How to Choose the Best Refinance Lenders

Written by: Matt Kuncaitis
Updated: 4/07/21

How to Choose the Best Refinance Lenders

Whether you have federal student loans, private student loans, or both, consolidating or refinancing could help you manage your payments and fulfill other financial obligations. For clarity, the process of combining multiple federal student loans is referred to as student loan consolidation. Meanwhile, refinancing is the process of taking out a new loan from a private lender to pay off one or more of your student loan debts.

You can only consolidate federal student loans, and you can’t transfer private student loans to the federal loan program. However, you can combine federal and private student loans into a single loan by refinancing with a private lender.

In this guide, we’ll provide information on choosing the best refinancing lenders to help you navigate the numerous options available.

Why Would I Need to Refinance My Student Loans?

Aside from potentially saving significant money throughout the life of your loans, refinancing could be a smart way to manage your finances. If you have good credit and a stable income, refinancing offers several benefits, such as:

  • Lower interest rates
  • Lower monthly payments with a longer repayment term
  • Paying off student debts faster with a shorter repayment term
  • Ability to combine multiple loans into one monthly bill
  • Removing co-signers from loans
  • Switching to a new loan servicer with better customer service
  • Decreasing your debt-to-income ratio and qualifying for other loans

How Do I Choose a Refinance Lender?

If you’ve been doing some research, you probably know that there are many refinance lenders and loan products. Each loan offer comes with its own terms, conditions, and requirements. In the sections below, we’ll walk you through the process and what you should know about student loan refinancing, which is the focus of this guide.

Check Your Qualifications

If you’re considering refinancing your student loans, the first thing you should check is if you qualify. As mentioned, each lender has its own eligibility requirements. In general, you can qualify if:

    • You pass a credit check. A minimum credit score in the high 600s and a FICO score in the 700s or excellent credit almost guarantees approval.
    • Your debt-to-income (DTI) ratio is low enough. You can be approved for refinancing even if you have low income as long as your total owed amount is relative to your income. Refinance lenders have different DTI ratio requirements but most lenders ask for no more than 30%.
    • You attended an eligible school. Student loan refinance lenders require that you went to a school authorized to receive federal aid money.

You are a U.S. citizen or a permanent resident.

Terms to understand:

  • Credit score: Credit scores range from 300 to 850. Higher scores give potential lenders confidence when evaluating your request for loans. This score helps lenders determine if you qualify for a loan or credit card and at what terms.
  • Credit report: This contains information about your credit activity and current credit situation, such as payment history and the status of your credit accounts. Lenders use this report to decide if they will loan you money and at what interest rates.
  • Debt-to-income ratio: This ratio compares the amount of debt you carry against your overall income. Lenders use it to measure your ability to manage your finances and repay the money you owe. Lenders like to see lower DTI figures because it means the borrower earns more money than they owe, which means they have the ability to pay debts on time.

Understand Variable Loans vs. Fixed Loans

When you take out a new loan or refinance your existing student loans through a private lender, you can generally choose between a fixed or variable interest rate. A variable rate student loan and a fixed rate loan are called such because of how the interest rates are set. Here are the main differences between a fixed loan and a variable loan.

  • With a variable loan, your interest rate fluctuates and so will your monthly payments.
  • With a fixed loan, your interest is the same throughout the life of your loan and your monthly payments are predictable.
  • Variable rate loans tend to have lower starting interest rates than fixed rate loans.
  • Fixed rate loans tend to have higher starting interest rates than variable rate loans.
  • With a variable loan, you could save on interest if the rate doesn’t increase by a lot.
  • With a fixed rate loan, the interest rate doesn’t change, which makes it easier to predict monthly payments.

There are benefits and risks associated with each choice. You just need to figure out which risks you’re willing to take and if the benefits can help you reach your financial goals.

Generally, a fixed rate student loan is the safer choice when interest rates are on the rise, especially if you’re not planning to pay your loans aggressively. However, if interest rates are declining and you’re OK with changing monthly payments, a variable rate loan might be worth considering.

Check the Repayment Terms and Conditions

You should always check the repayment terms when researching refinance lenders. The terms you’ll agree on will impact how much you’ll pay in total interest and how much your monthly payments will be.

Most refinancing lenders offer student loan plans of five, seven, 10, 15, or 20 years, and you typically can’t add years to your terms unless you decide to refinance again. You might also want to pay attention to fees and forbearance conditions before refinancing your student loans with a private lender.

Look for the Best Rate

When looking to refinance student loans, ensure you can get a lower rate than what you currently have, as a higher interest rate negates the purpose of refinancing. If you’re looking to qualify for a lower interest rate, focus on improving your credit by making monthly payments on time and in full and keeping your debt-to-income ratio low.

You should also regularly check the interest rates offered by your current lender and other lenders before making a final decision.

Which Is the Best Refinancing Lender?

There’s a wide array of refinancing companies, banking institutions, credit unions, and online lenders. Below are some of the best student loan lenders, depending on your needs and qualifications.

Note that the interest rates mentioned below include a 0.25% autopay discount.


