If you have rate-shopped over the past couple of months, you probably don’t need to do it again this month — there hasn’t been much movement. However, if it has been a while since you looked at refinance rates, things are better now than they have been at any point during the last couple of years.

Important Note: To compile the best refinance rates for November 2024, nearly two dozen national student loan lenders were compared. The lenders listed below were the ones with the lowest verified rates.

The lowest rate listed below includes any available .25% rate discount for borrowers who enroll in autopay.

The Current Lowest Student Loan Refinance Rates for Variable Loans

Rank	Lender	Lowest Rate	Sherpa Review
T-1		4.86%	ELFI Review
T-1		4.86%*	Splash Financial Review
3		5.29%	Laurel Road Review

The headline interest rates now hover around 5% with most of the top lenders. We have seen these rates climb over the past couple of months, and all signs point to them continuing to increase.

It is important to note that even though Splash, Laurel Road, and ELFI have the lowest possible interest rates, they do not necessarily get the top spot in our student loan consolidation and refinance rankings. Borrowers are still best served by applying with 4-5 lenders, as each lender has a different formula for evaluating applications. The best-advertised rates do not always equal the best rate offered, but they do provide a useful starting point.

The Best 20-Year Refinance Rates for November 2024

Rank	Lender	Lowest Rate	Sherpa Review
1		6.08%*	Splash Financial Review
2		6.53%	ELFI Review
3		6.55%	Laurel Road Review

On the other end of the spectrum, the best 20-year fixed-rate loans are currently offered by Splash, Laurel Road, and ELFI. Most other lenders have significantly higher rates and are not included in this table. The lenders at the top of this list look a lot different than the lenders at the top of the 5-year lists. Borrowers should consider whether they want a longer loan prior to putting together an application strategy.

Borrowers who are looking for the lowest possible payment when they refinance usually opt for a 20-year loan. The advantage is an easy monthly payment, but the downside is that it comes with a somewhat higher interest rate.

However, it is worth noting that the gap between the 5-year variable loans and the 20-year fixed-rate loans remains tight. Opting for a substantially lower payment and a slightly higher interest rate could make sense for many borrowers. Locking in a fixed rate also prevents payments from going up in the future.

Sherpa Tip: The interest rate gap between 10, 15, and 20-year loans is especially small right now. Even if you don’t need the lower payment offered by the 20-year loan, it might still be the best choice.

Opting for a lower monthly payment gives you flexibility in the event of any financial hardship. It also frees up cash each month to focus on other goals like buying a house or saving for retirement.

For many borrowers, I think locking in a 20-year fixed-rate loan is the best option currently available.

The Lowest Fixed-Rate Student Loans Available

Rank	Lender	Lowest Rate	Sherpa Review
1		3.95%	Earnest Review
2		3.99%*	Splash Financial Review
3		4.88%	ELFI Review

For borrowers looking for the stability of a fixed-rate loan, but still in search of an ultra-low interest rate, the 5-year fixed-rate loan is usually the best bet.

Surprisingly, with many lenders, the interest rate on a 5-year fixed loan is actually lower than a 5-year variable loan. Typically, we see lower rates on variable loans, but this is a unique interest rate environment.

Other Noteworthy Interest Rate Changes

In the mid-length loans, specifically those at 7, 10, or 15 years in duration, Splash, SoFi, and ELFI perform strongly. However, most borrowers will be best served by either opting for a short 5-year loan at the lowest interest rate possible or choosing a 20-year loan to get the smallest payment possible.

For our overall rankings and lender reviews, be sure to check out our Student Loan Rankings page.

Tips for Getting the Best Rate

For student loan borrowers looking for a lower interest rate, it’s important to keep a few things in mind:

• Shopping around to find the best rate has never been more important. Interest rates are constantly changing, and some lenders are starting to get picky on approvals.
  
• You can always refinance again in the future. Unlike a mortgage where a refinance is time-consuming and costly, refinancing a student loan takes little time and doesn’t involve any transaction costs. If you lock in a fixed-rate loan today, you could always refinance that loan again next year if rates drop. This is the ideal strategy to use when rates are dropping.
  
• When you refinance you are picking a new monthly payment. Two loans at 5.49% are not necessarily the same. If you have 20 years to repay a loan, your monthly payment will be much lower than a 5-year loan. This can free up cash for building an emergency fund, saving for retirement, or buying a house.
  
• Play around with different repayment lengths. With some lenders, the interest rate for a 5-year loan is the same as for a 15-year loan. Lower monthly payments are preferable, even if you want to pay off your debt quickly.

Finally, if you have a variable-rate loan, you can get off the inflation roller-coaster by refinancing into a fixed-rate loan. No matter how much interest rates grow in the future, if you have a fixed-rate loan, your monthly bill won’t change.

The post The Best Student Loan Refinance Rates for November 2024 appeared first on The Student Loan Sherpa.

Ironically, due to an unusual series of events, the group of borrowers who may benefit most from the SAVE plan are not necessarily those in the most financial distress, but rather borrowers who are financially better off and able to repay their loans in full.

SAVE Repayment Plan Background and Litigation

The SAVE plan (Saving on a Valuable Education) was designed to fix some of the biggest complaints about previous federal income-driven repayment (IDR) plans. With SAVE, borrowers could protect a greater portion of their income from their student loan payments, and for those with lower balances or without graduate debt, forgiveness could be achieved sooner.

However, several state attorneys general challenged the legality of the SAVE plan, filing a lawsuit to block its implementation. As a result, a preliminary injunction was issued, preventing borrowers from making payments under the plan for the time being. This block will remain in effect until the litigation is resolved, and the case could drag on for years, potentially going all the way to the Supreme Court.

