This week, rates for borrowers using the Credible marketplace to refinance student loans rose for 10-year fixed-rate loans and for five-year variable-rate loans.
For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender during the week of August 21:
Related: Best Student Loan Refinance Lenders
Ten-year fixed-rate loans spiked by 0.07 percentage points, while rates for five-year variable-rate loans rose by more than a full percentage point. In addition to this week’s rate changes, rates for both loan terms are higher than they were this time last year.
10-year fixed-rate refinance loans
Rates averaged 6.87%, up from 6.80% the week before and from 5.44% a year ago. Rates for this term hit their lowest point of 2022 during the week of Jan. 10, when they were at 3.44%.
Fixed interest rates offer consistency for a borrower’s budget. That’s because a fixed rate doesn’t change over time, meaning that your monthly payment amount shouldn’t either.
For refinance loans of the same size and APR, payments on a 10-year term would be lower than monthly dues on a five-year term. However, the longer your term, the more time there is for interest to accrue onto your balance. Still, choosing a 10-year term could be the right option if it’s a fit for your budget.
5-year variable-rate refinance loans
Rates on five-year variable-rate refinance loans averaged 7.54%, up from 6.48% the week before and from 3.63% a year ago. Rates for this term hit their lowest point of 2022 during the week of July 4, when they were at 2.51%.
It might behoove borrowers to select a variable rate, particularly if it’s significantly lower than the fixed rate offered by lenders. The lower your rate, the less interest you pay. With that said, variable rates are riskier than fixed rates because they fluctuate according to market forces, bringing unpredictability to your budget.
Of course, you can lessen the risk that your variable rate will increase if you select a shorter repayment period — such as five years. A shorter term means less time for interest to accumulate on your debt. You just need to be sure that you can afford the higher monthly dues on a five-year term versus a 10- or 15-year term.
Student loan refinancing weekly rate trends
Borrowers with good credit may find a lower rate by refinancing, even if they have federal loans. For the 2023-24 school year, for example, federal student loan rates range from 5.50% to 8.05%. Refinance rates for well-qualified borrowers could be lower.
But because federal loans come with certain benefits, like access to income-driven repayment plans and forgiveness opportunities, you might think twice before refinancing. The process is permanent and irreversible, so once you lose access to those benefits, you can’t get them back.
However, refinancing private loans generally carries less risk and could potentially lower your interest rate or monthly payment. You can use an online tool like Credible’s website to compare options from different private lenders and determine what kind of student loan refinance rates you may qualify for.
Current student loan refinancing rates by FICO score
Interest and payments on federal student loans have been suspended since 2020 to provide relief from the economic impacts of the COVID-19 pandemic. However, the payment pause is scheduled to expire, with interest starting to accrue Sept. 1 and payments due starting in October. There’s little reason to refinance federal student loans while the pause is in effect. But if you have private student loans and can qualify for a lower rate, it may make sense to refinance your education debt.
The interest rate that you qualify for depends on factors like your credit score, the type of loan you’re seeking, and the loan’s repayment term.
Good credit can help you lock in a lower rate, though rates tend to be higher on loans with fixed interest and longer repayment terms. You can request rates from multiple lenders to compare your options, as each lender has its own method of evaluating borrowers. Then, see how much you might save by estimating your monthly payment after refinancing.
You may need to apply with a cosigner if you want to refinance with bad credit, or you can improve your credit before applying.
How rates for student loan refinancing are determined
Many factors determine the interest rates you qualify for, and each lender has a different underwriting process. When determining the rates you qualify for, lenders typically consider:
- Credit score: Generally, the higher your score, the lower your rate.
- Income: Lenders want to be sure you earn enough to afford your payments, and may set minimum income requirements.
- Debt-to-income ratio: This compares your existing debt payments and your monthly income. If too much of your earnings goes towards paying down loans, it may be hard to qualify for refinancing.
- Loan term: Shorter loan terms typically offer lower interest rates.
- Fixed vs. variable rates: Fixed rates remain the same over the life of the loan, while variable rates can fluctuate. Generally, variable rates start lower than fixed ones.
- Larger economic trends: As with other types of lending, student loan refinancing rates are affected by the greater economy. When interest rates are higher across the board, it may be harder to find a low refinance rate.
What is student loan refinancing?
When you refinance student loans, you take out a new loan that’s used to pay off your existing student debts. Doing so may simplify your finances, as you can combine multiple loans into just one. You could also potentially lower your interest rate or reduce your monthly payment.
How to refinance student loans
Refinancing your student loans is a relatively simple process, but some research before you get started could make things even easier. Expect the following steps:
1. Review different lenders
Shopping around can result in big savings when it comes to refinancing. See what rates and terms each lender offers, as well as any extras such as discounts or rewards. You can also read lender reviews to check out each company’s reputation.
2. Prequalify, if possible
Many lenders allow you to prequalify for a refinance loan (without being subject to a hard credit check). To do so, input a few pieces of personal information on the lender’s site. Then, you can review the estimated interest rates and loan terms you may be eligible for.
