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Can You Refinance Student Loans? [2022 Update]

July 13, 2022

Refinancing student loans is a common practice that has a variety of benefits. When you refinance, you replace your old student loan with a new one. While the process is simple, deciding if it’s right for you requires some consideration. This guide breaks down how it works so you have all the information you need to make a decision.

How Does Student Loan Refinancing Work?

Student loan refinancing replaces your existing loan with a new one, usually with better terms. First, you shop around to find a lender with the best rates and terms that fit your needs. Credible has a free prequalification tool that provides personalized rates from multiple lenders without impacting your credit.

Next, you submit a full application with the lender of your choice. You can refinance some or all of your student loans into a single loan. Once you get approval and accept the new loan, your lender pays off your original student loan(s) and you make payments on the new loan for the agreed-upon term.

See Your Rates on Credible

Which Student Loans Can You Refinance?

You can refinance both federal and private student loans. This includes parent student loans, Parent PLUS loans, and international student loans. However, refinancing is only available through private lenders, so when you refinance federal loans you lose their benefits. This includes protections like:

  • Income-driven repayment plans
  • Loan forgiveness programs
  • Forbearance programs
  • Pandemic relief benefits

The lower interest rate still might make refinancing a federal loan worth it to you. It’s also important to note that some private lenders offer similar benefits, like pandemic hardship options and forbearance programs.

If these are benefits that you value, many of Credible’s lending partners offer similar forbearance programs.

Are You Eligible to Refinance Your Student Loans?

Every lender reviews your financial situation and current student loans to determine your eligibility. They all have different qualifications, but they generally include:

  • At least $5,000 in student loan debt.
  • A minimum credit score of 650.
  • A debt-to-income (DTI) ratio of 50% or less. Calculate your DTI ratio by dividing your total monthly bill payments by your total monthly earnings.
  • Stable employment and consistent income, which show that you’ll be able to make payments to your new lender.
  • Good payment history with your current student loans. Having loans that are in default (120 days for private loans and 270 for federal) tells potential lenders that you may not repay the loan.

If you don’t meet these requirements, many lenders will allow you to refinance your student loan with a cosigner.

It’s also worth noting that some lenders require that you’ve completed your degree and graduated, while others do not. If you’re an international student, lenders require that you have a cosigner who is a U.S. citizen or permanent resident.

See Your Rates on Credible

When Should You Refinance Your Student Loans?

You might refinance your student loan to swap a variable interest rate for a fixed interest rate or to release a cosigner. It can also be helpful to consolidate all of your loans into one simple monthly payment. However, the most popular reason to refinance is to save money by qualifying for a better interest rate with a lower monthly payment.

Now is the best time to refinance, since the Federal Reserve is raising the federal funds target rate three to four times this year. This rate is what banks and lenders use to set interest rates, meaning that each time the Federal Reserve increases the target rate, interest rates on loans will also increase.

Your current loan’s interest rate is locked in and won’t change. However, the window to refinance for the lowest possible rate is coming to a close. If you refinance after the Fed raises rates, you’ll likely pay more. Even if your credit score or DTI ratio aren’t perfect, it’s worth checking to see if you prequalify while rates are low.

See Your Rates on Credible

4 Steps to Get a Student Loan Refinance

1. Shop Around and Get Rate Estimates

It’s best to start by researching multiple lenders. Although they might seem alike, each lender has different features. For example, if you didn’t graduate, you’ll need to find a lender that doesn’t require a completed degree. You can compare offers from multiple lenders side by side on Credible.

Next, you’ll get rate estimates by prequalifying. This requires a soft credit pull and won’t impact your credit. Most lenders ask for basic information, such as:

  • Name
  • Address
  • Income
  • Monthly housing cost
  • Total student loan debt
  • University and degree

2. Pick a Lender and Loan Terms

As you get offers from different lenders, you’ll see fixed and variable interest rates, as well as a range of repayment terms. A variable interest rate usually provides a lower rate to start, but after a certain period, that rate can fluctuate. A fixed interest rate stays the same throughout the life of the loan.

Most people choose the lender offering the lowest interest rate. You may want to consider any other discounts, like autopay or loyalty discounts, before deciding.

3. Collect Documentation and Apply

When you’ve made a decision on your lender, you’ll complete an application. Most lenders require some documentation, including a government-issued photo ID, social security number, federal and private loan statements, and proof of income.

4. Wait for Approval and Loan Payoff

Once your application is complete, you’ll continue making your payments as usual while you wait for approval. This usually takes about 3 weeks, though it varies by each lender. When your new lender confirms approval, it will pay off your existing lender(s) and you’ll begin making payments to your new lender.

See Your Rates on Credible

The Best Lenders for Student Loan Refinancing

1. Credible

When you check your rates with Credible, you can compare offers from up to 13 companies in one place. It partners with trustworthy lenders, and allows you to quickly filter and sort offers based on what’s important to you, like APR, monthly payment, and repayment options.

Credible is affordable since it’s free to use, with no origination fees or prepayment penalties.

Credible’s lenders can refinance your total amount of qualified student loans, unlike other lenders that limit how much you can borrow. This makes it a great option if you have a substantial amount of student loan debt. Plus, Credible’s best-rate guarantee ensures that you get the lowest interest rate out there, or you get $200.

See Your Rates on Credible

2. Splash Financial

Splash Financial is a loan marketplace that offers some unique benefits, like the option to request cosigner release after just 12 months. Other lenders and marketplaces require a minimum of 24 to 36 months.

Splash Financial also gives you the option to refinance with your spouse, which could mean better approval odds and interest rates. You can also refinance parent student loans or loans in your child’s name after they graduate.

See Your Rates on Splash Financial

3. Citizens Bank

Citizens Bank is one of the only lenders that doesn’t require a completed degree to qualify for student loan refinancing. It also offers a loyalty discount that you won’t find elsewhere – if you have an existing eligible account with this lender, you can receive a 0.25% interest rate reduction. You can get another 0.25% off if you set up autopay, making Citizens Bank budget-friendly.

See Your Rates on Citizens Bank

The Bottom Line

The Federal Reserve is raising interest rates, but there’s still time to take advantage of historically low rates. Experts believe the first increase will come in March, so now is the best time to begin shopping around with lenders.

Credible makes it easy to check your rates with multiple lenders in just a couple of minutes, with no impact on your credit score. Even with less-than-perfect credit, it’s possible to refinance your student loans for a better rate.

See Your Rates on Credible

FAQ

What are the requirements to refinance a student loan?

Although eligibility requirements vary, lenders typically require a 650 minimum credit score, 50% or less debt-to-income (DTI) ratio, and a proven history of payments on your current student loans. You’ll also need to show that you have consistent income.

What happens when you refinance a student loan?

When you refinance your student loans, you apply with and accept a loan offer from a new lender. That lender pays off your original student loan(s) and you begin making payments of principal and interest to them based on your agreed-upon terms.

Can you refinance a student loan with the same lender?

Yes, you can refinance your student loans with the same lender, although it’s important to shop around to get the lowest interest rate. You may also use loan offers from competing lenders to negotiate with your current lender for a better interest rate. You can easily compare offers from multiple lenders on Credible.

Is this a good time to refinance my student loans?

Yes, now is the best time to refinance your student loans since the Federal Reserve is raising interest rates. There are at least three interest rates planned for this year. Each time, interest rates on student loan refinancing will also increase. By refinancing now, you get the lowest rates possible.

Ginny Dorn
Written by
Ginny Dorn is a freelance personal finance writer. She specializes in credit card debt, personal loans, and mortgages. She graduated from Western Illinois University with a bachelor's degree in family and consumer sciences.