Student Loan Refinancing Relief

student loan refinancing can help resolve your student loan debt problems.

Your financial situation is different from someone else. The student loan refinancing service that works for someone may not be the best choice for someone else. You should take the time to understand all the debt relief options available to you to find the best solution for your needs and goals.

What Is Student Loan Refinancing?

Student loan refinancing relief is a means for you to reduce the financial burden your student loans have on your life. Student loan refinancing is a great option for most people, but it isn’t always the best option for everyone.

Student loan refinancing allows qualified borrowers to reduce the interest rate and repayment terms on the new loan, saving thousands in total interest over the term of the loan. Student loan refinancing permits you to make monthly payments that pay off your loans faster, lock in a fixed interest rate, or remove a parent as the cosigner of a student loan. Depending on the interest rate and number of years it will take to pay off your new loan, refinancing can reduce your monthly payment, your total interest paid, or both.

Why Student Loan Refinancing?

Student loan refinancing is simply the process of converting your existing student loans to a new loan with a lower interest rate.  This offers you three benefits:  lowers the interest cost saving you money on your loan debt,  permits you to reduce your monthly loan payment and allows you to consolidate (combine) multiple student loans into a single loan payment.  Student loan refinancing is exclusively available from private lenders.  Unlike other types of unsecured debt refinancing, student loan refinancing has virtually no cost to you (other then your time and paperwork) to convert your existing student loan.  There is virtually no reason to not consider refinancing your private student loans.

You should refinance your student loans if:

    • You Would Save Money – There is no reason to refinance your student loans unless you end up paying less in interest.
    • You Can QualifyYou (or with a co-signer) generally need a credit score at least in the high 600s and enough income to consistently pay your debts and other expenses.
    • Your Finances Are StableIf you have federal student loans and choose to refinance, your federal loans will no longer be eligible for Income-Driven Repayment and loan forgiveness.   You need to ensure you will be able to consistently make your new student loan payment without this federal student loan relief option.

How To Refi | Will You Qualify?


When you refinance your student loan you take out a new loan at a lower interest rate. The lender will then use the funds to pay off the original loan (or loans) being refinanced leaving you with one single loan payment. If you are paying off multiple student loans, this is a process called debt consolidation. Normally you cannot include any other kind of unsecured debt, such as credit cards or personal loans, in your consolidated student loan.


The process to refinance student loans is similar to like that of refinancing other types of debt:

    • Identify which student loans you need to refinance. Note that if you include federal student loans, you will lose the option of federal student debt forgiveness.
    • Determine the total amount of student loan debt to be refinanced as well as the APR rate per loan. If there are multiple student loans, you will need to calculate the weighted APR.
    • Research multple student loan vendors and get multiple rate estimates.
    • Choose a lender and loan terms. The quoted APR MUST be less than your existing student loan APR.
    • Complete the lender student loan application which includes your approval of a hard credit check.
    • If your student loan application is approved (school, degree, credit score, Debt-to-Income ratio, etc.), work with the lender to specify the specific loan terms and monthly payment amount you desire.
    • Sign the final student loan lender documents.
    • Wait for the lender notice of having disbursed pay offs to your existing loans. (You should continue paying off your existing loans until this is completed to avoid late payments that will affect your credit score).

You now have only the new student loan to pay off.

Make sure that you review your credit report a month later to verify that the old student loans are noted as paid off.

Will you qualify?

You have your specific student refinancing lender requirements. This might be the type of student loan, amount being financed, term of the loan, minimum APR required, school or degree criteria, etc.  You should only apply to a lender that fits your requirements.

Student loan refinancing lenders also have their own requirements that vary by lender. In general the loan approval process is lenient versus other types of loans. Since school refinancing lenders want to issues loans to make money, you just need to make sure you can check off these basic items.

Good Credit

You will need a credit score in the mid-600s. A FICO credit score of 670+ is considered good. Remember you are applying for an unsecured loan, unlike a home mortgage or car. The lender is making their approval decision based on your previous credit payment history and your future earnings potential.

If you do not have a high enough credit score you can:

    • Apply with a co-signer with a good credit score. (Most lenders will allow you to take off the co-signer after a period of time of consistent, on time loan payments.)
    • Take steps to improve your credit score and then reapply. While you may have to pay off some accounts to improve your credit score, the savings from refinancing your student loan will likely be worth it.
Sufficient Income

Do you have enough income to afford your expenses and the new student loan? Lenders consider your total income and your debt-to-income ratio to assess your potential to repay the student loan. The lender is basically looking to determine how much of your income would be used to pay down debt on a monthly basis. The larger the portion of a your income goes towards debt, the potentially more difficult it may be for you to repay a new loan.

Industry lender DTI guidelines for mortgage mortgage approval is 43%, while for student loans is somewhat lower. Lenders will also take into consideration your school carreer path if it offers a high future earning potential such as medicine, lawyers and MBA graduates.

School Eligibility

Most student loan refinancing lenders require that borrowers attended a Title IV-accredited school. Many, but not all, require borrowers to have earned a degree.

Finances | Credit Affect Approval?

Does My Finances Allow Refinancing?

This depends somewhat on the type of student loan you are looking to refinance.

