Best Times to Refinance Student Loans

Need flexibility with your student loans?  Refinancing your federal and/or private student loans can be a great way to consolidate payments and potentially save money on interest over time. Learn how refinancing can make your student loan payments more manageable and whether changing your student loan repayment plan makes sense for you.

When is the right time to refinance your student loans?

You generally need to be in grace or repayment on one or more student loans after graduation or separation from school in order to refinance. Once you’ve reached that point, here are a few specific opportunities to consider: 

• When interest rates are lower than your existing rate(s). 

Student loans, auto loans, and mortgages are long-term financial commitments; the longer the repayment term of your loan, the more you will generally pay in interest over the years. If your current loan has a variable rate that goes up and down, this may be a good time to examine your options for refinancing. You could move to a fixed rate to lock in current rates, or refinance at a lower rate than your current one. 

• When you want to shorten or extend the length of time you’ll be making payments. 

Extending your repayment terms can lower your monthly required payment (though you’ll still be paying interest for the life of the loan and could pay more out of pocket in the long run). 

Alternatively, you could choose a shorter repayment term to pay off your loans sooner, though this may also be possible if you make more than your minimum monthly payment on a current loan (assuming there are no prepayment penalties). 

• When you want all your student loans under your own name. 

Students often do not have the credit history necessary to qualify for a loan on their own. A co-borrower may sign for the loan, or a parent may take out a Federal Parent PLUS Loan in their own name. If your current loan doesn’t have a co-borrower release option, refinancing and consolidating your loans is one way to get all your student loans under your name and credit history. 

How to Refinance Student Loans in Five Steps

1. Compile a list of your current student loans, their balances, and interest rates. 

Take stock of whether you have federal student loans, private student loans, or a combination of both, and who your servicers/lenders are. Make note of the current balances, the rates, and whether you have a fixed or variable rate. It may be a good idea to create a secure spreadsheet with the information for easy access later. 

• You can find information about federal student loans through the Department of Education’s website. 

• If you’re unsure which lender(s) hold your private student loans, you can consult your credit report. 

2. Explore current refinance rates and estimated payments. 

Most lenders now offer an option to enter your information on their website to view potential rates and offers. By inputting some basic details, the lenders will perform a “soft credit check” which will typically not affect your credit score. While every lender is different, most will ask for items such as: 

• Name and contact information 

• Your college or university 

• Total of your student loan debt 

• Your current income 

Your results will include a list of available terms (how many years the loan is for); rates, which may be fixed or variable; and an estimate of your payments. Compare information from different lenders, and then select the offer that best suits your needs for terms and payments. 

3. Gather the necessary information and apply. 

Just as you did for your original student loans, you’ll need to provide documentation of your identity and income. In general, you will need to provide: 

• A government issued photo ID 

• Social Security card or number 

• Proof of income, such as pay stubs 

• Statements and account information for your current loans 

You will need the same information for a cosigner if applying with one. Be sure to respond to any requests for additional information in a timely manner so the loan process isn’t delayed. 

4. Continue making your loan payments until the refinance loan is finalized. 

The new lender will notify you when the refinance process is complete, which may take several weeks. Until that time, you should continue to make any scheduled payments on your current loans. 

5. Register for online account access for your new lender and make note of your payment date. 

Setting up automatic payments is an easy way to be sure your payments are made on time.

Debunking Student Loan Refinancing Myths

There is endless information available about student loan refinance, but some borrowers may still be confused about the process and their options. Here are some popular student loan refinance myths debunked.

I have to refinance all of my student loans.

There may be reasons to exclude some of your loans from a student loan refinance. For example, federal student loans come with certain benefits such as income-based repayment or student loan forgiveness for public service, and you may wish to keep those loans separate. You can choose which loans to roll into your refinance and continue making regular payments on any you exclude.

I can only refinance my federal student loans with the federal government.

The U.S. Department of Education offers a consolidation program for federal student loans, which combines multiple federal student loans into a single payment. A Direct Consolidation Loan has a fixed interest rate for the life of the loan. The fixed rate is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent. 

However, you may also be able to refinance your federal student loans with a private lender such as a credit union. Our refinance solution allows you to combine both federal and private student loans into a new loan with one easy payment.*

Once I have refinanced my student loans, I cannot refinance again.

You can refinance your student loans multiple times. If you have previously refinanced or consolidated your student loans, you may wish to refinance again later to take advantage of lower interest rates or to change your repayment terms. Plus, your credit score may improve over time, presenting an opportunity for a lower rate.

The Bottom Line on Student Loan Refinancing

Deciding whether to refinance student loans involves careful consideration of personal financial goals, market conditions, and individual loan specifics. It’s crucial to weigh the potential benefits against the drawbacks to make an informed decision. 

If you’re ready to refinance, apply here.