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How Much Does It Cost to Refinance Student Loans?

How Much Does It Cost to Refinance Student Loans?
Rebecca Safier

Rebecca Safier

Updated June 8, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
While refinancing a mortgage can cost thousands of dollars, the price tag of refinancing student loans is much lower. In fact, it’s usually free. That’s right, the answer to, “How much does it cost to refinance student loans?” is typically $0. That’s because reputable lenders don’t charge application, origination, or prepayment fees. It may be possible to rack up extra charges if you miss payments or your loans go into default, but you shouldn’t have to pay anything to refinance. 

Does It Cost Money to Refinance Student Loans?

Generally, there’s no cost to refinance student loans. In fact, refinancing your student loans has the potential to save you money, particularly if you can qualify for a lower interest rate than you have now. The average student loan debt in America is high.Let’s say, for example, that you owe $30,000 at an 8.0% rate. Over 10 years, you’d pay a total of $13,678 in interest charges on top of the amount you originally borrowed. But if you can qualify for a 4.0% rate through refinancing, you’d reduce those interest charges to $6,448 over 10 years. To qualify for the best student loan refinancing rates, you (or your cosigner) will need to have strong credit. Most lenders look for good or excellent credit to approve you for refinancing and offer the lowest student loan refi rates. But as mentioned, most reputable banks, credit unions, and online lenders don’t charge origination or application fees to refinance. As a result, your cost to refinance your student loans with a new lender should be $0. 

Possible Fees to Refinance Student Loans

Although most reputable lenders don’t charge origination or application fees, you might find some lenders that do. If this is the case, consider widening your search for a lender that doesn’t charge these fees. Here are some potential fees to look out for and, hopefully, avoid. 

Origination Fees

You might come across origination fees when you’re researching student loans. An origination fee is the cost to lend the money and is typically expressed as a percentage of the loan amount. Direct subsidized and unsubsidized student loans, for example, come with an origination fee of 1.057%. PLUS loans also have an origination fee of 4.228% that’s subtracted from your loan proceeds. Most refinancing lenders, however, don’t charge origination fees or any other hidden costs of refinancing.  

Application Fees

Another fee to keep an eye out for is an application fee. Some lenders charge this fee to process your application for a loan. Again, application fees for student loan refinancing are rare, so if you come across one, consider applying with a lender that doesn’t charge you to apply. 

Prepayment Penalties

Both the federal government and private lenders typically don’t charge prepayment penalties on student loans. In other words, you’re allowed to make extra payments and pay off your loan ahead of schedule without racking up any fees. If you come across a lender that does charge prepayment penalties, that’s probably not a lender you want to work with. 

Late Fees

Although you can typically avoid origination, application, and prepayment fees when refinancing your student loans, it’s not uncommon for lenders to charge a fee for late payments. Not only can late payments lead to fees, but you run the risk of hurting your credit and letting your loans go into default. To avoid late payments on your loans, consider setting up autopay (this can also score you a 0.25% interest rate discount). If you’re struggling to afford payments, reach out to your lender before you miss a payment to see if it can help. 

Refinancing Student Loans to a Lower Interest Rate

Refinancing student loans is typically a free process that has the potential to lead to a lower interest rate. If you have strong credit, you could get a better interest rate than what you have currently. By lowering your interest rate, you can reduce the amount of interest you pay over the life of your loan. A lower interest rate can also decrease your monthly payment. In the example mentioned, refinancing a 10-year, $30,000 loan from an 8.0% rate to a 4.0% rate could reduce your monthly payment from $364 to $304. The benefits of refinancing don’t end there. This process also lets you choose new terms for paying off your student loans. You might choose a relatively short term of five years to pay off your debt faster, for instance, or a longer term of 20 years to make your monthly bills more affordable. Before opting for a long term, however, note that doing so could increase your interest charges. The longer you’re in debt, the more time your loans have to accrue interest. As you’re comparing loan offers, consider using a student loan refinancing calculator to estimate both your monthly and long-term costs. 

Is It Worth It to Refinance?

The answer to whether it’s worth refinancing student loans is different for everyone. It all depends on your individual circumstances. If you have high interest rates on your student loans, refinancing could be worth it, especially if you can make a move before interest rates rise. If you qualify for lower student loan refi rates, your debt could then become more affordable. And if you want to choose new terms or switch to a new lender, refinancing also offers a way to do this. Plus, there’s typically no cost to refinance your student loans, as long as you don’t miss payments or default on your loans. On the flip side, refinancing might not be worth it if you can’t qualify for a lower interest rate than you have now. It might also not be the right move to refinance federal loans if you want to retain access to federal benefits such as loan forgiveness. When you refinance federal student loans, they become ineligible for federal repayment plans, such as income-driven repayment, and forgiveness programs, such as Public Service Loan Forgiveness. If you want to access any federal programs now or in the future, it wouldn’t be a good idea to refinance your federal loans with a private lender. 

Refinance Your Student Loans With Lantern

Before you figure out how to refinance your student loans, it’s important to review both the pros and cons. Borrowers with high-interest loans might find the process to be highly beneficial, while federal loan borrowers might not want to privatize their debt. If you’re worried about the cost of refinancing, however, rest assured that student loan refinance typically doesn’t cost a thing. Most trustworthy refinancing lenders don’t charge you an origination fee, application fee, prepayment penalty, or any other refinancing fee. Plus, these lenders are often competing for your business, so shopping around will help you find the lowest rates. Lantern by SoFi can help you find and compare student loan refinance rates. 
Photo credit: iStock/LumiNola
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.LCSL0422015

Frequently Asked Questions

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About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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