reason you might want to change the term on a loan is to make your monthly payment more reasonable by extending the term, or to pay off the loan sooner by shortening it. You’ll want to have a thorough grasp on how this might affect your personal finances before deciding on anything. Furthermore, getting a co-signer can help secure a loan if you don’t have good enough credit or enough income. At the same time, you might want to release a co-signer from your loan during refinancing if you no longer need their assistance. 

That was a lot of information to ingest. While there are lots of features and considerations that are critical to refinancing (we’re not even going to talk about some of the benefits of federal loans, such as income-based repayment, you might not want to forfeit with a refinance), interest rates still rise to the top of the heap. 

How to Get the Best Interest Rate When Refinancing Student Loans

Getting a great interest rate is one of the most essential things to think about when you’re refinancing student loans. Really, what is refinancing worth if you’re not going to get a better interest rate?

Unless you really need to change your loan terms or update co-signer status, there’s not much motivation for refinancing with the prospects of lower rates. This is why consumers need to know how to get the best interest rate when refinancing student loans. 

While it’s possible to eventually land on the best rate by doing your own research, this can be an incredibly long and tiring process. Many will give up before finding the lender that will actually give them the best interest rates for refinancing student loans. One option to overcome this, however, is to work with a company like Juno.

Instead of being a lender themselves, Juno takes bids from a huge assortment of lenders, selects the best ones, and only offers those to their group members. The lenders pay Juno a flat rate regardless of what they’re offering to consumers, which eliminates any potential bias from the decision-making process. This is worthwhile to the lender because it allows them to access a huge group of borrowers at once. In this scenario, you can truly guarantee you’ll be getting the lowest interest rate because Juno will match it if you can find a better one. 

It’s important to note that you’ll need to have a decent credit score in order to qualify for a student loan refinance. For Juno specially, they want to see borrowers have a credit score of 650 or higher—though some lenders will have more or less flexible expectations than this. If you don’t meet the income or credit requirements to refinance your student loans, getting a cosigner is still an option. Just be aware that they’ll be on the hook to pay if you’re not able to meet your liabilities. 

Especially if you have private student loans, or a loan with a high interest rate, there are lots of benefits to refinancing. Taking the time to ensure you get the best rate, however, will take these advantages to a higher level.