Refinance as soon as you have good credit and a stable income to get a lower rate that will save you the most money. Can I refinance my private student loan?
3 reasons to refinance private student loans
Refinancing private student loans makes sense if you want to save on interest, change repayment terms or swap lenders.
- Save money
The best reason for refinancing private student loans is to save money. Lowering the interest rate can reduce your monthly payments, the total amount you pay, or both.
- Change the repayment terms
Refinancing private student loans may be appropriate for you if you want to change how you pay back your loans:
- Simplify repayment. If you have more than one private student loan, you can combine them into one refinanced loan with one payment. Credit providers may call it a consolidation of private student loans, but this means the same as refinancing.
- Extend repayment to reduce monthly payments.
- Shorten your repayment to save on interest. If you want to pay off student loans quickly, you can refinance and choose a shorter repayment schedule than at present.
- Choose a different lender
If you are not satisfied with the customer service or repayment options of the current loan holder, you can switch to another lender by refinancing. This is not in itself a sufficient reason for refinancing – especially if the change means paying more money.
When you should not refinance student loans
Basically you can’t or shouldn’t refinance if:
- You strive to forgive your student loan. Refinancing federal loans makes them ineligible for federal loan programs, including forgiveness of public loans and forgiveness of teacher loans.
- You have recently declared bankruptcy. Refinancing student loans is not impossible if you are declared bankrupt, but it is more difficult. Many lenders require time – from four to 10 years – from bankruptcy.
- You have recently repaid your student debt. The default past is the red flag for lenders.
Paying back loans will take you much longer. Refinancing to a low monthly installment can mean a longer loan period and higher interest rates.
You want a repayment plan based on your income
Income-based repayment plans or payment plans as you make money are necessary for some borrowers. If your income is a problem, you may be eligible for very low payments or even postpone payments until you are in a more financially stable place.
Like the loan cancellation program, if you refinance loans through a private company, this payment plan is no longer an option.
Are you having trouble making your monthly payments?
If your payments are high compared to your income and you have good credit standing, you can get an easier monthly payment when refinancing student loans. However, in addition to refinancing, it is good to look for ways to reduce your budget to maintain yourself and waste as much money as possible to pay off your debt.