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Student loan refi rates are very low right now ( see the lowest rates you can qualify for here) , and unlike with a mortgage refinance, it usually isn’t costly to refinance your student loans: “Most lenders don’t charge an origination fee or application fee,” says Rebecca Safier, certified student loan counselor and debt expert at Student Loan Hero.
But just because you can technically refinance your student loans when you want, doesn’t mean it’s wise to do it. If you have federal student loans, you may lose the built-in protections — like generous loan repayment and forgiveness options — if you refinance. That said, if you can shorten your loan term or get a better interest rate , it can make sense for many borrowers, no matter their loan type. We asked experts to share the best ways to get the lowest rates on a student loan refinance:
Improve your credit
Lenders typically give the best student loan refinancing rates to borrowers with the highest credit scores, so take steps to improve your credit. “You could work on paying down debts, especially revolving debt like credit card balances,” says Safier. Paying bills on time could help too, as could getting a copy of your credit report and correcting any errors.
Get your finances in order
Aside from your credit score and credit history, lenders will also look at your debt-to-income ratio — which is your monthly debt payments divided by your monthly income — which signals to them how able you would be to make payments each month on the refinanced loan. Most lenders want a DTI that is under 50%, and the lower your DTI, the better. If you want to improve your DTI, look to increase your monthly income or lower your debt levels, if possible.
Apply with a cosigner
A cosigner who has excellent credit and a solid income could help you secure a lower interest rate. That said, should you default on the payments, your cosigner will be responsible for making payments, but the good news is that some lenders eventually let the cosigner off the hook if the primary borrower is able to make on-time payments for a certain amount of time.
Get quotes from 3-5 different lenders
“Getting the best student loan refi is about how qualified you are, but it’s also about how well you shop around,” says Anna Helhoski, student loans expert at NerdWallet. “Many lenders let you pre-qualify online with no impact on your credit score. By shopping around, you can find the best refinancing offer. You might also check with your bank or credit union to see if it first, refinances student loans, and second, offers any special interest rate discounts for banking customers,” says Safier.
Ask how to get more of a discount on your rate
Another consideration is working with a financial services partner that offers rate discounts for things like direct deposit or using other bank services. Indeed, some lenders offer an interest rate reduction of roughly 0.25% for borrowers who opt in to monthly deductions from their bank account. Others offer perks for those who refi with the bank and also have a checking or another account with the bank.
Shorten your loan term
“You can also get the lowest rate with the shortest term, but make sure the trade-off for paying less over the course of the loan with a lower interest rate is a higher monthly payment amount,” says Helhoski.