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Student Loan Refinance Guide

BEFORE YOU CONTINUE READING: The information in this Guide, as it relates to Government-Owned Loans, such as the Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Parent Plus Loans and Direct Consolidation Loans, is valid only under normal circumstances. There are special benefits being applied on Government-Owned Loans during these trying times that are not permanent but are being applied for an indefinite period of time. As well, there are proposals for federal student loan forgiveness that have a likelihood of passing, that are not reflected in this Guide. Please click here to review information on these special programs and take them into consideration when deciding if a private refinance loan is right for you.

An Alternative to Expensive Student Debt

Today, a record 44.2 million Americans have student loans.1 And in 2016, total student loan debt in the United States topped $1.4 trillion, almost three times the amount outstanding just a decade ago.2 The average student loan borrower has $30,1003 in student loan debt. Graduate students borrow an average $57,0004, and students receiving professional degrees such as law or medical borrow even more. As many college graduates have realized, student loan debt can present a major obstacle to pursuing the dreams a college education promised to deliver in the first place.

There is good news. Refinancing your student loans can help. A recent study estimates as many as 8 million Americans could lower the interest rates on their student loans5. That’s almost one out of every five student loan borrowers!

In This Guide:

What is Refinancing?

Why Refinance?

Before You Refinance

Lowering Your Interest Rate Can Mean Big Savings

Variable vs. Fixed Rates

Refinancing Can Help You Pay Off Debt Sooner

What About Federal Student Loan Consolidation?

What Repayment Options Are Available?

Will I Save Money Either Way?

What is Refinancing?

When you refinance, you will receive a new loan from Brazos. Brazos will then pay off the principal and accrued interest on your current student loan debt. Because you can select from multiple options to configure your new loan, you can customize the new loan to help you meet your financial goals and fit your budget. Refinancing with a lower interest rate can help you achieve your financial goals by:

  • Reducing the total interest you will pay
  • Lowering your monthly payment
  • Allowing you to pay off debt sooner
  • Combining multiple loans into one monthly payment

Why Refinance?

Refinancing with a lower interest rate can help you achieve your financial goals by:

  • Reducing the total interest you will pay
  • Allowing you to pay off your debt sooner
  • Lowering your monthly payment
  • Combining multiple loans into one monthly payment

Before You Refinance...

To determine if refinancing your student loan is right for you, there are a few things you’ll need to keep in mind as you explore your options.

  • How your credit score impacts your rate
  • Repayment options available on your current loans
  • Details of your existing loan or loans

How Your Credit Impacts Your Rate

Before you go shopping for a loan, it’s important to understand your credit profile. Brazos Refinance Loans are a private student loan and your rate will depend on your credit. For refinance loans, the better your credit, the lower the interest rate you will qualify for, reducing your payment and saving you interest. Understanding your credit history and rough FICO score can help you shop for refinance options more effectively.

Brazos strives to provide transparent pricing. Check out our Rates & Terms to see our loan options, rates, and terms.

What Repayment Options Are Available On Your Current Loans?

Brazos Refinance Loans begin repayment immediately and do not offer repayment options such as graduated repayment schedules or income sensitive repayment options. These options may be available to you through your current lender and will be lost if you refinance your existing loans. If you believe you may want to take advantage of these special repayment options, refinancing may not be right for you.

Also, forbearance and deferment options may be available with your existing loans that are not available with a refinance loan. If you plan on going back to school, for instance, your existing loans may allow you to defer payment on the loans until you are no longer enrolled in school, whereas a Brazos Refinance Loan will not have this deferment option.

Details of Your Current Student Loan or Loans

In order to make an informed decision about refinancing your student loans, you’ll need some information about your existing loans.

  • How much do you currently owe?
  • What is your current interest rate?
  • When is your expected payoff date?
  • What is the current payment on your loan or loans?

This information will be necessary in order to calculate and compare total interest and monthly payments on your existing loans to those of refinance loan alternatives. If you don’t have this information, check with your current loan servicer. You should be able to get this information by logging in to their payment website or by referencing a recent billing statement.

Once you have this information gathered, check out our Refinance Calculator to see how a Brazos Refinance Loan can help you meet your financial goals.

Lowering Your Interest Rate Can Mean Big Savings

The term “interest” refers to the price lenders charge to lend money. Generally, interest rates are quoted on an annual basis and represented as a percent. The annual rate is converted to a periodic rate, typically daily, and is multiplied by the amount of debt outstanding to calculate the amount of interest that accrues. Payments on your loan are generally applied first to interest that has accrued, and the remaining amount reduces the amount of principal you owe.

How Much Can You Save?

Take a look at the example below, which compares several different types of student loans with a Brazos Refinance Loan.

Student Loan Cost Comparison Graph

How much can you save? Use our Refinance Calculator to compare your current student loans with a Brazos Refinance Loan.

Variable vs. Fixed Rates

There are two main types of interest rates available: fixed rates and variable rates. Fixed rate loans have a set interest rate that does not change for the life of the loan. The rate of interest and your monthly payments will be the same throughout the life of the loan.

Because fixed rates increase risk for lenders, fixed interest rates tend to be slightly higher than comparable variable rate loans.

Variable rate loans have an interest rate that resets at certain intervals of time, typically monthly, quarterly, or annually. As rates change, the amount you pay each month will also change. Because the borrower assumes some of the risk of increasing interest rates, lenders tend to charge lower interest rates at the start of variable rate loans in comparison to fixed rate loans.

Refinancing Can Help You Pay Off Debt Sooner

Refinancing your student loan debt can also help you pay off your debt sooner, saving you a significant amount of interest.

“Term” refers to the amount of time you have to pay off your student loan. Many federal student loans begin with 10-year terms, though they may be paid back over longer periods if they have been consolidated or if they’re above certain amounts.

