15 Secrets To Refinance Student Loans (2024)

If you want to save money on student loans, pay attention.

Here’s what you need to know.

How to refinance student loans

Student loan refinancing helps you to consolidate your existing federal or private student loans, or both, into a new, single student loan with a lower interest rate. When you refinance student loans, you can get a lower interest rate, lower monthly payment and pay off your student loans faster. You can also choose to pay off your student loans anytime between 5 and 20 years. Most importantly, you can save money, which can be used for other life expenses, retirement, a home purchase, investing or to repay other debt. Student loan refinancing could save you more than $30,000 over the life of your student loans, depending on your current student loan balance and interest rate.

How to get approved for student loan refinancing

Should I refinance my student loans? If you want to save money and get a lower interest rate, then student loan refinancing can be a smart option for you. Since the federal government doesn’t refinance student loans, you will work with a private lender to refinance student loans. Each lender has its own underwriting criteria, and each applicant's financial background and circ*mstance is unique. Therefore, student loan refinancing is not available to everyone. However, here is the best advice to get approved for student loan refinancing:

1. Have a good to excellent credit score

For student loan refinance, lenders want borrowers with a good to excellent credit score. Why? Your credit score is a measure of your financial responsibility. Lenders want to ensure that you make on-time payments and pay back your debt. The best student loan lenders expect a minimum credit score in the mid to high 600’s. That said, some lenders don’t have a minimum credit score.

Insider Tip:To maximize your chances for approval, a credit score of 700 or higher is best.

2. Be employed

To get approved for student loan refinancing, typically you must be employed. Why? Lenders want to ensure you have stable employment, which will give them confidence you will repay your student loan each month. One exception to the employment rule is if you’re graduating and have a written job offer to start work in the near-term. Some lenders may accept a written job offer or employment agreement as proof of employment.

Insider Tip: If you are unemployed or furloughed, you may want to wait until you’re fully employed again before applying.

3. Have stable and recurring income

If you are employed with stable and recurring monthly income, then you’re one step closer to getting approved for student loan refinancing. Why? Lenders want to ensure that you have sufficient monthly income to pay off student loans. If you have a regular paycheck coming each month, that will give lenders confidence in your ability to make monthly student loan payments. If you don’t have stable monthly income, it may be harder to refinance student loans.

Insider Tip: If you’re a consultant, freelancer or entrepreneur, you could try to provide other evidence of your income or assets to show financial stability.

4. Earn enough income to pay debt and living expenses

What is the minimum income needed for student loan refinancing? Many lenders don’t have a minimum income, while others set a relatively low minimum income. Most importantly, lenders want to ensure that you have enough monthly cash flow for living expenses and debt repayment. Do you qualify? Grab your pay stubs and identify your after-tax monthly income. When you subtract your new student loan payment (after you refinance) and any other debt payments, does a sufficient amount remain for other essential living expenses? If yes, then you may be a good candidate to refinance.

Insider Tip:Make sure to count income from all sources, including any side hustles.

5. Pay down other debt

Lenders will not only look at your student loans, but also will examine your other debt such as a mortgages, credit card debt or auto debt. That means that lenders will account for your total monthly debt payments as part of the underwriting process. Why? Lenders want to make sure you can pay all your debt each month, even with the lower student loan rate.

Insider Tip:If you have other debt, don’t worry. Try to pay off some other debt if possible to lower the balance. So long as you have enough cash flow each month to pay your debt obligations, you should be a strong candidate.

6. Consolidate credit card debt

If you have credit card debt, you can immediately lower your monthly payment through credit card consolidation. When you consolidate credit card debt, you can get a lower interest rate by combining your existing credit card debt into a single personal loan. A personal loan has a fixed interest rate and typically has a repayment period of one to seven years. A lower monthly payment can help improve your chances to refinance student loans.

Insider Tip: Credit card consolidation can also improve your credit score.