Earnest is an online lender founded in 2013. The company offers private student loans to current college and graduate students, student loan refinancing to graduates, and Parent PLUS loan refinancing. Aside from offering a wide array of repayment options, Earnest also considers your earning potential when deciding on loan terms and interest rates.

A borrower’s earning potential is based on their degree, credit history, and credit score. This approach is great for new graduates or borrowers who don’t have enough credit history.

Benefits of working with Earnest: With Earnest, you can choose a payment amount that’s within your budget, pick from 180 loan terms, remove a co-signer, increase payments any time to pay off the loan faster, and skip a payment and make it up later.

Interest rates: Variable interest rates starting at 1.99% APR; fixed rates starting at 2.98% APR

Minimum FICO credit score: 650

Better Business Bureau (BBB) rating:A+


The Pentagon Federal Credit Union, more commonly referred to as PenFed, is the second-largest credit union in the country that offers student loan refinancing. It’s a credit union so you’ll need to join, which is a simple process that can be done online. To gain eligibility, you must join via an association membership, employment, or military affiliation — you’ll see the full list of options during the application process. Also, you must make an initial $5 deposit to become a member and open an account.

PenFed allows married couples to refinance their student loans, which is especially helpful because they use the higher credit score to calculate the interest rate.

Benefits of working with PenFed: With PenFed, you don’t pay origination fees, application fees, or prepayment penalties, you may pay in full or partially at any time without incurring prepayment fees, and you can apply for co-signer release after 12 consecutive on-time payments.

Interest rates: Variable rates starting at 2.17% APR; fixed rates as low as 2.99% APR

Minimum FICO credit score: 670

BBB rating:A+

Laurel Road

Laurel Road, which was acquired by KeyBank in 2019, offers graduate student loans and refinancing on a variety of student loans. Their medical school loan refinancing option is available to borrowers who want to refinance their federal and private student loans to have a single payment. Laurel Road also pioneered residency refinancing loans, where medical residents or fellows can qualify for refinancing options before earning a full physician’s salary.

Benefits of working with Laurel Road: With Laurel Road, you can earn up to $400 for every person you refer who refinances their loans. If you’re a medical or dental resident, you can refinance your student loans as soon as you’re matched to a residency program. You can also refinance student loans that are still in a grace or in-school deferment period.

Interest rates:

  Term        Fixed APR       Variable APR

5 years      2.80%—4.80%       1.89%—4.65%

7 years      3.40%—5.10%        3.40%—5.00%

10 years    3.90%—5.40%       3.80%—5.30%

15 years    4.30%—5.45%       4.05%—5.35%

20 years   4.40%—6.00%      4.30%—5.90%

Minimum FICO credit score: 650

BBB rating:A


CommonBondis an online lender that offers both student loan refinancing and private student loans at fairly competitive rates. Its refinancing loans are best for borrowers who graduated with a bachelor’s degree or higher and value repayment flexibility.

Benefits of working with CommonBond: CommonBond offers 24 months of forbearance over the life of the loan with no fees — the longest forbearance time offered by any lender. You can also transfer or refinance your parent’s PLUS loans in your name.

Interest rates: Fixed interest rates at 2.59% to 6.74% APR; variable rates at 2.56% to 6.87% APR; hybrid rates at 2.98% to 6.57% APR

Minimum FICO credit score: 680

BBB rating:B+

Let Help You Find the Best Refinance Lender Offers

Refinancing student loans can be a smart way to manage finances and get a lower interest rate if you have good credit and a steady income. If you’re considering refinancing but are unsure where to start, we can help you learn more about private lenders and explore your loan options.

At, finding the best refinancing options to suit your needs doesn’t have to be complicated. Browse our latest articles and guides for answers to any questions you may have about refinancing.

FAQs: Refinance Lenders

Is It a Good Idea to Refinance?

If you’re eligible, refinancing might be a great way to manage your student loan payments, save money on lower interest rates, and work toward achieving your financial goals. Through refinancing, you can lower your monthly bills if you choose a longer repayment plan. You can also combine multiple loans into a single bill every month.

What Credit Score Do I Need to Refinance?

Most lenders require a credit score of 650 or higher. You may also need to show you have a stable income or an offer of employment.

Is It Cheaper to Refinance With a Current Lender?

Your current lender will want to keep your business, so checking what they have to offer is a great way to start your search when considering refinancing. It might also be an easier process since they already have all of your information. However, you should always shop around for the lowest rates.

Should I Refinance My Loan or Get a New Loan?

Refinancing is essentially taking out a loan to pay off your other loans, hopefully with a better interest rate and loan terms.

What Is the Difference Between Student Loan Refinancing and Student Loan Consolidation?

Student loan refinancing refers to the process of taking out a new loan to pay off one or more student debts. On the other hand, student loan consolidation is the process of combining qualifying federal education loans into a single loan payment through a Direct Consolidation Loan. Borrowers can only consolidate federal student loans, although federal and private student loans can be combined into a single loan through refinancing. Be aware that refinancing your federal student loans means losing access to programs like income-driven repayment and Public Service Loan Forgiveness.