Refinancing student loans could potentially save you thousands of dollars over the term of your loan. For example, as of 2018, the average CommonBond borrower saves $24,000 annually after refinancing. 

Of course, the savings will vary considerably from one student to another. The exact amount you will be able to save will depend on your unique circumstances and which lender you pick. 

How Refinancing Works

Refinancing means swapping one or more of your existing student loans for a new loan. This new loan comes with new interest rates and new terms and conditions. The rate of interest on your new loan will depend on your credit history and your debt to income ratio. The better your credit, the lower the rate you’ll qualify for. Even a small reduction in the rate of interest can add up to big savings over the term of the loan. Refinancing only makes sense if you qualify for a lower interest rate on your new loan.

You can refinance student loans multiple times, and you should if your credit score improves. This will qualify you for an even lower rate of interest on your new loan. Refinancing the second or even the third time will help you lock into lower rates every time. This will help you rack up your savings over the term of your loan. You do not pay any application or origination fees to refinance, so it won’t cost you anything.

How To Maximize Your Savings With Refinancing

These are the four most important things you can do to maximize your savings on your refinanced loan:

1. Make all payments on time every time. This will help you build your credit score. The higher your credit score the lower the loan interest you will pay on your refinanced loan.
   
2. Compare multiple lenders to see who offers you the best rate. Narrow down similar offers further by comparing payment flexibility.
   
3. Track market conditions and interest rates. If you aren’t in a hurry, apply for refinancing when interest rates are at their lowest.
   
4. Check your credit score periodically. If you qualify for a lower interest rate, consider refinancing your refinanced loan again.

How To Calculate Your Potential Savings

There are several online lenders that have student loan refinancing calculators on their site. You can use these online tools to calculate your potential savings.

The online calculators work by processing the information you input. You have to enter your current loan balance along with the interest rate, monthly payments, and remaining term in years. Then you enter the interest rate, monthly payment and term for the new loan. The online calculator will run these numbers and calculate your monthly savings and lifetime savings.

Using an online calculator to estimate your monthly and lifetime savings will help you decide whether or not refinancing makes sense for you.