College debt can drain your finances, especially when you're trying to save up for a down payment on a home or build your retirement nest egg. Student loan refinancing rates are near record lows, which means it may be a good time to refinance your student loans to save money on interest and pay off your debt faster.
Student loan borrowers who refinanced to a shorter-term loan on Credible reduced their interest rate by 2.29% and saved $16,943 over the life of their loans. But you should think carefully before you refinance your federal student loans, as you can lose protections like forbearance and forgiveness by doing so.
Keep reading to learn how to calculate how much you may be able to save on your private student loans by refinancing. If you want to refinance your college debt, visit Credible to compare rates across multiple lenders at once without hurting your credit score.
Current student loan refinancing rates are at record lows
The average student loan balance was $38,792 in 2020, up 9% from just one year prior, according to data from the credit bureau, Experian. These figures are likely much higher if you figure in graduate school debt and medical school debt.
While student loan balances have ballooned, student loan interest rates are much lower than they were years ago. Fixed interest rates on federal student loans, which are set by federal law, were as high as 6.8% in the 2006-08 school years, according to the U.S. Department of Education. Refinancing your federal student loans means you'll lose federal protections, though, so keep that in mind while making any decisions regarding your college debt.
Student loan interest rates have fallen since their peak, but if you attended college in the mid-2000s, you may be able to secure a much lower interest rate on your college debt than you're currently paying. Borrowers with good credit who refinanced to 10-year fixed-rate private student loans on Credible saw interest rates of 3.56% on average during the week of May 17, 2021, setting a record low. Rates on 5-year variable-rate loans averaged 2.95% for the week of May 31, 2021.
The rates table below shows real offered student loan refinancing rates, as low as 1.87%. See what kind of rates you can qualify for on Credible.
How to calculate your potential student loan savings in 3 steps
It's easy to see how much you can save on your private student loan debt. Just follow these three steps:
- Find your current interest rate and remaining loan balance
- Shop around to see the student loan refinance rates you can qualify for
- Enter your information in a student loan refinance calculator
1. Find your current interest rate and remaining loan balance
Get a copy of your most recent student loan billing statement to find your remaining loan amount and interest rate. If you can't find the proper documents, get in touch with your loan servicer (or servicers) for more information.
You can always request a free copy of your credit report from all three credit bureaus on www.AnnualCreditReport.com. You should be able to find a host of financial information related to your student loans, including your remaining balance and the interest rate you're paying, as well as your on-time or delinquent student loan payments.
2. Shop around to see the student loan refinance rates you can qualify for
Many private student loan lenders that offer refinancing let you prequalify for a loan, which means you can check your eligibility and estimated interest rate without negatively affecting your credit. You can do this by researching lenders and prequalifying on their websites.
You can save some time by using an online loan marketplace like Credible, which lets you see student loan refinance rates from multiple lenders at once by filling out a single form.
If you're not happy with your offered interest rate or you don't qualify for refinancing, consider taking some steps to improve your credit before applying. For instance, you could pay off credit card debt to lower your credit utilization rate or check your credit report to dispute any errors.
3. Enter your information in a student loan refinance calculator
An online student loan calculator does all the math for you. All you need to do is gather the information above and plug it in the appropriate box. A calculator can show you how much you'll save over time, as well as your new monthly payment and monthly savings.
For example, a student loan borrower with $40,000 in private student loan debt and a 10-year term could save $5,418 over the life of their loan — and $45 per month — by reducing their interest rate from 6.3% to 4%.
Credible has a user-friendly student loan refinancing calculator that's completely free to use. See how much you can save, and compare offers from top refinancing lenders.
Before you refinance, consider the consequences of losing federal benefits
Refinancing your private student loans to a lower interest rate is typically a good idea, but it may not be the right move if you have federal student loans. That's because federal student loans come with more protections, like income-driven repayment plans, forbearance on student loan payments and potentially even college debt forgiveness.
Weigh the benefits and risks of refinancing student loans before you go forward with such an impactful decision on your finances. And if you want to discuss your options with a professional, visit Credible to get in touch with a loan officer who can answer any questions you have.
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