Student Loan Refinancing

March 12, 2018 — 05:10 am EDT

Written by NerdWallet ->

Student loan refinancing saves you money by replacing your existing college debt with a new, lower-rate loan through a private lender. To qualify, you need credit scores at least in the high 600s - ideally higher - and a steady income. If you fall short on either, you might need a co-signer who qualifies.

If you have private loans only, refinancing is the best way to reduce your payments.

Federal student loan borrowers may refinance as well, but those with poor credit or who struggle to make payments should investigate government income-driven repayment plans .

Frequently Asked Questions

When should I refinance my student loans?

Refinancing is a good idea if you have private student loans, or if you have federal student loans and don't plan to take advantage of a federal forgiveness program or an income-driven repayment plan. Refinancing at a lower interest rate can reduce your payment or allow you to repay what you owe faster. For the biggest savings, choose the shortest repayment term.

Student loan refinance calculator: Should I refinance?

Is it possible to refinance student loans?

Yes. You need strong credit and a steady income to qualify for refinancing. Most lenders look for a credit score in at least the high 600s, a low debt-to-income ratio and a steady paycheck. Almost all lenders accept co-signers to help you qualify. Some lenders also favorably consider a job with high earning potential in a profession like medicine or law.

What if I don't qualify to refinance my student loans?

Is refinancing student loans better than consolidation?

Refinancing and consolidation describe the same thing: turning multiple loans into a single, new loan. If you go through a private lender, like the ones above, you may see a lower interest rate. If you consolidate your federal loans through the government, you won't receive a lower interest rate, but you may qualify for loan forgiveness programs or income-driven repayment plans.

Federal student loan consolidation vs. private student loan refinancing

Which is the best lender to refinance with?

Most borrowers will want to go with the lowest interest rate they qualify for. But if rates are similar, look for lenders that offer options such as deferment, forbearance or flexible repayment in case of an unexpected financial hardship.

Choose the best student loan refinancing offer

What will student loan refinancing cost me?

Refinancing student loans doesn't cost money. Reputable private lenders do not charge origination fees or prepayment penalties. Consolidating federal loans through the Department of Education is also free. Some so-called debt relief companies charge fees to consolidate loans on your behalf, but it's never necessary to pay for this service.

Student loan relief companies cash in on confusion