Q: Should I refinance my Navient student loans?

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Stanley tate

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Borrowers with private student loans with Navient should explore their options to refinance their loans for a lower interest rate, whether a variable interest rate or fixed rate. You should also look to refinance your loans if you're trying to get a cosigner release. (Note: you don't need to refinance to get a cosigner release. Ask your loan servicer for the requirements.)

Borrowers who have federal student loans that Navient is acting as the loan servicer should seldom look to refinance their loans to get a lower interest rate. The loan forgiveness options (i.e., Public Service Loan Forgiveness and Teacher Loan Forgiveness) and flexible repayment plan the US Department of Education are often too much to risk losing just for better loan terms.

Plus, you'll need a good credit score and steady income when you refinance your federal student loans with a private lender. If not, depending on the loan amount, you may need a cosigner to get approved for the loan.

How to avoid student loan refinancing mistakes

In my years as a student loan lawyer, I've more than a few student loan borrowers costs themselves time and money when they refinanced.

​They assumed they'd save more money by going with a variable rate loan. But they never checked to see how high the variable interest rate could climb.

Others thought they were doing better because their monthly payments were lower. But they failed to realize their loan payments were lower simply because they extended the repayment term. (Kind of like we all do when going for a 6-year auto loan repayment term versus 5 years.)

And a few more failed to realize they were being charged an origination fee for refinancing their student loan debt. I've seen some private lenders charge an origination fee of near $2 thousand for the new loan.

So how do you avoid student loan refinancing mistakes?

  • Read the disclaimers.
  • Run the numbers.
  • Don't just accept the loan with the lowest rate.
  • Don't be overly optimistic about your financial situation.
  • Be clear on your personal finances, major life changes, and your ability to pay the new loan off within the repayment term.
  • Check to see if there's a prepayment penalty.

Student loan consolidation vs. student loan refinancing

Student loan consolidation typically refers to combining one or more of your federal student loans into a new Direct Consolidation Loan from the federal government.

The Direct Consolidation Loan Program only allows you to consolidate federal student loan debt. You cannot consolidate your private student loans with your federal student loans.

The fixed interest rate for your new Direct Consolidation Loan will be a weighted average of the interest rate of the qualifying loans you included on your consolidation application.

​Student loan refinancing refers to refinancing some or all of your education loan debt with a private lender. You can refinance both federal loans and private loans.

If you refinance federal loans with a private lender, you'll lose student loan repayment options based on your income, loan forgiveness options, and loan cancellation options due to death or permanent disability.

Student loan refinance lenders with low-interest rates

When I wrote this article, most student loan refinance companies offered variable interest rates as low as the 1.98 to 2.39% range and fixed interest rates as low as 2.79% to 2.99%.

Those low-interest rates typically go to student loan borrowers with clean credit reports and high credit scores.

In my experience, few borrowers get rates that low.

Instead, I find that their rates are closer to the 4% to 5% range at the low end for both fixed and variable rate loans.

Here's a list of companies that refinance student loans:

  • Commonbond 2.98-5.79% fixed APR | 1.99-5.61% variable APR
  • Earnest 2.98-5.79% fixed APR | 1.99-5.64% variable APR
  • SoFi 2.98-6.28% fixed APR | 2.25-6.28% variable APR
  • Citizens One 2.99-8.49% fixed APR | 1.99-8.24% variable APR
  • Lend Key 2.99-8.77% fixed APR | 1.98-8.55% variable APR

Repayment options for Navient student loans

Your repayment options for your student loans with Navient depends on whether Navient is servicing your federal student loans or private student loans.

​Federal student loans

If you need a lower payment for your federal student loan, check your eligibility for a lower monthly payment based on your income.

Those plans include:

  • the Revised Pay As You Earn Plan
  • the Income-Based Repayment Plan and
  • ​the Income-Contingent Repayment Plan

Those payment plans will look first to your discretionary income to determine your payment amount.

Your discretionary income is based on your adjusted gross income and your family size.

If your income is currently lower than what was reported on your tax return, you can use alternative documentation of your income like a pay stub or, if you're self-employed, a letter stating your gross income.

Private student loans

When you can't afford your private student loan payments, check to see if you have any available deferment or forbearance time. This will give you time to figure out a more permanent solution without damaging your credit history with late payments.

From there, the next step is to see what repayment options you have available to you.

Most private lenders offer an interest rate reduction program for a short period (6-18 months).

A handful of lenders offer income-based repayment options.

To find out your options, contact the student loan servicer for your loans.

Related: Should I Hire a Student Loan Consultant

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Hey, I’m Tate.

I'm a student loan lawyer that helps people like you with their federal and private student loans wherever they live.

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