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Student Loan Refinancing Overview

1. What is student loan refinancing?

Student loan refinancing is the process of either taking one or multiple student loans and then refinancing them into a new single loan that often include new terms, such as a lower interest rate, a new monthly payment, and a new repayment length.

2. Who should refinance?

Refinancing is a great solution for working graduates who have high-interest rates on current outstanding student loans. Our borrowers shave an average of 2.5 years off their loan term and save an average of $17,496 in lifetime interest savings by refinancing. Borrowers should be aware that by refinancing, they may lose certain benefits offered by the federal programs, such as deferments, forbearance, and income-based repayment plans.

3. What loans can I including in my refinancing?

PenFed will refinance federal, private, and Parent PLUS student loans. When you refinance with us, we consolidate all of your loans into one easy monthly payment.

4. Where can I find my rates?

Use our Find My Rate tool to calculate your exact interest rate, compute your monthly payment, and compare lifetime interest savings all without completing a profile or submitting to a credit check.

5. How does applying with a cosigner help my application?

Although you may have good credit yourself, applying with a cosigner who also has good credit and strong income can ensure that you meet our credit criteria. This will increase the likelihood that you will pass our initial credit screening process and can provide you with a lower interest rate on your student loan refinance. PenFed will use the higher of the two credit scores for qualification purposes which means you can max out on savings.

Please note that when an application has a cosigner, the borrower and the cosigner will both a) jointly apply for credit; and, (b) be jointly liable for the requested loan. PenFed borrowers with a cosigner on their loan may request a "cosigner release" if after one year (12 consecutive months) of on-time payments is met, and a quick re-evaluation (note: this does not mean the borrower would have to re-apply) is completed on the borrower's financial and credit profile. Give us a call at 202-888-4320 if you would like to see if you qualify.

If your annual income is between $25,000 and $41,999, then you will need an eligible cosigner on your application. Also, if your credit score is between 670 and 699, then you will need an eligible cosigner on your application.

6. How long is my cosigner jointly responsible for my loan?

Your cosigner is jointly responsible for your loan for the life of the loan so make sure you choose wisely and can manage all the payments. If you miss a payment, it will damage your cosigner's credit.

7. How much can I borrow?

Our minimum loan amount is $7,500, and the maximum is $150,000.

8. Are there any fees associated with this loan?

There are no pre-payment penalties, origination, or application fees with PenFed.

9. Can I refinance my student loan while I'm still in school?

You must be out of school and have at least 2 years of employment to be eligible for a PenFed student refinance loan. For borrowers who hold degrees in MD, DO, DDS or DMD, your residency satisfies the 2-year employment requirement.

Applications Process

1. What number do I call if I have questions?

We will always provide free consultations about your student loan scenario via email, or via phone, 202-888-4320. We pride ourselves in putting you first and finding the best solution for each unique situation. Whether you have questions regarding an in-process application, as well as any servicing-related questions we are here to help.

2. Where do I send my underwriting documents?

To expedite the processing of your loan documents, and to keep them secure, it is best to upload them directly to your application.

If necessary, applicants may also email their documents to: and include the application ID.

3. Can I refinance loans for 2 or more borrowers into one loan (i.e. Can two people refinance their loans into 1 loan)?

We can typically facilitate this request for married couples and other unique situations. However, please call one of our student loan experts at 202-888-4320 to discuss options before proceeding with an application so we can find the best solution for you.

4. What is a Reference (a field listed in the application)?

A reference is an individual who could verify your name and address, but who does not reside with you at your physical address. If we were unable to get a hold of you, we would contact your reference. This only applies if you were severely past-due on paying your loan. A reference is not contacted during the application process.

5. Who can I use as a reference?

Your reference can be anyone over the age of 18, as long as he or she is not living at the same address as you. If you are applying with a cosigner, you cannot use him or her as your reference, nor can your reference live at the same address as your cosigner. Lastly, you and your cosigner cannot use the same reference (so make sure to call dibs).

6. What information is considered in the initial credit review on the application?

The initial credit review considers all of the information you and your cosigner provide during the application process, such as income, degree, and school, as well as the information obtained from your credit report. Once you pass the credit review, the next step is to provide documentation that supports the credit information.

7. If I save my application to come back and finish it later, how long is it kept on file?

We'll keep your unsubmitted application saved for 30 days. Once you have submitted your application and your initial credit check is run, we'll keep your submitted application on file for 60 days. But why wait when you can save money on your loan now?

You can access your unfinished application here.

8. How do I check the status of my loan?

Visit your application here.

Upon logging in, there will be a Checklist tab at the top of the screen. With the Checklist, you will be able to determine if there are any outstanding items needed.

9. I can't log into my account. How do I reset my username and/or password?

Visit your application here. On the log-in page, there is a link to reset the password, or to obtain your user name.