Despite the legal challenges, the Department of Education has offered some protections to impacted borrowers. Most notably, borrowers who signed up for SAVE are placed in an interest-free forbearance while the litigation is ongoing, meaning they are not accruing interest on their loans during this period.

The Big Winner is Borrowers Who Plan to Repay in Full

While SAVE was intended to help borrowers in financial distress, an unintended consequence of the litigation is that borrowers who are focused on repaying their loans in full may come out as the biggest winners. With the payment and interest pause in place, this situation mirrors the COVID-19 payment freeze, which allowed borrowers to make substantial progress on eliminating their debt without accruing interest.

For borrowers who are already in a strong financial position, this pause represents a unique opportunity. They can continue making voluntary payments, chip away at the principal balance, and ultimately pay less in total interest over the life of the loan.

How to Enroll in SAVE to Get 0% Interest

Despite the ongoing litigation, borrowers can still enroll in the SAVE plan, and by doing so, they will receive the 0% interest benefit. The enrollment process is once again available by signing up at studentaid.gov.

Unlike other IDR plans, there is no income cap for SAVE enrollment. Borrowers in any tax bracket can sign up for SAVE and take advantage of the interest relief.

Once enrolled, borrowers are placed in a special forbearance status, meaning that although they are not required to make payments, interest will not accrue on their loans either. This creates a window to plan your repayment strategy without the burden of growing debt.

Maximizing the Benefit

Borrowers looking to make the most out of this situation should consider taking an active approach to managing their loans. One of the smartest moves is to set aside the money you would have used for student loan payments into a high-yield savings account.

By doing this, you gain two key advantages. First, instead of paying interest on your student loans, you can earn interest on your savings. This allows you to turn the payment pause into a financial gain. Second, it gives you flexibility. If you encounter a financial emergency down the road, such as a car repair or unexpected medical expenses, the funds in your savings account will be readily available. In contrast, once a payment is made toward your student loan, that money is no longer accessible.

When the litigation finally ends and payments resume, you can use the money saved to make a lump-sum payment, potentially knocking out a significant portion of your balance or eliminating it entirely. Likewise, you can switch into a more appropriate repayment plan if the new SAVE payments end up being too high.

Final Thoughts

The ongoing SAVE litigation has created a unique opportunity for borrowers to improve their financial standing. Whether you’re aiming for debt elimination or just trying to get through the legal uncertainty, there are strategies you can implement to make the most of this situation.

For borrowers looking to pay off their loans in full, this is a prime opportunity to reduce your balance without accruing interest. By enrolling in SAVE, taking advantage of the interest pause, and using smart savings strategies, you can turn a period of uncertainty into a period of financial gain.

The post SAVE Plan Litigation: Why Higher-Income Borrowers Are The Big Winners appeared first on The Student Loan Sherpa.

Obtaining lower interest rates can save you hundreds or even thousands of dollars on your student loans.

Sign Up for Auto-Debit or Monthly Automatic Withdrawal

This route is the low-hanging fruit.

Signing up for automated payments saves .25% interest with pretty much every student loan company. Some lenders even offer a .50% reduction if you open a checking account. Saving a fraction of a percent in interest may not seem like much, but it can add up. For example, if you have $40,000 in student loans, that quarter percent savings is worth $100 per year. Not exactly huge savings, but a decent reward for minimal effort.

Even though this is an easy move that every borrower can make, we don’t recommend it for everyone. There are a couple of circumstances where it is best to stick with manual payments.

You can’t trust your lender – The automatic payments give your lender the green light to take money out of your checking account. Unfortunately, there is an element of danger here. This is especially true if your monthly payments might change, such as being on a variable-rate repayment plan. Taking out a fixed amount each month is one thing, but if there is a chance your lender takes out more than what you planned for, be cautious. Once your lender removes that money, it is hard to get back.

You can’t trust yourself – Smart student loan repayment is all about paying extra when you can and targeting high-interest student loans. The savings from this approach will far exceed the potential savings from a .25% interest rate reduction. If signing up for automated payments will cause you to be lazy when making extra payments, stick to manual payments. Lenders maximize profits when borrowers pay the minimum each month over the life of the loan. Don’t let a slight interest rate reduction bait you into maximizing your lender’s income.

Lender Rate Reduction Programs

Lenders seldom advertise or publicize interest rate reduction programs, but they do exist. Private lenders created these programs to help borrowers who had fallen behind on their debt. It is typically available only to those with an income insufficient to keep up with payments. A rate reduction program is rarely a term of the loan contract. As a result, lenders can change the requirements whenever they want.

The nice thing about rate reduction programs is that they can help. Lenders usually give most borrowers who cannot make a monthly payment the option of forbearance or deferment. Delaying payments is typically good for the lender and bad for the borrower, however. The balance on the account will grow due to unpaid interest. Once the deferment or forbearance ends, the borrower has a bigger student loan problem. Continuing to make payments with a lower interest rate allows a borrower to put a dent in the principal balance.

Perhaps the most notable rate reduction program is with Sallie Mae/Navient. Over the years, they have changed the requirements and tweaked terms several times. At present, borrowers can sign up for an interest rate reduction that lasts for six months. Qualifying requires a borrower to provide Navient a detailed accounting of their monthly expenses. Generally speaking, the further behind a borrower is in repayment, the more likely Navient is to help. We have also found that the quality of assistance depends upon whom you talk to you. If one call attempting enrollment is unsuccessful, a second or even third try might make a difference.

Pay Down High-Interest Debt First

On the surface, paying down high-interest student loans first might not seem like a method of lowering interest rates. However, we would argue that it does.

