How to Refinance Student Loans in 7 Steps

Here’s how to refinance student loans, in a nutshell: Find lenders that will offer you an interest rate that’s lower than your current rate. Compare offers. Apply for the loan with the lowest rate.

If you’re approved, the new lender will pay off your existing loans. Going forward, you’ll make monthly payments to the new lender.

Here’s a deeper look at the seven steps that make up how the student loan refinancing process works.

» MORE: Should I refinance? Calculate your savings

1. Decide if refinancing is right for you

Refinancing can make sense if it saves you money, but not everyone should refinance. The decision depends on the type of loans you currently have and whether you can qualify for a rate low enough to knock down your costs.

Do you have federal student loans? If you refinance federal student loans, they'll be ineligible for government programs like student loan forgiveness and income-driven repayment. Don't refinance federal loans unless your income is stable and you're ok giving up these federal repayment and forgiveness programs.

Do you have private student loans? If you have strong credit and income and qualify for a lower rate, then refinancing your private loans has minimal downsides. Private loans aren't eligible for federal repayment or forgiveness programs.

2. Research lenders

At first glance, most student loan refinance lenders are very similar. But look for certain features depending on your situation.

For example: Do you want to refinance parent PLUS loans in your child’s name? Then find a lender that allows it. Didn’t graduate? You'll need a lender that doesn’t require a college degree.

Use the chart below to learn what options you may have for different scenarios.

3. Get multiple rate estimates

Once you identify a few lenders that fit your needs, get rate estimates from all of them. Ultimately, the best refinance lender for you is the one that offers you the lowest rate.

You can compare rates from multiple student loan refinance lenders at once, or visit each lender’s website individually.

As you shop, some lenders will ask you to pre-qualify — supply basic information to give you its best estimate of the rate you might qualify for. Other lenders will show you a rate only after you submit a full application, but that rate is an actual offer.

Pre-qualification involves a soft credit check, which doesn't affect your credit scores. An actual application requires a hard credit check that may briefly lower your credit scores.

4. Choose a lender and loan terms

Once you land on a lender, you have a few more decisions to make: Do you want a fixed or variable interest rate, and how long do you want your repayment period to be?

Fixed interest rates are generally the best option for most borrowers. Fixed rates mean consistent monthly payments, which can be easier to budget for. Variable rates may be lower at first, but they’re subject to change monthly or quarterly.

You may want to consider your financial goals in the decision-making process. If your goal is to save the most money, choose the shortest repayment period you can afford. If your financial goals include lowering monthly payments so you can prioritize other expenses, pick a longer repayment timeline.

5. Complete the application

Even if you pre-qualify, you still need to submit a full application to move forward with a lender. You’ll be asked for more information and supporting documents to verify your loans and financial situation. This may include:

• Loan or payoff verification statements.

• Proof of employment (W-2 form, recent pay stubs, tax returns).

• Proof of residency.

• Proof of graduation.

• Government-issued ID.

Finally, you must agree to let the lender do a hard credit pull to confirm your interest rate. You’ll also have the option to refinance with a co-signer, which could help you qualify for a lower rate.

6. Sign the final documents

If you’re approved, you’ll need to sign final paperwork to accept the loan. A three-day rescission period — during which you can cancel or request changes — begins once you sign the loan’s final disclosure document.

If you’re denied, the lender will let you know the reason why. If it's because you have bad credit, you may be able to qualify by adding a co-signer, or you may need a lower debt-to-income ratio to qualify.

7. Wait for the loan payoff

After the rescission period, your new lender will pay off your existing lender or servicer. Going forward, you’ll make monthly payments to your new refinance lender.