Prequalifying gives you a better sense of what each lender can offer, helping you compare your options before you actually apply. But even if you prequalify, final loan approval is not guaranteed.
3. Submit an application
Once you’ve narrowed down your list of lenders, you can submit a formal application. This can typically be done on the lender’s website. While each lender’s process is different, you’ll often need to provide:
- Personal details like your name, contact info, and Social Security number
- Employment information, including who you work for and proof of your earnings
- Data about the loans you want to refinance, including the amounts and who currently manages them
The lender will perform a hard credit inquiry at this stage, so it’s wise to only formally apply with a few lenders and in a short period. That will minimize any potential harm to your credit score.
4. Await approval and disbursement
Approval timelines depend on the lender and your application. Some lenders can approve applicants instantly, while others may take several business days to do so. If your application wasn’t complete, the lender may request additional documentation before coming to a decision.
If approved, you’ll sign the final paperwork. Once you’ve completed your part, the refinance lender will work directly with your old lenders to pay off your loans. Continue making your regular payments until your refinance is complete. When you get the go-ahead, you can begin making payments to the new lender.
How to choose the best student loan refinancing company
When comparing different refinancing lenders, it can be difficult to keep all the details straight. Consider creating a spreadsheet or other document where you can track the specifics. When reviewing each company, take note of the:
- Advertised APRs (and what rates you prequalify for, if applicable)
- Loan terms
- Repayment plans
- Potential fees
- Discounts, cashback opportunities, or other rewards
- Hardship programs, if you later have trouble repaying your loans
- Cosigner options, including cosigner release policies
What are the requirements to refinance student loans?
Every lender sets their own requirements, and they’ll weigh many factors when they review your application. But in general, you can expect to need the following before you’re approved:
- Good to excellent credit: You’ll likely need a credit score in the mid- to high-600s or greater.
- Minimum income limits: Many lenders set minimum income requirements to ensure you’ll have enough to repay your loan. These vary widely, but you may need to earn at least $25,000 to $50,000 annually to refinance.
- Low debt-to-income ratio: You may have trouble getting approved if too much of your income goes to your existing debt payments. In general, you’ll likely need a ratio below 50% — but the lower it is, the better.
- U.S. citizenship or permanent residency: A majority of U.S. lenders only work with American citizens or permanent residents.
- A degree: Many lenders require you to have graduated with a degree or similar certification to refinance, though a handful of lenders may only require that you’re no longer enrolled in school.
- A cosigner, if applicable: If you can’t meet the above requirements, adding a well-qualified cosigner to your application can help. Using a cosigner can help you get approved or qualify for lower rates than you would otherwise get on your own.
What credit score do I need to refinance my student loans?
Each lender sets their own criteria when reviewing your credit, and it considers many factors in addition to your score. But in general, you’ll likely need a credit score in the mid- to high-600s or greater to qualify.
Some lenders cater to borrowers with poor credit, but these loans typically come with higher interest rates. If you can’t meet credit requirements on your own, adding a qualified cosigner to your application could help.
Pros and cons of refinancing student loans
Refinancing can have plenty of benefits, but depending on your exact situation, there are some drawbacks to be aware of.
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How do I choose between a fixed-rate and variable-rate loan?
Student refinancing loans often allow you to choose between fixed and variable interest rates. Fixed rates remain the same over the life of the loan, and your interest and payments will never change.
Variable rates, however, fluctuate based on broader economic benchmarks. During times when rates are increasing across all types of lending, your loan’s interest and monthly payment could increase without much warning.
Variable rates can be appealing since they often start out lower than fixed rates. If you plan to repay your loan relatively quickly, variable rates may carry smaller risks. But for longer-term repayment, fixed rates could be the safer bet.
When should you refinance student loans?
There’s no “right” time to refinance — each situation is different. However, you typically must have left school or be in your final year to apply. It might be the right time to refinance if:
- You have good credit and a stable income
- Your credit has significantly improved since you first borrowed student loans
- You can secure a lower rate or better loan term
- You have high variable rates, and want to switch to a fixed rate
- You’re only refinancing private student loans
- You won’t need federal benefits or protections, if you’re refinancing federal loans
How often can you refinance student loans?
There are no rules about how often you can refinance your student loans. In fact, you might refinance with your current lender or switch to a new lender as many times as you qualify to do so. Plus, it’s not costly to refinance again since reputable lenders don’t charge origination or other fees.
Refinancing a second or third time makes sense if you’ve significantly improved your credit score, debt-to-income ratio, or other financial markers that would help you qualify for a lower interest rate or better repayment terms.
Just keep in mind that refinancing multiple times can be unwise in some cases. If you refinance from a 5-year repayment term to a 10-year term, for example, you’ll spend more money on interest, increasing the total cost of your repayment. (You might accept this tradeoff, though, if you need some breathing room in your budget.)
Refinancing to a shorter term, on the other hand, could help you save money on interest costs. That’s because the shortened shelf life of your debt will limit the amount of interest that can accrue.
About Credible
Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options – without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 5,000+ positive Trustpilot reviews and a TrustScore of 4.7/5.