Should You Refinance Your Student Loans?

As a 27 year-old, college graduate living in the United States, I have my fair share of student loans. The grand total, when combined with my fiancée’s, is $115,000.

To our household, that is a terrifying number.

It should be. Debt is no joke.

Despite all this, we’ve managed to pull together a tax efficient investment strategy which allows us to utilize the tax code while simultaneously paying down the debt.

To up our game in our fight against debt we’ve accelerated our payments and lowered the interest rate on some loans thanks to refinancing with SoFI.

I haven’t spoken on the subject of refinancing a whole lot because I wasn’t sure if I would go through with it myself yet. There are some scary stats on how many people are simply not aware of the options they have when it comes to refinancing student loans. In many cases, refinancing a loan it could ultimately mean saving as much as $10,000 or more.

My goal today is to write a post about refinancing that I, myself, would have benefitted from reading three years.

So, should You Refinance Your Student Loans?

Before you consider refinancing — please, please, please — check out my previous article discussing the pros and cons to refinancing. This article focuses on my process only after I made the decision to refinance.

Step 1 – Assess Your Options


I utilized LendEDU’s service to identify 12 lenders in 3 minutes by answering 10 questions. To see what you might qualify for, take the same questionnaire via my exclusive link here.

If you have student loans, I don’t see a downside to at least assessing your options. There is no harm done on your credit score.

Step 2 – Analyze the Numbers

Once you see the lenders and the loan terms, you can then begin to analyze the numbers.

This part can be a bit tricky since the term of the loan will vary. While a 15 year loan might have an extremely low monthly payment, you’ll likely be paying much more interest over the long run.

Factor in how the change in monthly payments will impact your budget and your emergency fund.

If you decide on a variable interest instead of a fixed rate, understand how the rate may change and how your budget will be impacted by the price swings. For more on variable rate loans, check out this post by Sam from Financial Samurai.

My Numbers

I found an offer from SoFI that offered a lower interest rate. My original loan was relatively low at 5.382%. My new loan is now at 4.03%.

I also agreed to a 5 year variable rate loan. The current term remaining on my loans was about 6 years, so I’ve already set myself up to pay the loans off a year early. My goal is to have this loan eliminated within 2 years.

Step 3 – Closing on the Loan

The final step is putting all your ducks in a row. There is a good amount of paperwork associated with refinancing.

I refinanced with SoFi, as they offered the best options. In addition they made the process smooth and easy. They were accommodating when I didn’t have one of my W-2’s on hand, and were flexible to accept different types of documents (my tax return for that same year).

When it comes to promoting other services and products, I only feel comfortable doing so when the product is something that has benefited me OR where I can see a lot of readers receiving a benefit. This same feeling applies to SoFi so I feel very comfortable recommending them. Again, refinancing is a complicated process, but if the numbers work in your favor, I think you’ll be happy with your choice.

Also, I negotiated a referal that let’s you receive $300 for having them refinance your loan. Here’s my link for more information.

Once the lender reviews the documents, they will let you know if you’ve been approved or denied. This part is a bit hectic, but I know my credit score is good after having had to recently repair it.

After I received my approval, I signed the loan agreement. Again, if you’re considering this, please review my list of pros and cons to refinancing before you decide to opt in for a better student loan deal.

SoFi funded my old student loan and now I set up my autopay to send monthly payments to SoFi’s loan administrator.

One final pro tip: Make sure you continue to make old monthly payments UNTIL you receive confirmation that the original loan is paid and the refinanced loan is up.

These things can take as much as a month to complete, so be patient. Soon you’ll be enjoying the benefits of your refinanced student loan!

Have you refinanced a student loan, personal loan or mortgage? Was there any step of the process I left out that you want to know more about? Leave a comment and let me know.

Master Distiller

P.S. Another few hours spent on my blog’s theme. I’m real happy with how it is looking so far. Thank you for all the great comments!

P.P.S. If you’re curious to see more about SoFi, check out my exclusive link here that will get you a $300 credit for having them refinance your loan.

12 comments… add one
  • Jon @ Be Net Worthy Oct 10, 2016, 4:46 am

    I was fortunate in that I never had to take out student loans to get through college. If refinancing student loans is anything like refinancing a mortgage though, I know the process and paperwork can be intimidating. I refinanced our mortgage earlier this year to save us over $20k.

    Love the new look of the site – nice and clean!

    • Financial Panther Oct 10, 2016, 9:43 am

      Hey Jon. I’ll tell you that refinancing a student loan is nothing at all like refinancing a mortgage. You barely have to give them any paperwork. If I recall, when I refinanced, they only needed a copy of my most recent paystubs and ran a credit check. Never had to speak to anyone either.

      You know us millennials are scared of talking to anyone in person!

