June 4, 2021
by Adam Sisson
Looking for easier ways to repay student loan debt?
Student loan refinancing can be a smart solution for borrowers who are unhappy with their current loan situation. Refinancing can give you the power to save money on interest, choose a new repayment term, combine multiple loans into one payment, and more.
How to Know When to Refinance Your Student Loans
Knowing when to refinance can be difficult. Here are the seven signs you should look out for to know when it's the right time.
1. You Have High Interest Rates
You have bigger life goals than simply paying back college debt — things like buying a house, starting a family, getting a new car, or going on a much-needed vacation. And student loans with high interest rates can be a serious detriment to your financial plans.
Whether you have federal student loans — such as Direct Subsidized Loans, Direct Unsubsidized Loans, and Grad PLUS Loans — or private student loans through a bank, credit union, or other financial institution, you may feel stuck with a frustratingly high interest rate.
Paying more interest than you need to isn't fun, of course. That's where refinancing comes in.
Refinancing allows you to qualify for lower rates based on your credit history and other financial factors. If you're eligible for a lower rate, you'll save big money month-to-month and over the life of your loan.
2. You're Looking for Ways to Save Money
Money may be tight, or you might just be looking to have more spending cash. Either way, refinancing can be a smart way to save money.
No matter what your current interest rate is, there's always a chance you can qualify for a better one. And that's especially the case now while student loan refinance rates are currently at record lows.
It's important to monitor student loan refinance rate offers to ensure you're saving as much money as possible.
3. You Want to Pay Off Your Student Loans Faster
Ready to leave student debt in the dust?
Through refinancing, you can select a shorter term to become debt free sooner. A shorter term provides you with the ability to move onto bigger and better things with your finances more quickly, while also paying less in total lifetime interest.
4. You Want to Lower Your Monthly Student Loan Payments
On the flip side, you may have monthly student loan bills that are too high for your budget. If you feel like you need additional time to pay your debt, refinancing can be an effective option.
Refinancing gives you the ability to pick a longer term. With a longer term, you can substantially lower your monthly payments to get more wiggle room in your budget.
5. You Have Good Credit and Steady Income
Your credit history and income are important considerations when refinancing your student loans. If both aspects are in good shape, you may have a great chance to qualify for the best refinance rates being offered.
And because the refinance rates available today are so low, you can save a lot of money by refinancing as a creditworthy borrower.
6. You Have a Creditworthy Spouse, Parent, or Relative
If your credit isn't quite where you'd like it to be, you still could qualify for the lowest student loan refinance rates.
If you have a loved one with excellent credit history — such as a spouse, parent, or other relative — they can act as a cosigner on your student loan refinance application. A cosigner is someone who is responsible for making payments if you're unable to do so.
With a creditworthy cosigner, you'll become a less risky and more desirable refinance candidate. It's a great way to ensure that you have the best chance to qualify for the lowest rates possible.
7. You and Your Spouse Both Have Student Loan Debt
If you and your significant other both have student loans, you may be wondering if there's a way to combine them together. With some lenders, married couples can combine their college debt into one convenient and easy loan — while both taking advantage of refinancing's benefits.
Your Next Steps
If you think it's time for you to refinance, it's easy to get started. Once you find the right lender, you can start your application.