10. Upon pre-approval, what documents do I need to provide to complete the application process?

We require 5 items during the underwriting process:

  • Income verification: A paystub or tax return
  • Photo ID: A Driver's License, Passport, or state-issued ID card
  • Payoff Verification Statements from each existing servicer: a statement that projects the payoff amount 10, 15, or 30 days into the future
  • Graduation verification: A copy or photo of your diploma or transcripts
  • PenFed Membership Application: included in your application after pre-approval

No need to break out the fax machine, a smartphone picture or screen shot will suffice.

11. Do I need to be a PenFed member to refinance? How do I become a member?

In order to refinance with us, you will need to become a PenFed member but don't worry - it's easy to join, and there is no requirement for military service. You'll fill out a membership form during the underwriting process after you are pre-approved. Once your membership is confirmed, you'll have access to PenFed's award-winning products and services. You do not need to be a member to apply to refinance your student loans, we only require membership after pre-approval.

12. What are Payoff Verification Statements?

A Payoff Verification Statement is a statement provided by lenders and servicers that verifies the amount it would take to completely pay off your loan at a certain day in the future (often 10, 15, or 30 days in advance). The amount takes into account the loan balance, interest, fees, and any accrued interest during the time that the statement is requested and the future payoff date provided. This document is critical to the PenFed processing team during the underwriting process as it allows us to prepare an accurate payoff figure for your existing loans. On the contrary, loan statements or monthly billing statements solely provide the loan balance at a certain time, and they do not account for accrued interest.

Servicing the Loan

1. Following disbursement, when will I receive information about managing my account going forward?

On the day after your loan is disbursed, you will receive an email notification from PenFed with the steps to set up your online account and manage it going forward.

2. When can I expect my old loans to be paid off?

It typically takes 3-14 business days for your old servicer(s) to receive our payoff funds, apply them to your account, and process the payoff. Please check your account at your old servicer(s) to ensure that the payoffs have been applied after this timeframe. Contact PenFed if the balance is still outstanding after 14 business days and we will take care of it for you.

3. How long do I need to continue making payments with my old servicer after I refinance?

We recommend that you continue making regular payments with your existing loan servicer to avoid missing a payment while the disbursement goes through. Any overpayment we make on your existing loan will be refunded directly to you by your existing servicer in the form of a paper check sent to the address on your application. If your servicer sends us the refund, we will apply the funds directly to the principal balance of your loan.

4. Does PenFed offer deferments or forbearance?

We do not advertise for deferments and forbearance. However, if a borrower lost his/her job, or there was an extraordinary circumstance (death, illness), we would absolutely work with the borrower on a case-by-case basis to determine the best remedy. If forbearance is in the interest of both parties, then interest would accrue during the forbearance period, but no payment would be due.

5. What happens if I default on my loan?

Defaulting on a loan is a very serious matter which could have an adverse effect on your personal credit score. Further, bankruptcy does not cancel the obligation to repay an education loan. If you are about to miss a loan payment, contacts us immediately to work out a repayment schedule.

6. Is there a penalty for pre-payment or paying the loan off early?

No, you can pay your loan off early regardless of your repayment terms without any penalty. You will only be charged the amount of interest that has accrued on the loan until the day the loan is paid off.

7. What repayment options are there?

We only offer one type of repayment option; principal and interest payments. Any payment larger than the amount due made before the due date will be applied directly to the loan's principal balance.

8. Who is the loan servicer?

PenFed is the servicer of the student refinance loans. You can contact a representative of our Member Services team at 800-247-5626 or visit our website at

9. When will my first payment be due? How do I set up my account?

Your first payment is due 30 days after the loan disburses. To set up an account with PenFed, visit and click Create Online Account to register for Online Banking - you will need your member number and security code (call 1-800-247-5626 to establish your security code and obtain your member number).
Mobile App: Once you create your online account, you can pay via our mobile app which is available for download on the App Store and Google Play.

By Mail:

PenFed Credit Union
P.O. Box 247009
Omaha, NE 68124-7009

If you have additional questions, please contact a Member Services Representative at 800-247-5626.

10. Is there a deferment period?

Like other private lenders, we do not offer a deferment period.

Interest Rates

1. Why are your 12-year term loans priced higher than your 8-year or 5-year?

This accounts for the interest rate risk. It's always riskier for both parties to lock-in to a long-term rate without the information of where rates may be headed. To compensate for this risk, PenFed offers the protection of a fixed rate for 12 and 15 year terms, but in return, we ask for a higher premium for this protection.

2. How is the interest calculated on my loan?

Interest is calculated as simple daily interest. This means that each day the outstanding principal balance is multiplied by the interest rate and divided by 365 days to calculate that day's interest amount. For example, if you have a $10,000 loan and the interest rate is 7%, one day's interest will be ($10,000 x 0.07) / 365 = $1.92.