    • Distilled Dollar Oct 10, 2016, 11:39 am

      With SoFi, I had to provide pay stubs and two years worth of W2’s, in addition to SSN card and drivers license.

      Thanks on the comment regarding the new site! I’m glad the work behind the scenes is paying off.

  • Financial Panther Oct 10, 2016, 9:39 am

    While I was working in big law, I foolishly didn’t refinance my student loans right away because I didn’t educate myself and also wasn’t really sure what refinancing meant. After I did it, I finally realized that everyone should refinance right away if they know they’ll be working in a position where student loan forgiveness isn’t possible.

    I first refinanced through SoFi and got my rate down to 4.3% and snagged myself a referral bonus. Then I refinanced again with CommonBond and got a variable rate of 1.93% (and also snagged a referral bonus). Since I knew I was going to pay off my loans fast, it made sense to go with a variable rate. By the time I had paid off all $87k of student loans, my variable rate had moved up to 2.17%. I was still ahead, and probably would’ve stayed ahead with the variable rate for a long time.

    I also did a small refinance using Earnest. Again, I did it to snag a referral bonus, and I also wanted to get a tshirt from them. Yeah, that’s probably a stupid reason to refinance, but I like being able to say I refinanced with the big three student loan refinancing companies.

    One great benefit with refinancing with SoFi are the member events. In my city, SoFi hold quarterly dinners at fancy restaurants around town. They let you invite a guest as well. We’ve been able to go to tons of fancy restaurants for free because of these events (and you stay a member, even if you’ve already paid off your loan).

    Matt – if you refinanced with SoFi, make sure you look for those member event invitations. I’m sure they have them in Chicago pretty regularly.

    • Distilled Dollar Oct 10, 2016, 11:41 am

      You had me at free dinners! Thanks for letting me know.

      Nice work on refinancing. I’m sure we will be doing another round within a year. There is a portion of my fiancée’s that we should be refinancing soon.

    • The Vigilante Oct 25, 2016, 7:38 am

      I agree refinancing is the obvious choice when you can’t pursue loan forgiveness, but I’d like to add a caveat for anyone reading the comments: Student loan forgiveness is usually a really, really bad choice if, in pursuing it, you pass on the opportunity to earn more money in favor of a job that qualifies for forgiveness.

      Under most forgiveness plans, you end up paying MORE over the years. And the year your balance is forgiven, it is a taxable event! The main exception to this rule is Public Service Loan Forgiveness (10 years on any repayment plan, tax-free forgiveness) when you are working at a public service job with a salary comparable to the private sector. Other than that, there may be industry-specific forgiveness programs (like the ones for teachers) that work, but generally it’s a bad idea to purposely go for forgiveness.

  • Mustard Seed Money Oct 10, 2016, 12:43 pm

    I haven’t had to refinance student loans. I was fortunate that I graduated from college debt free plus I was extremely lucky because college tuition exploded after I graduated.

    I did go through a mortgage re-fi in 2010 and that was a huge pain. The amount of paperwork involved was a bear. I was so glad when it was completed but it took FOREVER.

    BTW…I love the redesign of the website. Looks really good 🙂

    • Distilled Dollar Oct 13, 2016, 3:26 pm

      Thanks! 🙂

      Lucky for you! Hah, I have mixed feelings towards our debt – since it really sparked the entire DD movement towards FIRE in the first place.

  • Finance Solver Oct 10, 2016, 2:30 pm

    I was lucky enough not to have to take on debt to fund my college expenses. With historically low interest rates, I know that people are looking to refinance a lot of their degrees / mortgages / etc. It seems like a smart thing to do as I don’t think interest rates will go towards the negative territory in the United States!

    • Distilled Dollar Oct 13, 2016, 3:29 pm

      If there’s an opportunity to reduce interest payments AND we understand all the risks at play – then yes, it’s a no brainer.

  • PatientWealthBuilder Oct 10, 2016, 8:47 pm

    I am a refinancing addict! Everyone should be looking to refinance to fixed rate debt to take advantage of these absurdly low rates. I am amazed at how many people have so much school debt. Is that like a trend or something? I have read that a lot of millennials have large amounts of school loans. I know I owed about $18,000 when I finished graduate school. I figured it made sense from a return on investment standpoint. But how does the ROI work on $115,000? I guess when you look at lifetime earnings it is certainly worth it! Congrats on the refi and the plan to pay off the debt. You will get there!

    • Distilled Dollar Oct 13, 2016, 3:28 pm

      Agreed! $115,000 makes for some challenging discussions. I’m confident our lifetime earnings will far and away outgrow that number, but it is hard to say. I’ll lean on Buffett here when he says, “the wisest investment you can make is in yourself.”

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