The math is relatively easy. Suppose you have two loans at $10,000 each. One has an interest rate of 8%, and the other has an interest rate of 2%. Your combined debt is $20,000 at an average interest rate of 5%. If you pay off the loans with equal payments, your average interest rate will stay at 5%. However, if you start to pay off the high-interest loan faster, your average interest rate will drop. So, if you eliminate the high-interest loan first, your average interest rate will become a very favorable 2%.

Many people realize that paying extra on their student loans is a great way to pay off loans faster and save money on interest. We like to call these people responsible borrowers. However, we found that when these responsible borrowers don’t focus on the high-interest debt, it can cost them.

Utilizing this approach doesn’t require an excellent credit score or enrollment in any program. If you just pay extra towards your highest interest rate student loan, your average student loan interest rate will drop over time. Finding that bit of extra money to attack high-interest debt can save a lot of money in the long run.

Enroll in the SAVE Plan

Signing up for SAVE can help you lower your interest rate in two different ways.

First, because the SAVE plan is currently being challenged in court, borrowers who sign up for SAVE can get there interest rate lowered to 0% as long as the case is pending. The case could take years to resolve.

Second, once the lawsuit is over, assuming SAVE survives, borrowers can receive the SAVE subsidy which covers the monthly unpaid interest each month on the loan.

Suppose your federal student loans generate $300 in interest each month, but your required monthly payment is only $100. As a result, your federal student loan balance is growing by $200 every month. Because the federal government doesn’t capitalize the interest each month, many borrowers think that their balance is just staying the same. Once an event that triggers interest capitalization occurs, the balance can jump by hundreds or even thousands of dollars.

Signing up for SAVE fixes this problem. Going back to our example, instead of growing by $200 each month, SAVE covers the extra $200, so your balance doesn’t move. For borrowers with significant student loan balances and smaller incomes, SAVE is an excellent option.

Even if SAVE were to be eliminated in the litigation, the older REPAYE plan would likely be reinstated. Like SAVE, REPAYE offers an interest subsidy. However, unlike SAVE, the REPAYE subsidy only covers half of the excess interest.

Join the Military

Choosing to serve your country can be a big boost in student loan repayment. For starters, numerous student loan forgiveness programs exist specifically for the military, such as the Military College Loan Repayment Program.

In the realm of interest rates, enlisting has immediate benefits as well. Military service can lower your student loan interest rates in two ways:

Servicemembers Civil Relief Act (SCRA) Interest Rate Cap – The SCRA limits all student loan interest rates for active-duty members of the military to 6%. This limit applies to both federal and private student loans. In fact, this interest cap applies to all debt, so long as the debt exists before you begin active duty. If you acquire new debt after active duty starts, it does not qualify for the interest rate cap. Federal law guarantees this rate cap, but you will probably have to contact your loan servicer to get things set up.

0% Interest for Service in a Hostile Area – Anyone who qualifies for special pay by serving in a hostile area doesn’t have to pay interest for up to 60 months. This benefit applies to all Federal Direct student loans issued after October 1, 2008.

Enlisting is obviously a major commitment. But, anyone currently in the military or considering joining should be aware of the potential opportunities to lower their interest rates.

Get Congress to Act

If you have student debt, it probably means that you don’t have millions of dollars to pay lobbyists or contribute to campaigns. However, borrowers as a group still wield enormous power in Washington.

Over the years, there have been proposals that would allow federal borrowers to lower their interest rates to the same levels that banks get when they borrow from the government.

Showing up to vote each November is critical to influencing DC. Think about the senior citizens. Seniors on Medicare and Social Security individually don’t have much money to spend on campaign contributions. But, they vote, and everyone in Congress knows it. Student loan borrowers currently number over 40 million. If they all voted for candidates who pledged to make a difference on student loans, lower interest rates could be just the beginning.

Refinance Student Loans at a Lower Interest Rate

Student loan refinancing is another excellent way to get a lower interest rate on your student loans.

When you refinance your student loans, a new lender pays off some or all of your old student loans in full. The borrower then agrees to repay the new lender according to new terms. The downside to this approach is that this eliminates the old loan’s terms and perks. So, if you like having income-driven repayment plans or loan forgiveness, it is best to skip refinancing and stick with federal loans.

The big advantage of refinancing is the enormous potential interest savings. College students without a job or a degree are risky bets and usually get charged higher interest rates by lenders. Graduates with a job and a degree are far less risky and generally more able to get better interest rates.

The more savvy a borrower is about the refinance process, the more they can save. There are multiple ways that a borrower can use refinancing to get lower interest rates…

Pick a Shorter Repayment Term or Loan Length

By refinancing student loans to a shorter-term loan, borrowers can significantly lower interest rates.

As an example, take a look at the best rates currently available on 5-year fixed-rate loans.

Rank	Lender	Lowest Rate
1		3.95%
2		3.99%*
3		4.88%

If we stretch things out to 20 years, the lowest possible rates jump considerably:

Rank	Lender	Lowest Rate
1		6.08%*
2		6.53%
3		6.55%

To see rates available for 5, 7, 10, 15, and 20-year loans, be sure to check out our best refinance rates by category page. These rates are updated monthly to provide a good idea of the best available rate for any given loan type.

The longer the loan repayment length, the riskier a variable-rate loan becomes. We typically suggest that all borrowers avoid variable-rate loans longer than ten years. However, if interest rates are at extreme highs, a longer-term variable-rate loan might make more sense.

Shop Around to Find the Best Rate

In the realm of student loan refinancing, the surest way to get the lowest possible rate is to shop around.