3. How are your interest rates determined?

Our interest rates are determined by your credit score and the type of degree you have. Your loan amount has no impact on the rates we offer but we do require a minimum of $7,500 to refinance. Your annual income is factored into DTI (debt-to-income) calculations but won't have any effect on your interest rate. If you apply with a cosigner or refinance with your spouse, we'll use the higher credit score to calculate your interest rate and save you even more on your student loans.

4. Can a borrower prepay the loan at any time?

Yes, a borrower may prepay the loan either partially or in full at any time without incurring any fees of penalties. So if you won the lottery, and want to take care of that balance, fees won't get in your way.

Variable Rates

1. How do variable rates work?

A variable rate means that the interest rate on your loan will fluctuate over the life of the loan based on market conditions. This means that the amount of your monthly payment will change from time to time. In general, if you choose a variable rate, most advisors suggest a shorter term in order to reduce your exposure to a potential increase in market rates. At the time of this writing, variable rates are lower than fixed rates. The interest rate on a variable rate loan is comprised of an index and margin added together. PenFed's variable rate index is the 1-month LIBOR, based on the LIBOR on the 25th day of the preceding month (or the next business day if the 25th falls on a weekend or holiday). The index is subject to change (increase or decrease) each month. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month's variable rate.

2. What is the floor and the cap for variable rate loans?

The cap for a PenFed variable rate loan depends on the term you select. For the 5-year and 8-year loans, the cap is 9.00%. For the 12-year and 15-year loans, the cap is 10.00%. PenFed's floor for variable rates is 2.00% for all terms. It's particularly important to compare the cap on variable rate loans. If interest rates were to increase dramatically, then a higher cap on a variable rate loan could expose you to significantly higher payments than on a fixed rate loan or on a variable rate loan with a lower cap.

3. What is LIBOR?

The London Interbank Offered Rate, more commonly known as LIBOR, is a standard benchmark for short term interest rates. It's the interest rate at which banks lend to each other. We use the 1-month LIBOR at PenFed. Our variable rates are comprised of a fixed margin (which never changes for the life of the loan) added to an index, in our case, 1-month LIBOR, which can change monthly. The rate will be determined on the 25th day of the preceding month (or the next business day if the 25th falls on a weekend or holiday), and the rate will be updated beginning after the first billing cycle following the Disbursement Date.

4. How do I choose between a fixed rate and variable rate?

It's up to you to determine what fits your financial situation best. In recent periods, variable rates have been lower than fixed rates, thus offering a borrower savings over the short run but the possibility of significantly higher payments if market rates were to increase over the life of the loan. A variable rate loan may be a good choice for a borrower with high enough income to absorb an unexpected increase in payments. Variable rates are not recommended for borrowers who are risk averse or for those choosing a longer term. By contrast, a fixed rate on a loan means that your interest rate will remain constant over the life of the loan and your monthly payment will never change. A fixed rate loan is a good choice for a majority of borrowers, particularly those who are refinancing and want to lock-in their savings.

Think of having a variable rate like paying your electric bill, which fluctuates, and a fixed rate like paying your rent - which does not change.

Credit Checks and Your Student Loans

1. Why is a credit check necessary?

The credit check serves two main purposes. First, it is used to verify the identity of all people signing the application. Second, it's used for qualification purposes and helps us offer you the best pricing we can based on your credit history.

2. What if I have no credit history?

There are many things that contribute to your credit history. If you aren't sure what your score is, you can check your credit score for free at CreditKarma. But if you have no credit history, you won't be eligible for our program.

Personal & Financial Information

1. Is my Social Security number needed?

We only request your Social Security card to verify your identity if an ID mismatch were to occur in the application process, or on the credit report. A PenFed associate will contact you directly if we encounter such a situation.

2. What is the difference between a U.S. citizen and a Permanent Resident?

U.S. Citizen - A person who was born in the United States, including the lower 48 states, Alaska, Hawaii, Puerto Rico, Guam, and the U.S. Virgin Islands; or who became a citizen through naturalization; or who was born outside the United States to U.S. Citizen parents under qualifying circumstances (derivative citizenship) and who has not renounced U.S. citizenship.

Permanent Resident - Any person not a citizen of the United States who is residing in the U.S. under legally recognized and lawfully recorded permanent residence as an immigrant. Also known as "Permanent Resident Alien," "Lawful Permanent Resident," "Resident Alien Permit Holder," and "Green Card Holder."

At this time, only U.S. citizens are eligible for PenFed loans.

3. What is the difference between a permanent address and a mailing address?

Your permanent address is the location that you consider to be your primary place of residence (like your parents' or guardian's address). Your mailing address is wherever you want to receive all of your loan documents.