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How to refinance your student loans
Take charge of your college debt by consolidating with a new lender.
If you feel like you’re drowning under your current repayments or think you might qualify for a lower rate, student loan refinancing can help. Not only does it allow you to consolidate your loans into one monthly payment, but you may be able to lower your repayments as well. Make sure you compare different lenders and have all the necessary paperwork handy before moving forward.
What's in this guide?
7 steps to take before refinancing your student loans
Before you begin the process of refinancing your student loans, take these precautionary steps to ensure it’s the right move for you.
Step 1: Evaluate your current loans.
You usually stand to gain more than you’ll lose by refinancing your private student loans. However, if you have federal loans, you’ll lose out on several benefits like income-driven repayment plans, forgiveness programs and multiple forbearance and deferment options by refinancing with a private lender. Think carefully about whether you’re willing to give up these perks.
Step 2: Check your credit.
Most refinancing providers require good to excellent credit — or a creditworthy cosigner — to qualify for their loans. If you’re hoping to get a lower interest rate, make sure your credit score is high enough. If not, you may want to work on improving it before refinancing.
Step 3: Compare lenders.
When comparing student loan refinancing providers, consider interest rates, loan terms, repayment plans, deferment options, fees and any extra perks that could set a lender apart.
Step 4: Review eligibility requirements.
Many lenders have specific eligibility requirements based on where you live, your credit score, whether you graduated and your annual income. Make sure you meet its criteria before applying.
Step 5: Figure out the payoff amounts of your current loans.
Get in touch with your student loan servicers to request payoff amounts — the remaining balances on your current loans. Once you know how much debt you’ll need to refinance, confirm the lender you’re interested in will accept that amount — many have limits to how much or little you can refinance.
Step 6: Create a budget to determine how much you can afford to pay each month.
Look at your monthly income after taxes and subtract any recurring expenses like rent, utilities, TV-streaming subscriptions, credit card payments and other monthly bills. Then leave a cushion for any emergency expenses that might crop up. What’s left is the amount you can comfortably afford to pay on your student loans each month.
This will come in handy when you’re deciding what loan term to choose based on the interest rate you’re offered.
Step 7: Gather required information and documents.
Before applying, ensure you have all the paperwork and information handy to speed up the process.
What documents will I need to apply?
Your lender might ask you to provide some or all of the following documents when you apply to refinance your student loans:
- Government-issued ID. Almost all lenders will ask for your government-issued ID on top of your Social Security number to confirm your identity.
- Recent pay stubs. Your pay stubs serve two purposes: They show how much you make and prove you’re employed full time.
- Recent tax returns. If you’re self-employed or make a steady income without receiving pay stubs, lenders will often accept recent tax returns as proof of income.
- Statements from your current loan servicers. Many lenders ask you to provide a recent statement showing how much you owe that lists your servicer’s contact information.
- Payoff letters. Some lenders also ask you to reach out to your servicer for a payoff letter, or a statement to show how much you’ll owe on your loans in 30 days. Others will do this themselves.
How to apply for student loan refinancing in 7 steps
You’ve done your homework, gathered your documents and chosen a lender. The next step is to complete the application. While applications will vary by lender, you’ll generally go through the following steps:
Step 1: Fill out a prequalification form.
Most lenders have an option to prequalify without affecting your credit score. This will help you determine if you even meet the lender’s minimum eligibility requirements.
If you don’t, you might want to ask a friend or family member to cosign your loan. Otherwise, you’ll need to go back to the drawing board and compare more lenders.
Step 2: Review the rates and terms you prequalify for.
Whether you prequalified on your own or needed to add a cosigner, most lenders will let you know within several minutes what potential rates and terms you’re eligible for. Compare what you’re offered to your current student loans to make sure it’s worth it.
Step 3: Choose the rate and term that best fits your budget, if possible.
From here, take a look at the number you calculated earlier about how much you can afford to pay each month. Some lenders might offer you the choice of different rates and terms, while others might only give you one option.
If you’re able to choose, you can use our student loan calculator to figure out what rate and term gives you repayments you can comfortably afford to pay each month. The shorter the term, the larger your monthly repayments will be — but the more you’ll save on interest in the long run.
If you’re looking for lower monthly repayments, you’ll want to go for a longer term. Keep in mind this will increase the total cost of your loan, though.
Step 4: Submit the full application.
Once you’ve decided you’re happy with the prequalification offer, it’s time to fill out the complete application. This step will require personal and financial information from you and your cosigner, if applicable.
After you submit the full application, you should receive some form of confirmation that the lender received it and it’s processing. If you don’t, reach out to customer service to make sure there aren’t any issues.
Step 5: Wait for an official decision.
This can vary greatly depending on the lender. Some might provide a decision immediately, while others may take a few days — usually no more than 72 hours.
Step 6: Review the rates and terms you’re offered.
If approved, you’ll receive an official offer with the rates and terms you qualify for. Though not always, this might differ from your prequalification offer.
Read through the contract and make sure you’re comfortable with everything. If you have any questions, reach out to customer service for help.
Step 7: Sign your loan documents.
Happy with your offer? Ready to officially complete the refinancing process? Sign your loan documents and return them to your lender.
Compare student loan refinancing providers
What happens after I sign my loan agreement?
Once you’ve returned your signed agreement, it can take anywhere from 10 to 30 days for your new lender to pay off your old student loans. Keep making payments to your current servicers until you receive confirmation that your loans have been paid off. From there, you’ll begin making monthly repayments to your new student loan servicer.
3 reasons why you might have been rejected
Did you get rejected after submitting your full application? Here are a few reasons why that might have happened:
- Low credit score. This is one of the most common reasons, but it can usually be overcome by reapplying with a qualifying cosigner.
- Low income. If your credit score is high but your income is low, this can also cause your application to be rejected. Consider reapplying with a cosigner who has a high income to strengthen your application.
- Errors on the application. Read back through your application and confirm all of the information you entered is correct — especially fields like your birthday, Social Security number and requested loan amount.
3 alternatives to refinancing your student loans
If refinancing doesn’t fit your needs or you’re unable to qualify, consider one of these alternatives instead:
- Take out a federal Direct Consolidation Loan. If you have federal loans, consider consolidating with a federal Direct Consolidation Loan. This gives you only one monthly loan payment, allows you to keep your federal benefits and opens you up to even more repayment and forgiveness options.
- Sign up for a different repayment plan. If your goal of refinancing was to lower your monthly payments, try signing up for an alternative repayment plan first. For federal loans, this could mean going on an income-driven or extended repayment plan. If you have private loans, reach out to your lender to review your options.
- Apply any extra money to your loan principal. If you want to pay off your loans as quickly as possible, refinancing could actually extend your loan term. Instead, consider putting any extra funds you receive — like a tax return or bonus — directly toward your student loan principal.
Bottom line
Refinancing could be a useful tool if you want to lower your interest rate, extend your loan term — or both. To find the best deal available to you, evaluate your current loans and compare lenders before applying.
You can learn more about how it all works with our guide to student loan refinancing.
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