Longer term loans help reduce monthly payments by dividing the amount owed into a larger number of payments. But the longer the term, the more time interest accrues on the unpaid amount, meaning you’ll typically pay more over the life of the loan.

Additionally, lenders typically charge higher interest rates for longer term loans because of the increased risk to them.

Because refinancing can lower the interest rate on your student loan debt, you may be able to afford a shorter loan term. By combining the lower rate with the shorter term, you can maximize the amount of savings you’ll realize through refinancing.

Shorter terms generally result in higher monthly payments, even when the interest rate is reduced, but will result in less interest paid over the life of the loan. The savings can be significant.

How Much Can You Save?

Take a look at the example below, which compares the total amount of interest paid for loans with different terms and interest rates.

Student Loan Term Cost Comparison

How much can you save? Use our Refinance Calculator to compare your existing student loans to a Brazos Refinance Loan.

What About Federal Student Loan Consolidation?

The U.S. Department of Education offers borrowers the ability to consolidate existing federally-backed student loans and Direct Loans owned by the federal government into a single loan. Though both consolidating and refinancing can combine existing student loan debt into a single loan, there are some significant differences.

What are the differences?

Direct Loan Consolidation is offered through the federal government, whereas refinance loan options are offered by private lenders such as Brazos.

Only federal loans are eligible for consolidation under the Direct Loan Consolidation program, whereas federal and private education loans are eligible for refinancing through Brazos.

The interest rate on the Direct Consolidation loan is the weighted average of your existing federal loans, regardless of credit history. Because the rate on a Brazos Refinance loan is determined in part by your credit score, you may be eligible for a lower rate.

Certain repayment options may be available through the Direct Loan Consolidation program that are not available through private lenders.

Consolidating under the Direct Loan Consolidation program will not require a credit check, whereas private refinance programs are credit underwritten, meaning you’ll need to pass a credit check to be approved.

Federal Direct Loan Consolidation Brazos Refinance Loan
Lender United States Department of Education Brazos Education Lending Corporation
What loans are eligible? Federal Loans Only Federal and Private Loans
Can I lower my interest rate? No Yes
Can I save money? No Yes, you can save money by lowering your interest rate and/or shortening the term of your loan.
Is a credit check required? No Yes
Are income sensitive or graduated repayment plans available? Yes No

What Repayment Options Are Available?

Repayment on a Brazos Refinance Loan typically begins 30 to 45 days after disbursement. Consolidation loans from the federal government are eligible for additional repayment plans, including graduated repayment plans and income sensitive repayment plans.

Direct Loan Consolidation is offered through the federal government, whereas refinance loan options are offered by private lenders such as Brazos.

If you believe you may need to take advantage of the Income Based Repayment or graduated repayment options offered by the federal government, a Direct Consolidation Loan could make sense.

Additionally, if you have federally-backed loans and are employed in a qualified “public service” position, you may be eligible for loan forgiveness programs not available with a Brazos Refinance Loan.

If you have federal loans, you can learn more about your repayment options and the Public Service Loan Forgiveness Program by visiting Federal Student Aid.6

Will I save money either way?

Not necessarily. Direct Loan consolidation of existing loans at the weighted average rate is not designed to save you money.

Direct Loan consolidation offers the ability to combine loans into one loan with one monthly payment, as well as the ability to extend the term of your loans in certain circumstances. While extending the term on your loans may result in lower monthly payments, you’ll pay more interest over the life of the loan.

Refinancing your student loans allows you to lower the interest rate on your loans, which could help you pay off your loans sooner, meaning you’ll pay less interest over the life of your loan.

Student Loan Refinance Fixed rates from


Including 0.25% Auto-Pay Discount7

See our rates

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1. Federal Reserve Bank of New York Consumer Credit Panel and Equifax, 2016 Student Loan Update;

2. Board of Governors of the Federal Reserve System (US), Student Loans Owned and Securitized, Outstanding [SLOAS], retrieved from FRED, Federal Reserve Bank of St. Louis;

3. The Institute for College Access & Success. (2016). Student Debt and The Class of 2015. Retrieved from

4. Jason Delisle. (2014). The Graduate Student Debt Review. Retrieved from

5. Credible. (2016). 2016 Credible Student Loan Refinancing Report. Retrieved from

6. While refinancing government loans as well as private loans may help many borrowers, federal loans have certain benefits that can help borrowers who experience financial distress. Private loans typically don’t have the same benefits. Everyone’s situation is different, so think carefully about refinancing your government loans and talk about it with a trusted advisor.

7. Brazos Refinance Loan fixed rates from % APR to % APR (with Auto-Pay Discount). Variable rates from % APR to % APR (with Auto-Pay Discount). Interest rates on Brazos loans are capped at 9.90%. Lowest variable rate of % APR assumes current 1 month LIBOR rate of % plus a % margin minus the 0.25% Auto-Pay Discount. Not all borrowers receive the lowest rate. If approved for a Brazos loan, the fixed or variable interest rate offered will depend on your creditworthiness, the term of the loan and other factors, and will be within the ranges of rates listed above. For the Brazos variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases.

Auto-Pay Discount. The interest rate in effect will be reduced by 0.25% if either the borrower or the cosigner authorizes automated (ACH) payments from any bank account. This ACH interest rate reduction, referred to as the Auto-Pay Discount, applies only when full principal and interest payments are automatically drafted from a bank account. This interest rate reduction will not continue to apply during periods of approved forbearance or deferment. The Auto-Pay Discount will terminate if the automatic bank account payments discontinue or there are any three instances of insufficient funds at any time during the term of the loan. A borrower may requalify upon reauthorization of automatic payments from a valid bank account.