May 6, 2021

Can You Refinance Student Loans?

Repayment

Like any other loan, student loans (whether federal or private) can be refinanced. For those who may not be familiar with the process of refinancing, simply put, this is taking out a new loan to pay off your existing loan(s). While this sounds counterintuitive, many debtors consider refinancing their loans as this can, ideally, lead to more favorable terms and lower monthly payments.

For student loans in particular, it’s important to note that those who have federal student loans may want to exercise caution when thinking about refinancing. This is because refinancing student loans will be done via a private lender since you can’t refinance with the federal government.

Consequently, this means losing access to government protection for your federal student loans, such as income-driven repayment plans and forgiveness programs.

Who Can Refinance Student Loans?

Typically, those who opt to refinance their student loans consist of professionals who have already graduated. It’s not common for lenders to allow student loan refinancing when the student is still in school, as most lenders require applicants to at least have a bachelor’s degree.

Aside from this, here are some other factors lenders take into consideration when checking who can qualify for student loan refinance:

  • Credit score: As with any loan, your credit score can significantly affect your eligibility for student loan refinancing. A score within the 600 range or above can be considered good, though some lenders much prefer borrowers falling within the 700 range or higher. In some cases, the credit score may even affect the interest rate you will be given.
  • Payment history: Proof of regular and on-time debt payments on your credit report will also work favorably for your student loan refinance application.
  • Income: To qualify for student loan refinancing, lenders will also look at your income versus how much debt you have to see if you’re actually earning enough to repay your loan. For student loans, having a debt-to-income ratio of 50% is generally required by lenders. A lower debt-to-income ratio will, of course, be more preferred by lenders.

How to Refinance Your Student Loans

If you’ve decide to refinance your student loans, the following tips and steps may make it easier for you to prepare and apply for refinancing:

  • First and foremost, review your current agreement thoroughly. Keep in mind that refinancing can only be advantageous when you want to alter your payment plan, which will allow you to choose between making more payments within a shorter time frame or fewer payments but within a longer time frame.
  • Check if your current loan has a prepayment penalty. Compare what you will have to pay: the early termination cost for your old loan versus the savings you can gain from refinancing. Make sure the value of the early termination cost isn’t going to outweigh your plausible savings.
  • Determine the current value of your loan and compare between lenders. Find one that will be favorable to your current financial situation and ability to pay. Check the lender’s requirements to see if you also qualify for their terms.
  • Check if you have alternative options. Some student loan refinancing services may offer packages or terms that can help you cut costs or are more aligned with your financial goals.

Should You Refinance Your Student Loans?

Currently, it’s not advisable for those with federal student loans to refinance. This is because the CARES Act, passed in March 2020, suspended payments and interest for federal student loans, effectively setting the interest rate to zero. This means your balance won’t increase even if you hold off on payments.

On the other hand, those who have private student loans may want to consider refinancing now that lenders have lowered their rates due to COVID-19 restrictions.

Ultimately, it is up to you to decide whether refinancing is the wisest course of action. Your goal, of course, should be to pay off the loan in a way that won’t lead you to financial ruin.

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Use Chipper for The Best Path to Forgiveness

Finding your path to student loan forgiveness is easier than ever before. Chipper helps members find better Income-Driven Repayment (IDR) plans every day. Once enrolled in an eligible repayment plan, we can help you explore your forgiveness options and understand your path towards forgiveness. Sign up with Chipper today and get on track with your student loans.

Use Chipper for Round-Ups

Paying off your student loans doesn’t have to be a long and painful journey. Round-Ups are a way to directly pay off your loans with your everyday spending! By tracking your linked spending account(s), we will calculate the rounded up amount from each transaction in a week (IE spending $4.28 would add $0.72 to the weekly amount). We then initiate a payment towards your student loan for the weekly amount. Get chipping away on your student loans with Chipper today.

Use Chipper for Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program was created to provide relief to borrowers aiding the public sector. Unfortunately, 30% of applicants are denied due to incorrect paperwork. We can help! Chipper was created to solve this issue by assisting borrowers in understanding their options as well as allowing forgiveness eligible users enroll into the best forgiveness program available. Sign up for Chipper today to see your student loan forgiveness options and get the forgiveness you deserve.

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The Teacher Loan Forgiveness (TLF) program was created to enable teachers working in Title 1 schools to receive student loan forgiveness of up to $17,500 (depending on their teaching subject). Chipper has helped teachers from all over the country qualify for TLF program and can help you get the forgiveness you deserve today. Find out if you qualify for forgiveness in minutes with our employer search tool.

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