7. Watch your debt-to-income ratio

Student loan lenders will focus on your debt-to-income ratio. What is a debt-to-income ratio? A debt-to-income ratio compares your monthly income to your monthly debt payments. Debt payments could include student loans, credit cards, mortgages and auto debt. For example, if you have $10,000 of monthly income and $3,000 of monthly debt payments, then your debt-to-income ratio is 30%. Lenders care about the debt-to-income ratio because they want to ensure you can manage your debt payments after you get a lower student loan interest rate.

Insider Tip:The lower your debt-to-income ratio, the better. You can improve your debt-to-income ratio by increasing income or decreasing debt (or both).

8. Get a cosigner if you need one

You don’t need a cosigner to get approved for student loan refinancing. However, a qualified cosigner could help increase your chances for approval and help you get a lower interest rate. A cosigner is someone who is typically a relative such as a parent, spouse or grandparent who will assume equal financial responsibility for your student loan after you refinance. The best cosigners have a good to excellent credit score and stable and recurring monthly income. The good news is that some lenders will allow you to release your cosigner from financial responsibility after you get approved for student loan refinance and meet certain requirements.

Insider Tip: If you do not have sufficient income, you can increase your chances for approval with a qualified co-signer who has a strong credit score and monthly income.

9. Compare student loan refinancing rates first

Don’t just go directly to a lender’s website and apply for student loan refinancing. Compare student loan refinancing rates first. This way, you could get a lower interest rate and find the best lender for you. Before you refinance student loans, compare rates, loan terms and other fine print.

Insider Tip: Student loan refinancing rates are incredibly low right now. It’s a good time to refinance in case rates go up again.

10. Apply to multiple lenders

After you compare rates, you should apply to multiple lenders to maximize your chances for approval. There is no limit on the number of lenders to which you can apply to refinance your student loans.

Insider Tip: If you apply to multiple lenders within 30 days, typically this is treated as a single inquiry on your credit report.

11. Check your credit report

What is your credit score? If you are not sure if you have good to excellent credit, chec your credit report. Importantly, if there are any errors, you should dispute them to make sure your credit report is accurate.

Insider Tip:You can get a free copy of your credit report from all three bureaus (Equifax, Experian and Transunion) throughAnnualCreditReport.com.

12. Refinance your private student loans

You should refinance private student loans if you can get a lower interest rate. Private student loans can’t be forgiven through income-driven repayment plans or student federal student loan forgiveness programs.

Insider Tip: If you don’t like your student loan servicer, student loan refinancing is a smart way to switch student loan servicers.

13. Refinance your federal student loans

If you’re struggling to pay your federal student loans, are enrolled in an income-driven repayment plan, or planning to pursue a student loan forgiveness program such as public service loan forgiveness, then student loan refinancing may not be right for you. This is because when you refinance a federal student loan, you won’t have a federal student loan any longer. However, if that doesn’t describe you and you want to save money, pay off student loans faster and get out of debt more quickly, then you can refinance federal student loans.

Insider Tip: When you refinance federal student loan and private student loans, you’ll get one student loan, one monthly payment and one student loan servicer. Much simpler.

14. Do this to get the lowest interest rate

If you want the lowest interest rate, choose a variable interest rate. When it comes to student loan refinancing, the advantage is that variable interest rates are lower than fixed interest rates. The disadvantage is that your interest rate can increase (or decrease) over time.

Insider Tip: If you think interest rates will remain low for awhile, and you can pay off a good amount of your student loan debt, then a variable interest may be best for you.

15. Use a student loan refinancing calculator

Use astudent loan refinancing calculatorto calculate how much money you can save with student loan refinancing.

Let's assume you have $100,000 of student loans with an 7.5% interest rate and 10-year repayment term. If you can refinance student loans with a 3% interest rate and 10-year repayment term, you can lower your monthly payment by $221 and save a total of $26,569.

Insider Tip: If you already refinanced your student loans, the good news is that there is no limit to how many times you can refinance. If you get a lower interest rate, use a student loan refinancing calculator to determine how much more money you can save.

Student Loans: Resources

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Kamala Harris and Andrew Yang renew call for $2,000 a month stimulus check

What Trump and Biden think about your student loans

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Student loan forgiveness reduced in new stimulus bill