Refinance student loans with a current bank: pros and cons


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Refinancing a student loan is a good option for borrowers looking to get a lower interest rate on their monthly payments.

The big question is, who do you turn to when you decide that refinancing is the next best step for your finances?

For many borrowers, going to the bank in your neighborhood that you have had a relationship with for years may seem the most comfortable option, especially when it comes to a large amount of debt.

Before making that choice, however, there are a handful of pros and cons that student loan borrowers should be aware of when looking to refinance with their current, local, or large bank.

Select spoke with Dan Rooker, Senior Advisor, CFP and Certified Student Loan Professional at Student Loan Planner, about what you should consider.

Benefits of refinancing student loans with your current bank

Your current bank is probably where you opened your first bank account. It could be a large, well-known traditional bank (think Chase, Wells Fargo, Bank of America) that offers all kinds of financial products, from checking and savings accounts to credit cards and mortgages. Or, it could be a small local bank or a credit union that serves only one community.

But beyond a few banks, like PNC Bank and Citizens Bank, most physical banks don’t offer student loan refinancing.

If yours does, Rooker says you can bet on some perks like more personalized customer service, lower fees on late payments, and the ability to get flexible underwriting terms given your relationship. For example, you might be able to get a better loan term when you meet someone face to face and discuss your goals.

Cons of refinancing student loans with your current bank

The biggest downside to refinancing student loans through your current bank is the interest rate they can offer you.

You may have a higher interest rate than an online lender because your local bank has physical branches. These locations involve overhead costs that large banks often pass on to customers in the form of higher interest rates.

“However, if your current bank is an online lender, it can be competitive with the online refinance market when it comes to interest rates and loan terms,” Rooker adds.

Refinance your student loans with an online bank

Online-only banks that offer student loan refinancing won’t have physical locations where you can get service in person, but the low overhead means they can usually offer you a lower interest rate, though. you are eligible. Since the main reason for refinancing is to get a lower interest rate on your student loans, it is worth going online to find a lender.

To guide you, Select analyzed and compared private student loan financing from national banks, credit unions, and online lenders to rank your best options. We have found that many of the best student loan refinancing companies are indeed online. Here are our top picks:

We’ve narrowed down the choices above because they offer low refinance rates, flexible loan terms, no upfront refinancing fees or prepayment penalties, financial hardship protection, and options for investors. co-signers if the direct borrower does not meet the income and / or credit needs to refinance on their own. (Learn more about our methodology below.)

Federal Student Loan Borrowers: Wait To Refinance Now

With federal student loan payments and interest on hold until at least September 2021, federal borrowers should wait until the freeze ends before considering refinancing. If you ever refinance with a private lender, you will lose all of the built-in protections you had from your federal loans, such as income-driven repayment plans, loan cancellation, and defer / forbearance options.

On the other hand, those with private student loans may consider refinancing today before interest rates rise.

Our methodology

To determine which student loan refinancing companies are best for borrowers, Select analyzed and compared private student loan financings from national banks, credit unions, and online lenders. We’ve refined our ranking by only considering those that offer low student loan refinance rates and prequalification tools that don’t hurt your credit.

While the companies we have chosen in this article consistently rank among the most competitive interest rates for refinancing, we also compared each company on the following characteristics:

  • Wide availability: All of the companies on our list refinance both federal and private student loans, and they each offer variable and fixed interest rates.
  • Flexible loan terms: Each company offers a variety of financing options that you can customize based on your monthly budget and how long it takes to pay off your student loan.
  • No creation or registration fees: None of the companies on our list charge borrowers an upfront “set-up fee” for refinancing your loan.
  • No early repayment penalties: The companies on our list do not charge borrowers for prepayment of loans.
  • Simplified application process: We made sure companies offered a fast online application process.
  • Co-signer options: Each company on our list allows a co-signer if the direct borrower does not qualify for refinancing on their own.
  • Automatic payment discounts: All of the companies listed already calculate automatic payment discounts in their advertised rates.
  • Private student loan protections: While you lose the benefits of the federal student loan when you refinance, each company on our list offers some type of protection for borrowers in times of financial difficulty.
  • Loan sizes: The above companies refinance loans in a range of sizes, from $ 5,000 to $ 500,000. Each company advertises their respective loan amounts, and completing a pre-approval process can give you an idea of ​​your interest rate and monthly payment.
  • Credit / eligibility conditions: We took into consideration the minimum credit scores and income levels required if this information was available.
  • Customer service: Each company on our list provides customer service that is available by phone, email, or secure online messaging. We have also opted for lenders who have an online resource center or advice center to help you educate yourself about the student loan refinancing process.

After reviewing the features above, we’ve sorted our recommendations by best for overall refinancing needs, having a co-signer, applying with a fair credit score, refinancing parent loans, and medical school loans.

Note that the rates and fee structures for refinancing private student loans are not guaranteed forever; they are subject to change without notice and they often fluctuate with the Fed rate. Choosing a fixed rate APR when you refinance will ensure that your interest rate and monthly payment will remain consistent throughout the life of the loan.

Your refinance rate depends on your credit rating, income, debt-to-income ratio (DTI), savings, payment history, and overall financial health. To refinance your student loan (s), lenders will conduct a serious credit check and request a full application, which may require proof of income, identity verification, proof of address, etc.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.


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