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10 Questions to Ask Before Refinancing Your Student Loans

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10 Questions to Ask When Refinancing Student Loans

By now, there's a good chance you may have heard about student loan refinancing as an option to help lower monthly payments or save money across the life of your loan. But how does it work? What do you need to know? We've collected these 10 frequently asked questions and wanted to share the responses to fill you in on what you need to know. If these 10 don't answer what you had in mind, feel free to ask us anything by tweeting us @PenFed or getting in touch via our Facebook page.

1. What discounts are available, and are there any fees?

We never charge prepayment penalties, application or origination fees on a student loan refinance. If you have a graduate or professional degree, you may also be eligible for a lower interest rate. Check to see exactly what you may qualify for using our Find My Rate tool.

2. When does repayment start? Is there a derferment period?

When you refinance a loan with PenFed, there is no deferment period; your first payment is due 30 days after the loan disburses. The disbursement date can depend on your current servicer, but it typically takes place 3–14 business days after the promissory note is signed. This brings us to another frequently asked question…

3. How do I make payments?

After disbursement, you will receive correspondence with information on how to set up an online account and make a payment with PenFed. Need to adjust your payment date? After making your first payment, you can adjust the payment date by contacting PenFed Member Services at 800-247-5626.

4. What will my new loan term be?

That's completely up to you. We currently offer 5, 8, 12, and 15 year terms for fixed and variable rates. Our most popular term is our 8-year term but the term you select depends on your goals for refinancing. If you can afford to increase your monthly payments and want to get out of debt as fast as possible, then a 5-year term is best for you. Want to lower your monthly payments on your 10-year term but still save money? Try a 12-year loan term. Feel free to call one of our refinancing experts at 202-888-4320 if you need help determining the best strategy for your situation – we are here to help.

5. Am I able to combine federal and private loans, or do they need to be refinanced separately?

Yes, we can refinance both federal and private loans together. Remember, refinancing your federal loans will mean that you are no longer eligible for the benefits of federal loans, such as income-based repayment or student loan forgiveness for public service jobs.

6. Is there a maximum amount of student loans that I can refinance?

Our maximum loan amount is $300,000. Our minimum amount for refinancing is $7,500.

7. What are your DTI requirements?

Generally, your DTI (debt-to-income ratio) will need to fall below 40%, although our thresholds vary based on your income. Try calculating your DTI with an online calculator (like this one from Zillow) before applying to see if you are eligible. When married couples apply together (with one partner as the cosigner), we combine the income and debts, which can increase your likelihood of being approved.

8. How are your interest rates determined? Will my loan amount or annual income have any effect on my rate?

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. Your annual income is factored into DTI calculations but won't have any effect on your interest rate. If you apply with a cosigner, we'll use the higher credit score to calculate your interest rate.

9. 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 process takes place. Once your loan disburses, it can take anywhere from 3-14 business days for a payoff to be processed. Keep checking your account to ensure that the payoff is applied within this time frame. Any overpayment we make to your existing loan servicer will be refunded directly back to you through your PenFed share account.

10. What type of customer support does PenFed offer?

In addition to telephone and e-mail support, you can chat with us through our website or text your PenFed representative. If you need help with the application or want to figure out how to save the most money by refinancing, please reach out to us.