Student Loan Consolidation and Refinancing Companies

Pick from the top 4 student loan consolidation and refinancing companies and decide whether loan consolidation is the right option for you. Also, learn about the services they provide.

Updated by Jason Joy Manoj on 22nd November 2019

Student debt has been on a rise and with this comes the need to manage our debt better. Can the various student loan consolidation and refinancing companies out there help us? let’s find out.

There has been a report stating that 69% of college students took out student loans and they graduated with an average debt of $29,800 including both private and federal loans. Having student debt over your head isn’t fun and what’s worse is that it affects your ability to save for retirement, hinders your qualification for other loans, including a mortgage. You simply can’t erase a debt but what you can do is manage your payments, here are two options that can help you strategically manage your debt -

  1. Loan consolidation
  2. Refinance your loans 

Although consolidation and refinancing are used interchangeably they are quite different. This article will provide an in-depth study of what both of these options have to offer.  

Contents


Student Loan Refinancing Companies 

Below are the top student loan consolidation companies of 2019

  • Earnest

  • Laurel Road

  • SoFi

  • Education Loan Finance

1. Earnest

Earnest is a financing company, founded in the year 2013.

It has funded over $4.5 billion just on student loans alone for over 50,000 borrowers.

Fixed APR Variable APR Loan Terms Eligible Degrees
Co-signer Release
3.48-8.44% 2.47-8.15% 5,7,10,15 or 20 years Undergraduate & Graduate
Yes, after 36 on-time monthly payments

Highlights

  • The rates offered are both fixed and variable rates and the loan term spans within 5 to 15 years

  • The loan amount offered is usually from $5000 for the school-certified cost of attendance

  • Earnest does not charge for any application fee but charges an undisclosed origination fee

  • They provide autopay discounts and options for deferment and forbearance

Reviews

Earnest has more positive reviews than any other servicer

  • Customer Satisfaction for Earnest is based on the speed and flexibility of its operation

  • They provide better rates than other competitors

  • Highly professional and wonderful to do business with

  • Excellent support with friendly staff who are truly helpful

Learn more on Earnest 


2. Laurel Road

Laurel Road is an online-based lender which is a division of KeyBank.

It was formed in the year 2013 and has been refinancing and consolidating student loans ever since.

Borrowers can complete the entire application for loan consolidation online with Laurel Road on their website.

Fixed APR Variable APR Loan Terms Eligible Degrees
Co-signer Release
3.50-7.02% 2.43-6.65% 5,7,10,15 or 20 years Undergraduate & Graduate
Yes, after 36 on-time monthly payments

Highlights

  • The type of loan that can be consolidated are the graduate, resident, fellows, and Parent Loans

  • They offer both fixed and variable rates for a duration ranging from 5 to 20 years

  • Loan amount starts from $5,000

  • There is no application fee but they charge an undisclosed amount as an origination fee

  • Up to 12 months forbearance options are provided in cases of hardship

Reviews

Just like Earnest, Laurel Road has also received an appraisal from thousands of customers, most of which are linked to their customer support and interaction with their customers.

  • The experience is easy, straightforward and amazing

  • Some customers have claimed that the whole experience completely exceeded their expectations

  • The easy nature of the application process has also received much appraisal

  • User-friendly website with great chat support

Learn more on Laurel Road


3. SoFi

Since the establishment of SoFi in 2011, it has consolidated and refinanced student loans for over 250,000 students in the united states, resulting in about $18 billion.

It is one of the few servicers offering student loan consolidation to borrowers with as low as 650 credit score.

Fixed APR Variable APR Loan Terms Eligible Degrees
Co-signer Release
3.49-8.07% 2.43-6.65% 5,7,10,15 or 20 years Undergraduate & Graduate No

Highlights

  • The rate types offered are both fixed and flexible

  • Loan amount starts from $5,000

  • No application fee is charged but origination fees are undisclosed

  • Autopay and other additional SoFi loan discounts are offered

  • Deferment and forbearance options are made available to borrowers

Reviews

Some of the reviews on the services of SoFi from its thousands of customers are:

  • Amazing experience

  • The application process was quick and simple

  • Quick debt relief after consolidating

  • High approval rate

Learn more on SoFi


4. Education Loan Finance

The Education loan finance, popularly known as ElFi among its borrowers, was established back in the year 2015 by the Tennessee based SouthEast Bank for the purpose of assisting borrowers on consolidating and refinancing education loans into a single loan to lower their cost of education.

Fixed APR Variable APR Loan Terms Eligible Degrees
Co-signer Release
3.29-6.69% 2.80-6.01% 5,7,10,15 or 20 years Undergraduate & Graduate
You must apply again without your co-signer

Highlights

  • They provide both fixed and variable loan terms

  • Loan amount starts from $15,000 or higher

  • They do not charge for any application or origination fees

  • Options are available for deferment and forbearance

Reviews

  • Working with ELFI to consolidate my student loans was surprisingly easy

  • They were very friendly and supportive

  • The process was quick and easy

  • Great service and rates

  • Amazing website user interface


Student Loan Consolidation 

When you consolidate your student loans you basically combine multiple federal loans into a single loan. This will reduce the number of payments you have to make each month so it will help manage your payments. 

Consolidation does not reduce the interest you have to pay but it will help manage your payments. Managing a single payment is much less of a hassle than managing multiple payments simultaneously. Upon extension of the loan term, you will be able to lower your monthly payments. And you can still be eligible for benefits such as loan forgiveness programs.

