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Every Student Loan Refinancing Cost You Should Know

Refinancing your student loans is a chance to knock a considerable amount of money off your total student loan debt. Depending on your terms, it can also cut down your repayment time.

If you’re thinking about refinancing your one or more student loans, you’re probably wondering how much it costs. In some cases, refinancing doesn't cost anything. But like most financial decisions, it’s not always that simple. Your refinancing costs depend on the lender you choose and whether it charges fees.

Here’s an in-depth look at the cost of refinancing student loans and how to decide if refinancing is right for you.

What’s student loan refinancing?

When you refinance your student loans, a lender pays off your old loans completely. In turn, the lender creates a new student loan with new repayment terms and a new interest rate. If you’re refinancing federal loans, they become a private loan and are no longer eligible for federal repayment benefits.

If you have multiple loans, you can consolidate them into one refinanced student loan. This lets you focus on repaying only one, monthly loan payment.

What’s the cost of refinancing student loans?

It's possible that refinancing your student loans won’t cost you anything extra. That’s because many private lenders don’t charge additional fees when you refinance. If that’s the case with your lender, the only cost is your loan principal payment, plus interest charges for each statement cycle until your loan is paid in full.

Some lenders charge fees, which could add considerable cost to your debt. Most of these charges occur if you make late payments, have your payment returned or default on your loan.

Let’s take a look at some of the common fees associated with student loan refinancing.

Refinancing fees

There are a few fees that private lenders may charge when you refinance your student loans. Depending on your lender, you could end up paying some or all of these fees.

Application fee

Generally, the best refinancing lenders don’t charge an application fee. However, it’s always best to double-check whether a lender you’re considering applies this fee, and include it when calculating your total refinancing cost.

Origination fee

Some lenders charge an origination fee to help offset the costs of processing your loan and disbursing the funds. Although most private lenders have gone away from these additional fees on refinanced loans, some still charge origination fees on private loans.

Late fee

Late fees are more common than other types of fees when you refinance. You might get charged a late fee when you miss your monthly payment. Some lenders offer a grace period before charging a late fee. Here are a few lenders that charge late fees currently:

  • Laurel Road: 5% of the late payment amount or $28, whichever is less
  • RISLA: 6% of the late payment amount

Prepayment penalty

Lenders used to charge fees if you paid off your student loans early. However, this is no longer the case. In 2008, Congress passed the Higher Education Opportunity Act. This amended previous legislation to prohibit private lenders from charging fees when borrowers pay off loans early. You can pay off your refinanced loan as quickly as you want without fear of extra charges.

Returned payment fee

Another fee related to monthly payments is a returned payment fee. If your payment is returned to you for insufficient funds, you’ll likely end up paying a returned payment fee. This fee is charged on both returned checks and electronic payments.

Having overdraft protection on your payment account can help you avoid having payments returned. Lenders that charge returned payment fees include:

  • Laurel Road: $20
  • RISLA: $10

As you can see, most of the fees related to refinancing student loans are charged when there’s a failure from the borrower to keep their end of the loan agreement. You can set up automatic payments to avoid paying costly fees. Some lenders even give interest rate discounts if you set up automatic payments.

Refinancing non-fee costs

Although you might not face extra monetary charges, there can be an underlying cost when refinancing student loans. Federal student loans have access to a host of protections and programs to help borrowers. When you refinance your student loans, they become a private loan, and you lose access to these federal protections.

Federal protections include student loan forgiveness programs, income-driven repayment plans and deferment and forbearance options. If you qualify for a forgiveness program, like Public Service Loan Forgiveness, refinancing disqualifies you from that program.

Is the cost of refinancing student loans worth it?

Refinancing your student loans can lead to significant savings over the life of your loan. If you qualify for a lower rate, you’ll end up paying less interest on your loans. This where refinancing can cut down your student loan debt overall.

With little to no additional cost to refinance student loans, it can be a great option depending on your situation. Use our Student Loan Refinance Calculator to find out just how much money you could save by refinancing.

Whether refinancing your student loans is right for you depends on your loan debt and your current and future financial situation.

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Lender Name Lender Offer Learn more
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