All lenders offer a range of loan types and loan options. What they don’t advertise is that all lenders evaluate applications differently. Lenders put different weights on different factors, such as the college you attended, how long you have been in your job, and your profession. A borrower with a high credit score and average income might get vastly different results than a borrower with an average credit score and high income.

Accordingly, the companies advertising the best rates may not be the company that actually offers you the best rate. Because there are so many variables in play, it is essential to check rates with several different lenders. We typically suggest investigating 5-10 lenders out of the many student loan refinance companies.

The good news about shopping around is that it takes very little time. Most borrowers can get a rate quote within 5 to 10 minutes.

Fortunately, shopping around does not hurt your credit score. The credit agencies treat multiple applications within the same window as a single application. This allows borrowers to shop around without fear of negative credit consequences. To be safe, try to keep your shopping around confined to a one- or two-week window.

Get a Cosigner

This option is a pretty lousy way to get a lower interest rate when you refinance. It can help borrowers with less than perfect credit qualify, but it is a massive obligation for the cosigner.

Getting a cosigner to help pay for college is one thing. Getting a cosigner to refinance is another story. Refinancing for some is more of a luxury. Obtaining lower interest rates is nice and saves money, but does it justify the risk that your cosigner is taking on?

That being said, borrowers who are struggling to get approved may be able to refinance successfully with the help of a cosigner. If that cosigner was on the original loan, this move might make even more sense. The cosigner’s obligation doesn’t change, but the borrower’s ability to pay it off faster is improved. This is a win for both parties.

Some borrowers use refinancing as a workaround to get their cosigner released from the loan. If the cosigner is on the original loan but not the refinanced loan, the cosigner has no further obligations when the refinance goes through.

Pay Off Existing Debt First

When refinancing, the two most significant factors in approval decisions are your credit score and your Debt-to-Income ratio (DTI).

Completely eliminating a debt can have a considerable impact on your DTI. Lenders usually don’t care about your current debt balances. For example, if you have a car loan, it doesn’t matter if you owe $20,000 or $5,000. The impact comes from monthly payments on your credit report. Lenders care about the $300 per month that you owe on your car loan. If you eliminate that monthly payment, your DTI improves. It also increases your chances of scoring the best possible interest rate.

If you are about to eliminate a monthly payment, be sure to let some time pass so that the debt doesn’t appear when lenders check your credit report.

Fix or Improve Your Credit Score

Lenders consider your credit score when determining the rates they offer you. Therefore, anything that you can do to improve your credit score will help your cause.

Correcting errors on a credit report is a quick way to get a boost, but that isn’t the only way to improve it. The impact of negative items on a credit report drops with time.

Find a New Job or Get a Raise

This tip probably falls into the easier-said-than-done category, but it can make a big difference to your debt-to-income ratio.

Different lenders have different requirements for documenting income and time required at a job, but a recent paystub is sufficient proof of income for many.

Refinance Again

The option to refinance a second or third time is something that many borrowers fail to consider.

The good news for consumers is that there is no rule or limitation on refinancing multiple times.

If you have had the good fortune of getting a higher-paying job, improving your credit score, or eliminating some old debt, there is a good chance that better rates may be available. Similarly, if the first time through the refinance process you skipped out on shopping around, a second bite at the apple might be an excellent opportunity to lock in the best deal.

With many lenders offering refinancing services, jumping around a few times can be an effective strategy.

Lowering Student Loan Interest Rates

The thirteen different approaches that can be used to get lower interest rates represent an opportunity for nearly all borrowers to get some help on their student loans.

Different strategies require different levels of effort, but for many, a minimal investment of time can result in major savings.

The post 13 Ways to Get a Lower Interest Rate on Your Student Loans appeared first on The Student Loan Sherpa.

One of the big changes that many borrowers may have missed: the Department of Education will now cover some or all of the monthly interest for millions of borrowers.

If you are familiar with the SAVE subsidy, this isn’t breaking news. If you haven’t heard about the SAVE subsidy — pay close attention. This particular assistance is something that will make a huge difference in borrower finances.

Why the Government Pays Interest for Some Borrowers

Before jumping into the program details, it is helpful to first explain the problem that the Department of Education is trying to solve: growing balances due to interest.

Historically, when borrowers signed up for an income-driven repayment plan, they often saw their balances grow each month. When that interest capitalized, borrowers started paying interest on the interest, and balances spiraled out of control.

In some cases, the growing balance didn’t matter. For example, a borrower pursuing PSLF usually doesn’t care how much gets forgiven. The critical detail is that the remaining balance gets erased. However, for other borrowers, a tax on forgiveness, or a shift to repay the debt in full meant the extra interest really hurt.

When the new SAVE plan was being developed, rule-makers sought to address this particular issue.

Student Loan Interest Relief Basics

The easiest way to understand the SAVE subsidy is that it is designed to keep your balance from growing.

For example, if you have $40,000 in federal student loans at 6% interest, your loans charge $200 per month for interest alone. If you qualify for an IDR payment of $75, your student loan balance will grow by $125 per month!

Using this same example on the SAVE plan, the SAVE subsidy would cover that extra $125 each month. Borrowers wouldn’t have to worry about a growing balance. Additionally, borrowers can pay extra to knock down their principal balance — though this strategy usually isn’t recommended.

Calculate Your Interest Subsidy: Use this calculator to estimate monthly payments on SAVE and your monthly interest subsidy.

Qualifying for SAVE and Student Loan Interest Help

There are a few limitations to SAVE. First, the SAVE repayment plan is only available for federal student loans. Interest relief isn’t available for private loans.

Additionally, borrowers need federal direct loans to qualify for SAVE. However, some loans can be consolidated to gain SAVE eligibility. For example, a borrower with a Graduate FFEL Loan could consolidate their loan into a federal direct loan and enroll in SAVE.

