Student Loan Refinance Guide
By refinancing, borrowers have the option to change the term (the length of time it takes to repay) on their loan. They can shorten the term, which allows borrowers to pay off debt faster. Extending the term, or lengthening the amount of time it takes to pay off a loan, can help make monthly payments more manageable, although the total interest paid over the life of the loan might be more.
Cosigners can benefit with refinancing too. A little-known advantage to refinancing is that it allows qualifying students to obtain a loan without a cosigner, taking the cosigner off the hook so the student can repay their loan on their own.
Educating yourself about the pros/cons of refinancing along with careful consideration of the current rates and terms on your current loan(s) will help you make a decision about refinancing that works for you and your financial situation.
Today, 43.5 million Americans have student loans. By the end of 2021, total student loans in the United States topped $1.6 trillion, an increase of more than $600 Billion over the last decade. The average student loan borrower has $39,489 in student loan debt. Not surprisingly, Generation X and Millennial age groups had the most debt with average balances around $46,000. 15
In most cases, student debt is manageable and borrowers earn enough money after graduation to successfully make their loan payments. However, some borrowers find that student loan debt presents obstacles to achieving life goals after graduation. And, even when payments are manageable, smart borrowers are always looking for ways to fit loan repayment into their overall budget. This is where refinancing can help.
There is good news. Refinancing your student loans might help. Many many borrowers can still lower their interest rate on their student loans by refinancing student debt. It depends on what the weighted average interest rate is on their current loan(s).
In This Guide:
What Is Refinancing?
When you refinance government student loans or private loans, 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
- 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, and other programs, 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 private student loans, 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 private or direct loans 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. In addition, Federal Direct Loans may offer other programs, such as loan forgiveness programs. These options and programs may be available to you through your current lender and will be lost if you refinance your existing loans. Therefore, if you believe you may want to take advantage of these special repayment options and other programs, refinancing may not be right for you. To learn more about the existing federal programs and options on Federal Loans, please visit https://studentaid.gov/.
Also, forbearance and deferment options may be available with your existing federal loans that are not available with a Brazos private or direct loans refinance program. If you plan to return to school, for instance, your existing federal loan 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 are represented as a percent. The annual interest rate is converted to a periodic rate, typically daily, multiplied by the amount of debt outstanding to calculate the amount of interest that accrues. Payments on your loan are generally applied first to accrued interest, and the remaining amount reduces the amount of principal you owe.
How Much Can You Save?
The amount you can save depends on the term you select and the interest rates at the time you refinance.
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. Therefore, the rate of interest and your monthly payments will be the same throughout the life of the loan. Because fixed rates increase the 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, typically monthly, quarterly, or annually. As rates change, the amount you pay each month will also change. Because the borrower assumes some of the risks of increasing interest rates, lenders tend to charge lower interest rates at the start of variable rate loans compared 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, are above certain amounts, or are part of certain repayment plans.
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.
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 interest rate 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 if you have a good credit score.
Certain repayment options and access to other federal programs 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 will need to pass a credit check to be approved.
|Federal Direct Loan Consolidation
|Brazos Refinance Loan
|United States Department of Education
|Brazos Education Lending Corporation, a Texas nonprofit
|What loans are eligible?
|Federal Loans Only
|Federal and Private Loans
|Can I lower my interest rate?
|Can I save money?
|No, the federal government uses the weighted average of your current interest rates
|Yes, you can save money by lowering your interest rate and/or shortening the term of your loan.
|Is a credit check required?
|Are income-sensitive or graduated repayment plans available?
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.
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 www.studentaid.gov.
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.
When you refinance government student loans or private loans, you can 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.
But, remember, if you think you may be interested in or eligible for any of the forgiveness programs offered through Direct Loan Consolidation, you may save money in the long run if your loans are ultimately forgiven.
Not a Texas Resident?
At Brazos, we are committed to making higher education more affordable. Reach out to us, and we will assist you in finding the best option to refinance government student loans or private loans from other lenders.
What People Say
- Kenn, Brazos Borrower
"Our family has worked hard to build good credit. The team at Brazos made sure we were able to make that effort really pay off. We received a better rate on our two student’s education costs than we could find anywhere. Our advisor was always available and went the extra mile to make a complicated process work for us. Thank you... We will see you again next year!"
- Mitchell, Brazos Borrower
"Great people and service. Always there to help or answer my questions."
- Brad, Brazos Borrower
“I was surprised to find the Federal Parent PLUS Loan charges an origination fee of 4.2% with interest rates in the 7.6% range. Brazos offers lower rates and zero fees. They made it easy to apply and work through the process."
- Alison, Brazos Borrower
"Easy access to communicate with representatives. Prompt responses from all communication as well. Customer service is excellent and feels like a small town local bank. I’ve never felt like just another number."
- Kelley, Brazos Borrower
"Great experience. Super easy. Zero fees and decreases the overall amount I will owe on my student loans. So happy!"
Frequently Asked Questions
When you refinance, you take out a new loan to pay off your old loan(s). You should consider refinancing if your current education loans carry a high interest rate, if you would like to reduce your payments, or if you would like to pay off your debt sooner. Refinancing can save you money over the life of the loan, help you pay off your debt sooner, and/or lower your monthly payment. If you are a college graduate with high-interest rate student loans, you should consider refinancing your student loans.