How much does it cost to refinance a student loan?

Think refinancing your student loans will cost big bucks? Think again. (iStock)

Refinancing your student loans can be a good way to reduce your interest rate, lower your monthly payment, pay off your student debt quicker and save cash in the long run — but how much does it cost to refinance a student loan? Is it worth it? Well, here's some good news.

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A student loan refinance should "save you money, not cost you it," says Anna Serio, a certified loan broker with

If you're considering refinancing, here's everything you need to know about the loan cost and any fees that could potentially be associated with a student loan refinance.

How much does it cost to refinance a student loan?

You can usually refinance your current student loan free of charge.

When you refinance a student loan, you’ll more than likely change lenders. That means Lender A will lose all the interest you’re paying on that loan, while Lender B will gain it.

To learn more about refinancing school loans – and to compare multiple lenders at once to see what kind of refinance rates are currently available – visit Credible now. You can enter your current loan amount and estimated credit score to see what each loan servicer has to offer.


Is there an upfront fee to refinance student loans?

Though there may be a few exceptions here and there, the majority of student loan lenders charge no upfront fees.

In most cases, decades of interest payments and a new client are much more profitable than a few hundred dollars in upfront fees. For these reasons, many lenders forgo these charges in an effort to attract more refinancing customers.

Some lenders will also hide the upfront fees. Instead of asking for charges at the time of application or during the loan’s origination, they’ll roll the extra costs into the loan’s interest rate. This essentially gives you a “no-cost” loan, but with a higher interest rate.

Credible can help you compare prequalified student loan refinancing rates from up to 10 lenders without affecting your credit score. Plus, Credible offers a best rate guarantee.


Other potential costs and penalties to look out for

Though most student loan lenders charge no fees upfront, there may be small application fees with some. You also might also be charged an origination fee after the fact.

“In some rare cases, you might have to pay an origination fee after you agree to the terms of your new loan,” Serio said. “If there is an origination fee, it might be as much as 5% of your loan, which the lender typically adds to your loan balance.”

Once your new loan has been approved, there are other possible charges you could face, too, including late fees (if your payments aren’t on time) or returned payment charges (if a check bounces or if you have insufficient funds). These should all be spelled out in the fine print, so make sure to read carefully when comparing your student loan offers.


How to refinance your student loans

Before moving to refinance, you first have to understand where your loans stand. “Take a look at your current debt to get an idea of how much you need to refinance, your current rates and monthly repayments,” Serio said. “You can use this as a jumping-off point when shopping around for lenders.”

You’ll next need to compare rates and lenders. Rates and terms vary widely from one student loan lender to the next, so be sure to use a tool like Credible, where you can enter simple personal information (such as your credit score and current loan amount) to find your rate.


You should also use a student loan refinance calculator to view your potential payment amounts and ensure the new loan’s payment is within budget.

What documents do you need to refinance student loans?

Is it time to refinance? Once you’ve determined the best deal, then you can apply for the loan. Make sure you have the following documents on hand before you start the loan application:

  • Your driver’s license and Social Security card
  • The most recent statements for your school loans
  • Your two most recent paystubs
  • Your most recent W-2 and tax return

After you’ve submitted your application, it’s just a waiting game. “Continue making repayments with your current loan servicer until you’ve had confirmation that your old account has closed and your new account is opened,” Serio said. “While you can get approved in as little as a day, it could take a few weeks or longer to fully transfer your balance to a new account.”


Pros of a student loan refinance

It probably sounds like a hassle, but refinancing your current loan can come with big benefits, such as:

  • Reduced interest loan rates
  • Lower monthly payments
  • Long-term savings over time
  • A potential new lender

“You might be able to switch to a provider that offers more benefits than your current lender,” Serio added. “For example, some lenders offer free career coaching and financial advice to borrowers. Others might have more flexible repayment plans, like longer terms, the option to defer your loans if you decide to go back to school, or a repayment plan that increases over time.”

Cons of a student loan refinance

There are also some downsides to refinancing, specifically if you're refinancing federal student loans into private loans. Here's what you could lose:

  • Student loan forgiveness program options (Federal student loans come with certain payment and forgiveness plans that private lenders just don’t offer. If you can’t afford the payments on your federal loans, consider a federal consolidation or rehabilitation program first, before opting for a private student loan refi.)
  • A grace period (for federal student loans)
  • Income-driven repayment plans (for federal student loans)
  • Variable interest rates could potentially increase


How to find the best refinance deal

Shop around. Loan rates, fees, and terms are different for every lender.

Use a tool like Credible to compare rates and make sure you’re getting the best deal.

If you have more questions about refinancing (or about your personal finances), visit Credible's website to learn more or reach out to a financial advisor for help.

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