Finally, the SAVE relief depends on your balance and yearly income. If you have a substantial annual income and a small federal loan balance, SAVE may not offer much help.

To date, nearly five million borrowers have signed up for SAVE. Of that group, almost three million borrowers qualified for $0 per month payments. These borrowers won’t have to make a payment for at least a year, will have their interest covered, and will make progress toward student loan forgiveness.

Further Reading: Learn more about zero-dollar payments and how borrowers can use them to save money and qualify for loan forgiveness.

Maximizing the Interest Subsidy Benefit

If you qualify for a SAVE subsidy or you are reasonably close to qualifying, these tips may help you maximize the benefit.

• Find ways to reduce your AGI – SAVE payments are usually calculated based on the AGI of your most recent tax return. Getting crafty with your tax planning can mean lower student loan payments. For example, putting money in the right retirement account can lower your student loan bills.
• Consider Filing Taxes Separately – If you are married and file taxes jointly, your spouse’s income is used to determine monthly IDR payments. Filing separately can exclude spousal income from these calculations.
• Use SAVE to Focus on Other Goals – If SAVE covers part of your student loan interest, it could be an excellent time to build up your emergency fund. Likewise, you might also want to pay off credit card debt or save for retirement. Minimum payments often make the most sense for borrowers on SAVE.

The post The Government is Paying Student Loan Interest for Millions of Borrowers: Learn How to Qualify appeared first on The Student Loan Sherpa.

Not long ago, refinancing offered a path to significantly reduced monthly payments and lower interest rates. Today, the best refinance rates now hover around 5%.

With high interest rates and federal policy changes, refinancing is no longer the shortcut that it used to be. Refinancing is still helpful in certain circumstances, but these cases are the exception rather than the rule.

Sticking with Federal Student Loans Rather than Refinancing

Federal student loans are almost always preferable to private loans. The creation of the new SAVE plan and expansion of loan forgiveness further tilts the scale in favor of federal loans.

Back when refinance rates hovered around 2%, some high-earners faced a difficult decision: do I refinance for a reduced interest rate, or do I stick with the many protections of federal loans?

Today, the interest rates on most federal loans are as low, if not lower, than the best available refinance rates. As a result, the decision is relatively easy for most borrowers.

Fewer Refinance Options

High interest rates are not the only problem for borrowers considering refinancing.

In the current economy, not only are interest rates high, but capital availability is low. In other words, lenders have less money to lend.

Getting approved for a preferred interest rate has become more difficult for borrowers. Feedback from readers of this site appears to confirm that refinance lenders have gotten pickier about who gets approved for a refi loan.

The Exception to the Rule

In a time of high interest rates and inflation, one group of borrowers should seriously consider refinancing: those with variable-rate student loans.

The higher interest rates climb, the more expensive variable-rate student loans will become.

Trading a fixed-rate loan for a variable-rate loan protects borrowers from future interest rate growth.

As of November, 2024, the following lenders offer the lowest interest rates on fixed-rate refinance loans:

Rank	Lender	Lowest Rate	Sherpa Review
1		3.95%	Earnest Review
2		3.99%*	Splash Financial Review
3		4.88%	ELFI Review

If interest rates decline in the future, borrowers can refinance a second or third time. Unlike refinancing a mortgage, refinancing student debt takes very little time, and crucially, there are no transaction costs.

Sherpa Note for Federal Borrowers: A few federal loans still exist with variable rates. These loans were last issued in 2006.

Federal borrowers with variable-rate loans do not need to refinance with a private lender. They can consolidate their federal loans to secure a fixed-rate federal loan.

Timing is Critical When Refinancing

Refinancing isn’t necessarily a bad idea. Exchanging one private loan for another private loan with a lower interest rate is almost always a win.

However, refinancing doesn’t make much sense when refinance rates are high and existing student loan rates are low.

In the coming years, this math might change. If interest rates drop in the future, the high interest loans that students borrow today might become great candidates for a refinance.

For now, refinancing is an option of limited benefit for most borrowers.

The post How Inflation Changes the Student Loan Refinance Math appeared first on The Student Loan Sherpa.

The problem is that we can’t look at federal loans in a vacuum.

Most borrowers will find that another priority takes precedence over eliminating their student debt. Additionally, with programs like income-driven repayment and student loan forgiveness, moving student loan elimination down the list of financial goals can make a lot of sense.

An Emergency Fund is the First Priority

In terms of financial priorities, having an emergency fund is far more important than paying as much as possible toward your student loans.

To be clear, I’m not suggesting that you don’t make student loan payments until you build up an emergency fund. Instead, I suggest you make minimum student loan payments while building up your emergency fund.

One recent study found that 57% of Americans were uncomfortable with their emergency fund reserves. The same survey found that 22% had no emergency funds at all.

At present, many high-yield savings accounts pay over 5% interest, so the gap between student loan interest rates and savings rates is especially small for many borrowers.

How much should I set aside for an emergency? For student loan borrowers, a properly sized emergency fund will take into account many different circumstances. This emergency fund guide for student loan borrowers will help identify the right size fund to protect yourself and your family.

Knock Out Riskier Debts First

Federal student loans are a nightmare, but they provide borrowers with unique perks. For example, a borrower who loses their job can immediately qualify for $0 per month payments for at least a year. This borrower protection alone makes student loans less of a risk to your financial future than other forms of debt.

