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Can You Refinance Private Student Loans?

If you are eligible for a lower interest rate, you should refinance your private student loans.

Because most refinance lenders don’t charge upfront fees, a lower rate might help you pay less each month, save money on interest, or do both.

Here are 3 reasons why you should refinance private student debt.

1. Modify the repayment period

If you wish to modify the way you repay your debts, refinancing private student loans may be perfect for you:

  • Make repayment easier: You can consolidate several private student loans into a single refinanced loan with a single payment if you have more than one. Private student loan consolidation is a term used by lenders to describe the same thing as refinancing.
  • Spread out your payments to lower your monthly costs: Refinancing can decrease your monthly bills by extending your repayment period to as long as 20 years, in addition to decreasing your interest rate. Paying less each month might free up funds for necessary expenditures or other goals, such as saving for retirement or a down payment on a home. It may also assist you in lowering your debt-to-income ratio. Extending your repayment period, on the other hand, will almost certainly result in you paying more in the long run since more interest will accumulate.
  • Reduce the payback period to save money on interest: You can refinance and pick a shorter repayment plan than you presently have if you want to pay off your student loans quickly. You can also accelerate repayment by making additional payments on your current private loan. 

2. Long-term Financial Savings

Saving money is the most compelling rationale for refinancing private student loans. Lowering your interest rate might reduce your monthly payments, the total amount you return, or both.

Assume you have a $50,000 private loan with a 10% interest rate and 8 years to pay it off. You’d pay around $758 every month in installments, for a total of $22,836 in interest.

By refinancing at 6% APR and choosing a 9-year payback period, your monthly payments would reduce to around $206 and your total repayment amount would fall to $68,766.

You’ll need a calculator to help you figure out how much money you’ll save in monthly payments, interest payments, and total payments. Use our calculator to help you:

3. Change Your Lender

If you are dissatisfied with your current loan holder’s customer service or repayment alternatives, you can move to a new lender by refinancing.

This is not the best incentive to refinance, especially if switching would result in a higher monthly payment.

However, you may be able to get huge returns from a different lender.

Co-signer release, referral incentives, and 1-on-1 career mentoring are just a few of the extras available from certain lenders.

Private loans can only be transferred to other private lenders, not the federal government.

More: Best Student Loan Refinance For Nurses

When You Should Not Refinance Private Student Loans

There are a few drawbacks to refinancing private student loans. According to the interest rate you are eligible for and the repayment plan you choose, you may end up paying more interest in the long term.

Many refinancing lenders, on the other hand, allow you to pick among 5 or 7-year repayment plans.

If you re-enroll in school after refinancing, you may lose access to advantages like payment deferments

Due to the coronavirus epidemic, you’ll also forego any private student loan reduction choices your lender is now giving.

You’re unlikely to lose out on income-driven repayment or loan forgiveness programs. Those benefits are usually only available to students who have taken out federal student loans.

How To Refinance Private Student Loans

Begin by comparing rates from many student debt refinancing lenders at the same time. You’ll need to make a couple of additional decisions after you’ve identified a lender:

You may apply to have your private student loans refinanced directly with them once you’ve identified the best refinancing lender for you.

To confirm your interest rate, you’ll have to grant the lender permission to run a thorough credit check.

If you fulfill the eligibility conditions and your application is granted, your new lender will pay off your previous loan and issue you a new one.

Private loans can be refinanced as many times as you like. If interest rates fall or your credit improves, you might be able to receive a better offer.

Frenqaly Asked Questions