I’ve spent over a decade tracking student loan refinance rates. In that time, I’ve interviewed numerous leaders from banks and lenders and gotten a ton of feedback from readers on their experiences.
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 April 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 |  | 6.64% | ELFI Review |
For those looking for shorter-duration loans or lower rates, be sure to check out this month’s rate update and market analysis.