Before making extra payments on federal student loans, borrowers should first focus on eliminating the following debts:

• Credit Cards – Credit card interest rates are usually significantly higher than student loan interest rates. The most efficient way to eliminate debt is often by paying off the highest-interest debts first. Knocking out credit card interest payments from your budget is a huge first step.
• Private Student Loans – Federal loans may offer forgiveness and protections for times of hardship, but private loans offer no such perks. Even if your private loans have a slightly higher interest rate than your federal loans, knocking out this debt first might make more sense.
• Personal Loans – Many Americans use a personal loan to consolidate credit card debt or to make a large purchase. The interest rates on these loans are not usually as high as credit cards, but they are often much larger than student loan interest rates. Paying off personal loans before student loans is usually the smart move.

The Homebuyer’s Dilemma

Aggressive student loan repayment and buying a home usually don’t work well together.

Even though federal loans can cause a headache on mortgage applications, the best option for most is to sign up for a plan like SAVE that offers low monthly payments.

Generally speaking, if you want to buy a home, the best path is to save for a down payment, knock out high-interest credit card debt, and find a repayment plan with low monthly payments on your student loans.

Surprisingly, if you cut your student loan balance in half from $100,000 to $50,000, there is a good chance that it won’t move the needle on your mortgage application. However, changing to a different repayment plan could have a dramatic impact.

The advanced mortgage guidance page explains how the various debts and financial goals can impact your ability to buy a home.

Maximizing Retirement Opportunities

If student loans are the financial crisis of the present, retirement is the financial crisis of the future. Many of the retirement resources utilized by previous generations may not be available for younger borrowers.

Pensions, social security, and home appreciation are tools used by current retirees that may not help those of us who are decades away from retirement.

Thus, setting aside money for retirement could be critical. For example, if your employer matches retirement contributions, borrowers are almost certainly better off maximizing this benefit than they are paying down federal loan balances.

Here again, the terms of federal student loans allow borrowers to set money aside for retirement and lower their monthly student loan bills. This can mean a more secure retirement and more federal debt forgiven.

When it Finally Makes Sense to Attack Your Federal Loans

Some fortunate borrowers may reach the point where they have eliminated all of their risky debt. They have built up an emergency fund and made the necessary moves to get ready for retirement.

These financially secure borrowers might realize they don’t need income-driven repayment or loan forgiveness. For the borrowers in this category, it isn’t a question of if they will pay off their federal loans, it is a question of when.

Even for this group of borrowers, I’d argue that making extra payments on their federal loans might not be the best move.

In this situation, utilizing a private lender to refinance could be the ideal strategy. The refinance lender pays off the existing federal balance in full, and the borrower repays the debt at what is hopefully a much lower interest rate.

This move is risky because it permanently eliminates all of the valuable federal loan perks and protections. However, for the borrowers who don’t need these tools, it can result in significant savings.

As of November, 2024, the following lenders offer the lowest interest rates on student loan refinancing:

Rank	Lender	Lowest Rate	Sherpa Review
1		6.08%*	Splash Financial Review
2		6.53%	ELFI Review
3		6.55%	Laurel Road Review

The Time to Pay Extra on Your Student Loans

Determining whether or not you should make extra payments on your student loans is a process of elimination question.

If you have examined all of the alternatives, and none of them apply to you or seem like good options, then making extra payments to knock out your loans quickly could make sense.

If you identify a bigger priority or a better alternative, you can revisit your student loan strategy whenever circumstances change.

The post Extra Payments on Federal Student Loans Rarely Make Sense appeared first on The Student Loan Sherpa.

At first glance, the shorter-term loan seems like a great choice. The interest rate is often the lowest possible, and the accelerated repayment reduces total interest spending.

This approach may work well for some borrowers, but the 20-year refinance loan is the best choice in most cases.

20-Year Loans have the Lowest Monthly Payment

The longer the repayment length, the lower the monthly payment. It’s simple math, but the consequences are significant.

A lower monthly bill makes it easier to pay your rent bill. The lower monthly payment enables borrowers to attack high-interest credit card debt or save money to buy a house.

In short, the 20-year loan means flexibility for borrowers.

Managing Extra Interest Charges on a 20-Year Student Loan

If the lower payment is the obvious advantage, spending extra on interest is the obvious disadvantage.

However, this downside isn’t nearly as bad as borrowers might think.

For starters, the interest rate gap between 5-year refi loans and 20-year refi loans is quite small. The 5-year loans start at around 5% interest, and the 20-year loans start at just over 6%.

Secondly, and more importantly, borrowers are not obligated to make minimum payments on a 20-year loan. Someone could choose to aggressively pay it off in five years or less. By securing a 20-year loan instead of a five-year loan, borrowers pay slightly more each month in interest, but they gain flexibility and improve their credit profile.

Improving Borrower Credit Profiles

When people think about creditworthiness, credit scores are usually the first item that comes to mind.

However, an equally important number is the debt-to-income ratio. If you have ever seen a credit application rejected due to insufficient income relative to your debts, it was a debt-to-income ratio issue.

Crucially, debt-to-income ratios look at monthly debt payments instead of total debt balances.

Locking in a lower monthly payment makes it easier to buy a house or to pay off an auto loan.

Thus, even if you plan on paying off a student loan in five years, you might still be better off with a 20-year loan.

Fixed vs. Variable Rate Loans

We can’t discuss the best refinance loan without considering fixed versus variable interest rates.

At a time when interest rates are high across the economy, it might seem like picking a variable-rate loan is the smart choice because monthly payments could drop as interest rates go down.

This approach would be a mistake. Even though rates are high right now, they could continue to climb. A variable-rate loan exposes borrowers to this risk.

Should rates drop in the coming months or years, borrowers can always refinance their loans again. Unlike a mortgage, there are not any costs associated with refinancing a student loan. If rates drop by .5%, a borrower could refinance, and the only cost would be the 15 minutes spent applying for the loan.