Private Student Loans

Refinancing a private student loan has few, if any lending costs (origination fees) in the lending process. If you are struggling to make consistent payments, you should make the effort to refinance your student loan. If approved, with a lower APR than your existing student loan, you can reduce your monthly payment making it easier to be consistent in your loan payments.

Federal Student Loans

Refinancing a federal student loan also has few, if any lending costs. However, if you are struggling to make consistent payments, you should NOT refinance your school loan.

If you are using the Standard Loan Plan of 10 year payments, you should consider an Income Driven Repayment (IDR) plan. The IDR, plans adjusts your monthly school loan payment based on your ability to pay, instead of the terms of the loan. The IDR plans can lower your monthly student loan payment and free up cash for other expenses.

However they DO NOT save you money in your school debt unless combined with a Federal Loan Forgiveness program.

FICO Score

Consumer Credit Report
Payment History
Amounts Owed
Length Of History
Credit Mix
New Credit

Refinancing With Bad Credit

It is possible to get student loan financing with bad credit.  It however will take you time and discipline.  But the financial reward of saving money on your student debt cost will be worth it.


Most student loan lenders will let you strengthen your loan application by adding a co-signer who has a stronger credit profile.

Your refinanced student loan will appear on your co-signer’s credit report. Your loan will be consider part of the co-signer’s overall debt load and any late payments will reflect negatively on the co-signer’s credit score. If you default on your student loan, your co-signer will be responsible for payment.

Some student loan refinancing lenders offer a co-signer release. This gives you the option to remove the co-signer if your credit has improved and you have made a certain number of on-time payments.

Some private student loan lenders also provide a disability discharge.

Improve your credit

You will need to improve your credit before applying for your student loan. Pay every bill on time and stay well below your credit limits.

Start by checking your credit report to determine where you need to improve. If you notice any errors on your credit report, dispute them to get them erased. You may also wish to consider contracting a third-party company to do an analysis of your credit report for ways to improve it.

Improve Your DTI

Lenders also look closely at your debt-to-income (DTI) or the money left over after you cover regular monthly expenses such as rent and car payments.

From the lenders’ view, the more cash available, the more likely you are to repay a refinanced loan. To improve your cash flow, increase your income or reduce your discretionary expenses and pay off outstanding credit card balances to reduce your debt.

Refinance Federal Student Loans?

The Standard Repayment Plan is the most popular plan for federal student and parent loans. It is a level payment plan, with up to 120 fixed monthly payments during a repayment term of up to 10 years.

An Income Derived Repayment (IDR) plan for federal student loans is different. Instead of setting monthly payments according to your student loan balance, the amount due is relative to your income. It is intended to make your payments affordable while taking income and family size into account.

The term of IDR student loans is 20 – 25 years, rather than the Standard Repayment Plan of 10 years. When combined with one of the various student loan forgiveness plans, you have the potential to have the remainder of the IDR loan forgiven after 10 years. This is a significant reduction in your student debt, regardless of whether you are obligated to pay taxes on the debt forgiven.

You should refinance federal student loans only if you’re comfortable giving up federal loan protections and it will save you money.

You should NOT refinance your federal student loans if you expect to qualify for federal loan forgiveness, are currently in an IDR plan or you are financial at risk and will not be able to make your new student loan payments.

Risks | Benefits

federal student loans REFINANCING Risks

You cannot refinance student loans through the federal government. You can consolidate them, but federal consolidation won’t lower your interest rate or save you money.

When you refinance federal student loans, a private lender pays off your existing federal loans and issues you a new private loan with new and better terms.

Once you refinance with a private lender, you can’t return your federal student loans to the federal student loan program. By making this trade, you give up certain benefits. The risks of refinancing federal loans include:

    • Lose Access To Potential Loan Forgiveness.
    • Forfeit Flexible Repayment Plans.
    • Give Up interest Free Payment Postponements.
    • Losing Flexibility Of loan discharges.

Federal Student Loan Refinancing Benefits

The primary reason to refinance federal student loans is to save money by reducing your loan interest rate. That may lead to a lower monthly payment, a shorter repayment term or both. To get the best deal, you will need to have excellent credit, strong income prospects and a strong college degree.

Your personal situation will determine what you save on servicing your student debt.   Assume that you have a $30,000 Federal Standard Repayment Plan loan of 10 years at 7% interest rate.  If you do private lender refinancing at 3% interest rate, you would save you close to $7,000.  You also have the option to accelerate your payments to save even more.

Student Loan Refinancing Summary

Private Loans
Federal Loans
Refinancing Option X
Annual Percentage Rate 3+% 7%
Standard Payment Term Varies 10 Years
Extended Payment Terms Varies 20-25 YearsX
Death Discharge X
Bankruptcy Discharge (in rare cases) X X
Closed School Discharge X
False Certification of Student Eligibility or Unauthorized Signature/Unauthorized Payment Discharge X
Unpaid Refund Discharge X

Explore All Refinancing Options

Student loan refinancing does not cost money, unlike house mortgage refinancing. There are generally no origination, application or prepayment fees. But read your loan agreement carefully to make sure you understand any loan costs you could incur in the future, like late fees.

If you decide to refinance your student loans, compare multiple lenders to see who offers you the best rate. If you have similar offers you should give greater importance to lenders who offer the most flexibility with payments and the longest possible forbearance options.

When in doubt, do your due diligence, make a decision, and move forward with your life.

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