Fees to Refinance Student Loans: What Borrowers Need to Know

Student loan refinancing is a way to save money on interest charges by scoring a lower rate. If you’re thinking about refinancing, you might be curious if there are fees to refinance student loans. The short answer is no.

Most of the time, you don’t pay additional fees to refinance student loans. Like most financial decisions, refinancing isn’t always that simple, though.

Keep reading to learn more about fees and taxes you might see when refinancing, how lenders make money when you refinance, and why you might receive a cash bonus during the process.

Fees to refinance student loans

When you refinance student loans, lenders don’t charge a refinancing fee. Unlike refinancing a home loan, there’s no charge to refinance student loans. There are two primary reasons to refinance student loans — reduce your interest rate or adjust your monthly payments.

Reducing your interest rate can save you thousands of dollars in interest charges over the life of your loans. You can also lower your monthly payments by lengthening your loan terms, but will this strategy increases your total debt bill. Regardless of your reason for refinancing, you should never get charged a fee by a lender to refinance.

Federal student loans charge what’s known as an origination fee. You rarely see a private lender charge this kind of fee unless you take out a specialty private loan. For example, there may be a 2% origination fee on MBA loans, medical loans, and dental school loans  (subject to state-specific regulations). But those are private student loans, not student loan refinance loans.

The competition for creditworthy customers is stiff, so charging refinancing fees isn’t in private lenders’ best interest. You might even receive additional perks and benefits, like a cash-back bonus (which we will discuss later) when you refinance student loans.

How lenders make money refinancing student loans

If private lenders don’t charge origination fees, you might wonder how they make money. Typically, student loan refinance companies make money in three ways:

• Interest charges
• Other fees
• Selling loans

One of the main draws of student loan refinancing is the ability to lower your interest rate. Despite lower rates, private lenders still earn considerable money from interest charges.

Although they don’t charge origination fees, there are also other fees placed on refinance student loans. Fees you might see when you refinance include late fees, returned payment fees, and forbearance fees.

Another way private lenders make money is by selling your loan to investors. This is one of the primary strategies for private lender SoFi, which sells loans to investors, like pension and insurance funds. By lending at lower rates and selling for a premium, private lenders can flip loans for a considerable profit while maintaining some ownership over the loans.

Other fees and taxes related to refinancing student loans

For the most part, you won’t face any additional fees when you refinance student loans unless you have issues making monthly payments. Here are some possible fees you might see after refinancing your student loans.

• Late fees: You might pay a fee when you make late payments on your refinanced loan. Some lenders charge a 5% late payment fee on the unpaid amount or $10, whichever is less.
• Returned payment fees: You could face a return payment, or return check, fee if your check is returned because of insufficient funds. Education Loan Finance (ELFI) charges a $30 return payment fee.
• Forbearance costs: Some private lenders offer forbearance for hardship. Policies vary between lenders. You probably won’t face a fee to put your loan in forbearance, but it will continue to accrue interest during the forbearance period.

You shouldn’t face penalties for paying off your refinance loan early either. As part of the Higher Education Opportunity Act, Congress made it illegal for private lenders to charge penalties on prepaid student loans.

If you refinance through Earnest and happen to live in Florida, you could face another charge. Florida charges a stamp tax of 0.35% on loan documents, which the lender passes on to borrowers.

Refinancing student loans vs. other loans

Origination fees are an upfront fee for executing a loan, including tasks like processing your loan application, preparing loan documents, and underwriting the loan. It’s commonly based on a percentage of the total loan amount. The percentage varies by loan type, loan amount, and lender.

As mentioned, most lenders don’t charge an origination fee when you refinance student loans. Other loan types typically charge an origination fee, but some lenders choose to make money in different ways. Origination fees are at the discretion of lenders, and are required to disclose the fee when quoting the loan cost and terms.

For example, on average, mortgage lenders charge an origination fee between 0.5% and 1.0% on mortgage loans. Below are the loan types that generally charge an origination fee:

• Mortgage loans
• Personal loans
• Auto loans
• Private student loans
• Medical practice loans
• Small business loans

The federal government charges origination fees on federal student loans. Here are the current origination fees charged on federal student loans:

	Direct loans	PLUS loans
On or after 10/1/20 and before 10/1/21	1.06%	4.23%
On or after 10/1/19 and before 10/1/20	1.06%	4.24%

Prepayment penalties don’t exist with student loans, but they’re common with other loan types like select mortgage loans, auto loans, small business loans, and personal loans. Not all lenders charge prepayment penalties, so always check the loan details before applying for any loan.

Why do lenders offer cash bonuses to refinance?

Student Loan Planner®’s private lending partners offer cash-back bonuses when you refinance your student loans. For some, that might seem unethical to provide a “reverse fee” or cash bonus to take out a loan. The reality is that when you earn a bonus for refinancing, it’s not incentivizing you to take on more debt. Your student loan debt already exists.

Most borrowers aren’t aware of the benefits of student loan refinancing, and that it’s possible to refinance multiple times to continue lowering your interest rates or improve your loan terms.

Student Loan Planner® partners with lenders to offer bonuses because to help you save money to pursue other life and financial goals. Nobody should be bogged down with crushing student loan debt. Refinancing is one way that borrowers can tackle their debt head-on and save thousands of dollars.

Use our student loan refinance calculator to see just how much money you can save. Although other loans seem to charge you fees left and right, you pay very few fees when you refinance your student loans.