Consolidation and Default

Default on a federal student loan is when you haven’t made a payment in 270 days. You have 3 options to go ahead with - Loan rehabilitation, loan consolidation, repaying the loan in full. If you don’t take any further action the interest payment will start to accumulate and you will no longer be eligible for any federal student aid, repayment, forbearance or deferment. 

Advantages and disadvantages of student loan consolidation

There are potential advantages and disadvantages for student loan consolidation here is an in-depth understanding of both-

Advantages

  • Easier to manage payments when you combine multiple loans into a single loan

  • You can reduce the amount being paid each month by consolidation or even by extending your loan term. Extending the loan term can lead to an increase in interest payments

  • Direct consolidation loans are eligible for several income-driven repayment plans which the original loan is not eligible for

  • The single loan got after the consolidation is applicable for loan forgiveness, however, it should be noted that you can be taxed for the given amount

  • Upon consolidation, you get a fixed interest rate, this lock in a rate helps safeguard any fluctuations in interest rate which can take place in the case of a variable interest rate. 

Disadvantages

  • You can’t consolidate a private loan through Direct Consolidation with the US Department of Education. Since a majority of borrowers do consider private loans to help cover their expenses these loans would not be eligible

  • The ‘pay your high-interest loans off first’ strategy are not applicable. This strategy helps you pay less interest overall

  • If you’ve been making payments towards loan forgiveness before consolidation, those payments won’t count after consolidation and you will have to start making scheduled payments again towards your loan forgiveness

  • If you consolidate a Perkins loan you lose its cancellation and discharge options

  • If you consolidate a Perkins Loan you could lose the subsidized interest benefits.


Student Loan Refinancing

Refinancing is the process where a lender will pay off your current loans and issue a new loan for the total amount you owe. This new loan issued is based on your creditworthiness, you will be able to save money and lower your monthly payments when refinanced with an interest rate reduction. If you refinance a federal loan then you will lose your eligibility for certain federal programs such as income-driven repayment and forgiveness programs.

A number of factors are taken into consideration such as income, debts, employment, and credit. There are a number of companies that offer to refinance your loans, you might wonder which is the best company to go ahead with. There is no definite answer to that but what you can do is compare all the available companies and see which one works best for you, we will get into the companies and what they offer later on in this article. 

Advantages and disadvantages of student loan refinancing

Refinancing may or may not be the best situation for you. While deciding if it best suits your current financial situation it's good to keep in mind the advantages and disadvantages of refinancing your loans.

Advantages

  • Upon refinancing you can get a lower interest rate which can help you save money and you can pay off your loans quicker 

  • You get an option to choose between a fixed or variable interest rate upon refinancing

  • Upon refinancing you can release a co-signer if you qualify for the new loan on your own

  • You can combine private loans and federal loans 

Disadvantages - 

  • Eligibility requirements for refinancing are more stringent as compared to that of direct consolidation

  • In order to qualify you will need a degree from a school that is accredited for the Title IV federal student aid program

  • You will lose the benefits offered by federal programs like loan forgiveness and repayment plans

  • You will lose out on discounts and rebates offered along with the federal loans

  • The repayment terms are up to 30 years which is comparatively longer when compared to federal loan lenders which range between 5 and 20 years

  • The amount of options you have in hand with a private lender is less when compared to that of those associated with federal loans

  • You can default faster with a private lender, when you don't make a payment on a federal loan you generally default after 270 days but with a private lender, you can default if you just miss one payment

Read more student loan refinancing


How to pick the best refinancing company?

As discussed earlier it is important to compare the various refinancing companies, you can compare them on the various basis but here are 4 crucial factors that your comparison should be based on:

1) Rates 

 Your interest rates are of two types, the fixed and variable rates. The fixed interest rate depends on your lender and your eligibility. The variable interest rate is generally offered lower initially but it is subjected to change as per the market conditions. 

A rate check option is also an important decisive factor while considering a refinancing company as some lenders let you prequalify to get rate quotes and estimated terms without hurting your credit.

2) Loan terms and amount

Always lookout for the maximum and minimum amount allowed by the lender, although the maximum amount might not be much of a concern if you are looking to borrow a large amount of money it would be advisable to check the limit offered by the lender. Most refinancers require you to refinance at least $1,000. 

Look out for the loan period offered, a shorter loan period can help you get out of debt sooner with higher monthly payments to be made but a longer loan period can decrease the amount you spend each month.

If you are comfortable with an autopay deduction then you should lookout for a lender who offers the same. Some lenders offer autopay with a 0.25% APR discount.

3) Fees 

There are a number of fees that will come to account while you refinance, the most common one is an origination fee. The refinancer charges a percentage of the amount you refinance. If you make a monthly payment late, you can be charged with a late fee which is about 5% of the monthly payment. 

Additional fees would include those because of insufficient funds in your account and the payment is returned. Or if you close the account without updating your autopay information.

4) Repayment and Hardship options 

Various lenders offer various repayment options but most of them offer interest-based repayment options. Watch out for the deferment and forbearance options provided as they will come in handy if you come across any financial difficulties during repayment of your loans. Usually, deferment is offered for those who go back to school or join the military, begin a residency program, etc.

Lenders may also offer other hardship options such as extending your grace period, offering lower interest rates or monthly payments.


Conclusion

You need to figure out what is the best way to pay back your student loans whether it is through consolidating or refinancing but don’t limit yourself with these options or even with the lenders. The more you research and the more you figure out which is the best method to go-ahead with. Explore other payback options available to you and strategize, one payment at a time.