Think of the fixed rate as a ceiling rather than a floor.

The Best Rates on 20-Year Refinance Loans

As of November, 2024, the following lenders advertise the lowest interest rates on 20-year fixed-rate loans:

Rank	Lender	Lowest Rate	Sherpa Review
1		6.08%*	Splash Financial Review
2		6.53%	ELFI Review
3		6.55%	Laurel Road Review

The post The Best Student Loan Refinance Length is a 20-Year Fixed-Rate Loan appeared first on The Student Loan Sherpa.

This is objectively awful advice.

The on-ramp is helpful because mistakes will hurt borrowers less, but it doesn’t mean borrowers should ignore their loans.

Those who wait will miss out on some excellent programs.

Interest Consequences of Waiting to Restart Payments

Some of the articles suggesting that waiting is ok acknowledge that there will be interest charges.

It is accurate to say that interest will accrue, but it overlooks the missed opportunity.

Many of the borrowers most worried about restarting payments can potentially qualify for low monthly payments on the new SAVE plan and qualify for a large monthly subsidy to cover interest.

Missing this opportunity could be a costly mistake for many borrowers, especially the growing number that are eligible for $0 per month payments.

Delaying Payments Delays Forgiveness

Student loan forgiveness is an excellent opportunity for borrowers with unaffordable balances to eliminate debt.

Forgiveness isn’t a quick fix, but it offers a light at the end of the tunnel.

Those who ignore their loans at the restart will lose out on valuable progress toward loan forgiveness.

Suppose you skip the first six months of payments after the restart. That move would push back your eventual forgiveness by six months. As a hypothetical, let’s say it moves forgiveness back from spring 2033 until fall 2033. If your salary today is smaller than what you earn in 2033, the money you save today will be much smaller than the extra money you spend in 2033.

Waiting to restart student loan payments means a longer wait for student loan forgiveness. It also likely means spending more on the path to loan forgiveness.

Missing Out on Temporary Programs

In early 2024, the Department of Education will update IDR payment counts for all federal borrowers. This one-time adjustment will move many borrowers closer to loan forgiveness.

To qualify for this program, some borrowers must consolidate their loans by December 31, 2023. If this deadline is missed, borrowers will miss the adjustment benefits.

Dealing with student loans and learning the many new rules now in place is a headache. Waiting to restart payments doesn’t prevent this headache. It just delays it.

However, delaying the restart could mean missing out. Now is the time to suck it up and get things figured out. Waiting a year to get serious about student loans could mean missing out on a tremendous one-time opportunity.

Think About Commentator and Media Bias

In many of the articles suggesting that borrowers don’t have to do anything for a year, there is a subtle, or in some cases overt, criticism of the President.

By downplaying the risks associated with not restarting repayment, the critique cuts deeper.

No matter your politics, it shouldn’t impact your student loan strategy. You owe it to yourself and your family to repay the debt in the most efficient manner possible.

Saying there are zero consequences to not making payments could make for a nice sound byte, but it doesn’t qualify as insightful student loan guidance.

“On-Ramp” Purposes

If not restarting on time is such a big mistake, what is the purpose of the “on-ramp” to the restart?

The idea behind the on-ramp is to help borrowers smoothly transition back to repayment.

Many people will miss payments because they have new servicers, and important letters and emails get sent to old addresses.

Rather than tanking a borrower’s credit report, the Department of Education is trying to minimize the damage.

Many have argued that this program is misguided.

It might be.

However, the one thing we can say for sure is that it isn’t a blank check for borrowers to ignore their student loans for another year.

The post Advice to Ignore Student Loan Restart is an Awful Idea appeared first on The Student Loan Sherpa.

That said, I’m not sure that this is a topic that will interest most borrowers. If you are refinancing, you want the lowest rate possible, so you shop around. If rates get better, you refinance again. Insight on how the process works doesn’t really change this procedure.

However, if you are curious about how rates move or trying to project where they might head, this article may help.

The Federal Reserve Raising Rates Doesn’t Immediately Impact Refinance Rates

When the Federal Reserve raises interest rates, one would think that student loan refinance rates immediately increase. The Fed regulates the overnight lending interest rate between banks. If borrowing is more expensive for banks, it seems logical that interest rates on loans would increase.

The reality isn’t that simple.

Many of the biggest student loan refinance lenders sell the loans they refinance. They bundle large groups of borrowers into a single large asset that is then sold to investors.

Because of this system, refinance interest rates are most impacted by investor interest. The closest parallel is probably mortgage interest rates.

Parallels Between Mortgage Rates and Student Loan Refinance Rates

Like student loans, mortgages are often bundled and sold to investors. If there is a considerable demand for this investment product, lenders can offer lower interest rates. If investor demand drops, lenders must raise rates to entice investors to buy.

For borrowers trying to project refinance interest rates, this relationship is valuable. Mortgage rates change daily. Refinance interest rates typically change once or twice a month at the most. If you read about a sudden jump in mortgage rates, student loan refinance rates are likely headed in the same direction.

Limitations on the Mortgage and Student Loan Refinance Connection

Mortgage rates are typically reported for 30-year fixed-rate mortgages.

No refinance lender offers a 30-year refinance loan.

Additionally, borrowers looking to refinance have the choice between fixed and variable-rate loans, and loan terms are usually 5, 7, 10, 15, and 20 years.

Variable-rate mortgages exist, but they have largely fallen out of favor in the wake of the 2007-2008 financial crisis.

Because of the differences in loan durations and loan terms, mortgage and student loan refinance rates will not move in lockstep.

Taking Advantage of FinTech vs. Traditional Bank Differences

There are two main types of lenders in the student loan refinance space: traditional banks and fintech (financial technology) companies.

