Typically, student loan borrowers cannot refinance their debt until they graduate or withdraw from school. At that point, federal student loans and the majority of private student loans have a grace period, so it can make sense to refinance right before the grace period ends.
Depending on your financial situation, the goal of refinancing may be to snag a lower interest rate and/or have lower monthly payments. Doing so can alleviate some of the stress you may feel when repaying your debt. In this guide, you’ll learn when you can refinance and what options are available, plus the potential benefits and downsides of each.
What Do Your Current Loans Look Like?
Before deciding whether or not to refinance your student loans, you need to know where your loans currently stand. Look at the loan servicers, loan amounts, interest rates, and terms for all loans before making a decision.
Contact Info for Most Federal Student Loans
The government assigns your loan to a loan servicer after it is paid out. To find your loan servicer, visit your account dashboard on studentaid.gov, find the “My Aid” section, and choose “View loan servicer details.” You can also call the Federal Student Aid Information Center at 800-433-3243.
Loans Not Owned by the Department of Education
Here’s how to get in touch:
• If you have Federal Family Education Loan Program loans that are not held by the government, contact your servicer for details. Look for the most recent communication from the entity sending you bills.
• If you have a Federal Perkins Loan that is not owned by the Education Department, contact the school where you received the loan for details. Your school may be the servicer for your loan.
• If you have Health Education Assistance Loan Program loans and need to find your loan servicer, look for the most recent communication from the entity sending you bills.
Private Student Loans
Private student loans are not given by the government, but rather banks, credit unions, and online lenders. You’ll need to find your specific lender or servicer in order to find out your loan information.
Can You Refinance Student Loans While Still in School?
You may be able to refinance your student loans while still in school with certain lenders, but doing so may not make the most sense for your situation.
If you’re worried about interest accruing on your unsubsidized federal loans and/or private student loans while in school, you can most certainly make interest-only payments on them in order to keep the interest from capitalizing.
One important note: With federal student loans, any payments you make while still in school or during the grace period will not count as a qualifying payment toward loan forgiveness, if you plan on using that.
💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.
Which Loans Can Be Refinanced While Enrolled?
You can refinance any type of student loan while enrolled in school, assuming that the lender allows it. If you’re still in school and want to refinance, a lender will want to make sure you have a job or job offer on the table, are possibly in your last year of school, and have a solid credit profile. You could also consider refinancing your student loans with a cosigner if you do not meet the lender’s requirements on your own.
A couple of important points if you are considering refinancing federal student loans with a private lender:
• Doing so means you will forfeit federal benefits and protections, such as forbearance and forgiveness, among others.
• If you refinance for an extended term, you may have a lower monthly payment but pay more interest over the life of the loan. This may or may not suit your financial needs and goals, so consider your options carefully.
Which Loans Can’t Be Refinanced While Enrolled?
If you find a lender willing to refinance your student loans while still in school, they most likely won’t exclude a certain type of loan. However, it is best not to refinance federal student loans while enrolled. Federal Subsidized Loans, for example, do not start earning interest until after the grace period is over. Since you aren’t paying anything in interest, it doesn’t make sense to refinance and have to start paying interest on your loans immediately.
If you plan on using federal benefits, such as income-driven repayment plans or student loan forgiveness, refinancing student loans could be a bad idea. Refinancing gives you a new loan with a new private lender, thereby forfeiting your eligibility to federal benefits and protections, as noted above.
Is It Worth Refinancing Only Some of Your Loans?
Yes, it can be worth refinancing only some of your loans. The student loans you may want to focus on refinancing may include ones that have a variable rate (and you prefer a fixed rate), ones with a relatively high interest rate, or ones where you’ve had a less-than-ideal relationship with the servicer and are looking for a new experience.
When you might want to think twice about refinancing:
• If you have federal loans and plan on using an income-based repayment plan, for example, it makes sense not to include those loans in the refinance.
• If you have a low, fixed interest rate currently, you should probably keep those loans as is. The main reason to refinance is to secure a lower interest rate or a lower payment. Keep in mind, though, that by lowering your payment, you typically are extending your term. This can mean that you end up paying more in interest over the life of the loan.
| Pros | Cons |
|---|---|
|
• Possibly lower your monthly payment • Possibly lower your interest rate • Shorten or lengthen the loan term • Switch from variable to fixed interest rate, or vice versa • Combine multiple loans into one |
• Lose access to federal benefits and protections • Lose access to remaining grace periods • May be difficult to qualify • May end up paying more in interest if you lengthen the term |
Examples of Refinancing Before Earning a Degree
As stated above, there are some lenders that may allow you to refinance before you graduate or withdraw from school. These lenders may currently include Citizens Bank, Discover, RISLA, and Earnest.
Graduate students are also eligible to refinance their undergraduate student loans, assuming they meet the lender’s requirements or use a cosigner. Parents with Parent PLUS Loans are also typically allowed to refinance their loans prior to their child graduating. Rules will vary by lender, so make sure to do your research and choose a lender that will work with your unique situation.
💡 Quick Tip: Federal parent PLUS loans might be a good candidate for refinancing to a lower rate.
Alternatives to Refinancing
If refinancing your student loans isn’t the right option for you, there are alternatives to refinancing you can explore.
• The main alternative is student loan consolidation, which combines your federal student loans into one loan with one monthly payment. The main difference between consolidation and refinancing is the interest rate on a federal loan consolidation is the weighted average of the rates of the loans you are consolidating, rounded up to the nearest one-eighth of a percentage.
• You typically won’t save on interest, but you can lower your monthly payment by extending the loan term. Doing this, however, means you’ll probably pay more in interest over the life of the loan.
• Student loan refinancing refers to paying off current loans with a new loan from a private lender, preferably with a lower rate. This rate is not the weighted average of the loans, but rather is based on current market rates, your credit profile, and your debt-to-income ratio.
• Other alternatives to refinancing include making interest-only payments while still enrolled in school or requesting a student loan forbearance if you’re struggling to make your payments. Forbearance means you can reduce or pause payments for a designated period of time.
You’ll want to know all your student loan repayment options — and the pros and cons of consolidating or refinancing your loans, prior to making a decision.
A calculator tool for student loan refinancing can come in handy when estimating savings, both monthly and over the life of your loan.
Weighing Perks and Interest Rates
Before deciding whether refinancing is right for you, it’s important to again highlight this important point: If you refinance your federal student loans with a private lender, those loans will no longer be eligible for programs like income-driven repayment plans, federal forbearance, and Public Service Loan Forgiveness.
But if you can get a lower interest rate, refinancing may be a good fit. Most refinancing lenders offer loan terms of five to 20 years. Shortening or elongating your loan term can affect your monthly payment and the total cost over the life of your loan.
For some borrowers, lengthening the term and lowering the monthly payment will be a valuable option, even though it can mean paying more interest over the life of the loan. Only you can decide if this kind of refinancing makes sense for your personal finances.
The Takeaway
When can you refinance student loans? As soon as you establish a financial foundation or bring a solid cosigner aboard. Can you refinance your student loans while in school? Yes, however, not all lenders offer this and it may not make sense for your situation. It’s also important to understand the implications of refinancing federal student loans with a private lender. If you do not plan on using federal benefits and protections and are comfortable with the possibility of paying more interest over the loan’s term, it might be a move worth considering.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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