Report: Refinancing Student Loans May Help, But It's Hard to Get Approved
By Allie Bidwell, Communications Staff
As the conversation around the burden of student debt has continued to intensify, the refinancing industry has also grown. While refinancing federal student loans with a private lender may be a helpful option for some borrowers, it's increasingly difficult to get approved, according to a new report from LendEDU.
After analyzing data from more than 32,000 student loan refinancing applicants from 2017, researchers at LendEDU found that the average credit score of approved applicants has increased, and that the majority of applicants still get denied. LendEDU gathered the data from eight refinancing companies including SoFi, Citizens Bank, College Ave, Earnest, LendKey, CommonBond, Laurel Road, and ELFI, which together make up the majority of the student loan refinancing market.
Overall, LendEDU found that the average credit score of approved applicants was 764 — up from 757 the year before. And in 2017, 58 percent of applicants were denied, compared with just 43 percent in 2016.
The report also gave some insight into the types of borrowers who are ultimately approved to refinance their loans. The borrowers tend to have higher loan balances, for example. In 2017, the average size of the loan refinanced was $66,453, while the national average student loan balance is around $30,000. Just one year prior, the average amount of debt refinanced was $53,892.
Additionally, about one-third of approved applicants (33.21 percent) had a cosigner on their loan.
Borrowers who had their loans refinanced on average ended up with an interest rate of 5.56 percent. While that interest rate is lower than some federal loans, it's still higher than the average interest rate of 4.82 percent for refinanced loans in 2016.
Loans refinanced in 2017 had an average term length of 11.73 years, up from 10.4 years in 2016. And on average, it took just over one month — 34.33 days — from the borrower's approval to the point when the loan was funded, up from 28 days in 2016.
Publication Date: 1/18/2018
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