Over the years, I’ve noticed that fintech companies tend to change rates much faster than traditional banks.

This presents a considerable opportunity for borrowers.

If interest rates are increasing, the best deals can often be found with the refinance lenders backed by traditional banks, such as ELFI, LendKey, and Citizens.

When the interest rates are decreasing, the fintech companies often lead the charge. When rates drop, lenders like SoFi and Earnest often have the best deal.

Predicting Rates Usually Doesn’t Help

Now that I have shared how I project student loan refinance rates, it’s time to share an essential nugget of information: predicting rate movement is a waste of time for the average borrower.

If you want to refinance your student loans, you should shop around and check rates with as many lenders as possible. This is how you find the best deal.

If rates drop, you can refinance a second, third, or fourth time. There isn’t a limit to how many times you can refinance.

Most importantly, there isn’t a cost associated with refinancing. There are no application fees, prepayment penalties, or other borrower costs beyond the interest you pay.

Housing is much different. Each time you get a new mortgage, it costs money. There are application fees, title fees, and appraisal fees.

If you are looking for a mortgage, trying to time the market to get the best rate is potentially a valuable exercise. For a student loan borrower, there isn’t much to gain.

The Best Rates Currently Available

As of November 2024, the best deals currently available for refinancing are in the 20-year fixed-rate loan category.

The following lenders offer the lowest rates:

Rank	Lender	Lowest Rate	Sherpa Review
1		6.08%*	Splash Financial Review
2		6.53%	ELFI Review
3		6.55%	Laurel Road Review

For those looking for shorter-duration loans or lower rates, be sure to check out this month’s rate update and market analysis.

The post Insider Tips and Insights on the Student Loan Refinance Marketplace appeared first on The Student Loan Sherpa.

Today, we will explore how these zero-dollar payments work, who qualifies for them, their advantages, disadvantages, and more.

Paying $0 Per Month on Your Student Loans

The idea of receiving a bill for zero dollars from your student loan servicer may raise eyebrows, but it’s a real option thanks to income-driven repayment plans. These plans determine the payment amount based on what borrowers can afford to pay, rather than their outstanding loan balance. While there are limitations, a $0 payment can be a beneficial choice for many borrowers.

How do I get a Zero Dollar Payment?

To begin, it’s important to note that a $0 payment is available only for federal student loans; private loans do not qualify. Eligible borrowers need to sign up for an income-driven repayment plan. IBR, PAYE, ICR, and SAVE all will work. These plans require payments ranging from 5 to 15% of a borrower’s discretionary income. If the government’s calculation determines that a borrower has no discretionary income, their monthly payment will be $0.

Payments on income-driven repayment plans are recalculated annually, adjusted for inflation and changes in income.

Sherpa Tip: This article treats all of the federal income-driven repayment plans similarly because qualifying for $0 payments and the pros and cons are all identical.

However, it’s worth noting that there are some important differences between these plans.

For starters, if you qualify for a $0 per month payment, REPAYE/SAVE and its generous interest subsidy is often the best choice.

$0 Student Loan Payments vs. Forbearances and Deferments

Qualifying for a $0 payment differs considerably from a forbearance or deferment.

While forbearances and deferments have time limits and usually do not last a year, there are no such restrictions on zero-dollar payments. Borrowers making $0 payments on income-driven repayment plans can continue to do so year after year.

Furthermore, $0 payments can count towards student loan forgiveness. Borrowers on income-driven plans can have their loans forgiven after 20-25 years, and those working in public service can use their $0 payments to qualify for the 120 payments required for public service loan forgiveness.

Downsides to Understand

Despite the benefit of not making monthly payments, it’s crucial to understand that the student loan interest does not vanish.

The loan balance increases with each passing month due to accruing interest. Borrowers should be aware of capitalized interest, where the additional interest is added to the loan balance, leading to interest being charged on the increased amount.

To avoid unnecessary capitalization of interest, borrowers should make sure not to miss any income certification deadlines.

Submitting $0 Monthly Payments

When borrowers have $0 payments, there is no need to send a check or complete additional paperwork each month.

However, for loans without a required payment, borrowers still must remember to certify their income before the lender-imposed deadline.

Are $0 payments too good to be true?

Given the prevalence of student loan scams and unreliable information from loan servicers, skepticism is natural when it comes to $0 payments on income-driven repayment plans like IBR, PAYE, and REPAYE/SAVE.

Fortunately, one of the advantages of federal student loans is the availability of income-driven repayment plans based on borrowers’ income rather than their loan balance.

If the Department of Education determines that a borrower cannot afford monthly payments, they will owe $0 per month. Even unemployed borrowers can be eligible for income-driven repayment plans, with most qualifying for $0 monthly payments. The Department of Education considers factors like family size and location to determine affordability, calculating payments based on the Adjusted Gross Income (AGI) reported on tax returns.

IDR Enrollment Process

While not every borrower can qualify for a $0 payment, anyone can apply for an income-driven repayment plan.

The process may take a few months to complete, but the initial paperwork can be filled out in approximately 10 minutes. Borrowers can apply through studentloans.gov or submit a paper application to their loan servicer.

Frequently Asked Questions

Final Thoughts

Understanding $0 payments on income-driven repayment plans can help borrowers make informed decisions about managing their student loan debt.

While the concept may seem too good to be true, it is a legitimate option for eligible borrowers with federal student loans. By taking advantage of income-driven repayment plans, borrowers can benefit from affordable payments, loan forgiveness opportunities, and a path toward financial stability.

The post Paying $0 Per Month On Your Federal Student Loans with IDR Plans Like SAVE appeared first on The Student Loan Sherpa.