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5 Things You Need to Know About Refinancing Your Student Loans

What you'll learn: What you need to know to refinance your student loans


Refinancing your student loans is a smart way to manage your debt better. When you refinance, a new loan takes the place of an old loan. The best part is that you can consolidate multiple student loans into one debt. That makes it easier to keep up with payments. It may also help you snag a lower interest rate.


What to Know About Student Loan Refinancing

If you have multiple separate loans, a high interest rate, or high monthly payments, you’re a good candidate for refinancing.

You’ll need a good credit score to qualify for refinancing — for most lenders, that means a score of 670 or better. Before you apply to refinance, review your credit report to make sure your score is high enough (and to check for errors). If your score is too low, you might have to improve your credit score or find a cosigner.

Credit unions tend to offer competitive interest rates because they are member owned.

In addition to your credit score, lenders will evaluate other factors such as:

  • Whether you have consistent income
  • Your payment history for your student loans and other bills
  • Your debt-to-income ratio
  • Whether you have completed your degree or not

If you’re ready to refinance your student loans, here are a few other things you should know:

1. Borrowers of All Ages Can Refinance

Borrowers of all ages, in all stages of their careers, have the option to refinance. You can refinance your student loans whether you’re a recent college graduate or have been working for 20 years. To be eligible for refinancing, you typically need a degree, good credit, and an income that allows you to make debt payments.

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2. The Type of Loan You Have Matters

Do you have a private student loan, a federal student loan, or a combination of the two?

Know what type of loan you have, who issued the loan, the rate you’re paying, and the term of the loan. Keep in mind that when you refinance, you might not only get a lower interest rate but also a longer term, which could reduce your payment burden and make it more manageable.

Refinancing with your spouse could help you get a lower rate.

You should also be aware that you might lose certain benefits attached to your original loan or loans if:

  • Your federal loan allows you to change repayment plans easily
  • You’re taking advantage of a federal department relief program (such as income-based repayment or public service forgiveness)
  • You’re in the military

In general, the upside of refinancing offsets any loss in benefits, but be sure to make a thorough comparison.

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3. It’s Important to Compare Multiple Financial Institutions

Make sure you research several different financial institutions before you commit to refinancing. Traditional banks, online lenders, and credit unions will likely offer different advantages, so you’ll want to consider the repayment term and rate offered by each institution, as well as other benefits. Credit unions, for example, tend to offer competitive interest rates because they are member-owned.

Don’t forget to read online reviews from other borrowers when you’re comparing lenders. You’ll want to find a lender with good customer service who can work with you to find a payment plan that suits your circumstances.

Know what type of loan you have, who issued the loan, the rate you’re paying, and the term of the loan.

4. You’ll Need to Gather Some Paperwork

To apply for refinancing, you’ll need to collect your current loan information, including:

  • Your loan number
  • The name of your lender
  • Loan rate
  • Loan term

Start by asking lenders for quotes since a quote does not involve a hard pull of your credit. In fact, many companies offer online tools that use soft pulls that won’t affect your credit. With an online tool, you can get an estimated rate and payment. You can then compare it to your current payments and those of other lenders without dropping your credit score.

Keep in mind that quotes expire after a certain amount of time, so you may have to get a new quote if you wait too long.


Check student loan refinance rates without affecting your credit score.

5. Spouses Can Refinance Together

Refinancing with your spouse could help you get a lower rate. Many lenders evaluate a couple based on their combined income, while shared debts (like mortgages) are counted only once. This is an especially appealing option if one spouse has a lower credit score or is a stay-at-home parent and can’t get a lower rate while applying alone.

Not every lender evaluates couples together, so it’s important to ask an individual lender about their policy. But even if you can’t refinance together, your spouse may be able to cosign for you when you refinance. If your partner has a better credit score, that may help you get a better rate.

Borrowers of all ages, in all stages of their careers, have the option to refinance.

The Takeaway

Keeping up with student loans can be a hassle, especially if you have multiple loans with different interest rates and due dates. After all, you have all of your other bills to stay on top of, too. But refinancing can help you simplify things with one lower monthly payment.

Add to that a lower interest rate and you’ve got a formula for student loan success.

Lock In a Lower Interest Rate

Keep more money in your pocket with student loan refinancing from PenFed.