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Whether you’ve got student loans and you’ve just discovered student loan refinancing, you probably have a lot of questions. Choosing a new lender to refinance your loans with is no small commitment, and you could run into some obstacles if you’re unclear on the details.

Here, we’ll cover the most frequently asked questions about student loan refinancing, so you can be completely prepared before making your decision.

Questions to ask when refinancing your student loans

These common refinancing questions can help you get a better sense of whether refinancing is right for you, and give you a better understanding of how the process works. Click on a question to jump to the answer, or scroll down to read them all.

The basics:

What happens when you refinance a loan?
What is the difference between student loan refinancing and consolidation?
Is student loan refinancing right for me?
Do I have private or federal student loans?

Qualifying for refinancing:

Do I qualify for student loan refinancing?
Can I refinance if I didn’t go to a federally accredited school?
Can I refinance if I haven’t graduated?
Can I refinance if I filed for bankruptcy?
Can I refinance if I’m a co-signer on the original loan?

Refinancing details:

Can I postpone payments if I go back to school or lose my job?
Which is the best lender to refinance with?
What does student loan refinancing cost?
Can my child refinance parent PLUS loans on my behalf?
Will the federal reserve raising interest rates affect my decision to refinance?
Why was my application for refinancing rejected? What should I do now?
What will my interest rate be when I refinance my loans?
What will my monthly payment be after I refinance my loans?
Do I need a cosigner to refinance my loans?

What happens when you refinance a loan?

When you refinance a loan, you’re essentially taking out a new loan from a different lender. Your new lender will pay off the full balance of your original loan to your lender (the government in the case of federal loans, and the lending company for private loans), and offer you a new loan, potentially at a lower interest rate.

What is the difference between student loan refinancing and consolidation?

Student loan consolidation is the simpler of the two, so let’s start there.

Direct Loan Consolidation is a U.S. government program that allows borrowers to aggregate all of their federal loans into one simple payment, often with a longer repayment period. The interest rate for the new loan is a weighted average of the interest rates on the loans you’re consolidating, and it’s always a fixed rate.

Consolidating federal loans can also give you access to certain repayment programs. Loan consolidation is a good option if you’re looking to lower your monthly payments, as consolidating gives you the option to extend the repayment term of your loan — but remember, extending your repayment term also means you could end up paying more interest over the life of the loan.

Student loan refinancing, on the other hand, is when a private lender pays off your current loan and offers you a new loan, potentially with a lower interest rate. So if you’re more concerned about paying off your total debt faster, refinancing your loans might be an option to consider.

Is student loan refinancing right for me?

Refinancing is offered by private lenders, not the government, so it’s not a great fit for those planning to take advantage of federal repayment options such as income-based repayment or public service loan forgiveness.

If you have private loans or do not plan to use government repayment programs, refinancing can significantly lower the interest cost on your loans, by lowering your interest rate and helping you to pay off your debt sooner. Some of the best lenders that refinance student loans offer interest rates that can be as low as 2%.

This is especially true for those of you that took out loans when interest rates were higher from 2006 – 2013. Refinancing doesn’t guarantee lower monthly payments, but you’ll likely be able to pay off your debt faster.

Refinancing lenders generally evaluate factors like your credit score, annual income, and savings when deciding whether you’re a good candidate for refinancing.

Do I have private or federal student loans?

If you have federal loans, your lender will be the U.S. Government. All federal loans are listed in both the Federal Student Aid portal and the National Student Loan Data System, which you’ll need a Federal Student Aid ID to access (create one here if you don’t already have one).

Private student loans won’t be listed in these databases but will appear on your credit report. You can access your credit report for free once per year from AnnualCreditReport.com.

You can also check with your lender to see whether you have private or federal student loans.

Do I qualify for student loan refinancing?

At a minimum, you must be a be a U.S. citizen or permanent resident, aged 18 or over, with more than $5,000 of student loan debt to qualify for refinancing. In addition, lenders look for good credit and a steady income when evaluating refinancing candidates.

Credible’s prequalification tool allows you to see personalized rates from seven different lenders, which can give you an idea of whether you’d qualify and how much you could save by refinancing. Each lender evaluates borrowers based on their own set of criteria, so it’s a good idea to check rates from multiple lenders. Prequalification does not require a hard credit pull, and therefore will not affect your credit score.

Can I refinance if I didn’t go to a federally accredited school?

While many lenders do require that you have a degree from a federally accredited school when you apply to refinance, each lender has their own policy. RISLA, for example, does offer refinancing on loans from any U.S. college, and Citizens Bank offers refinancing to these students after 12 months of full, on-time payments.

If you went to a non-accredited school, be sure to check with the lender you’re interested in before applying to avoid an unnecessary credit check.

Can I refinance if I didn’t graduate?

Again, some lenders will offer this option, while others will not.

For instance, Earnest offers refinancing for students who will graduate within 6 months and have a job that will also start within that time frame.

Lenders like RISLA and MEFA also offer students who have not completed a degree the chance to refinance their student loans. Learn more about refinancing without a degree.

Can I refinance if I filed for bankruptcy?

Yes, but typically only after a set period of time post-bankruptcy. Many lenders require no history of bankruptcy within the past five years, while others may not offer refinancing until the bankruptcy is no longer on your credit report.

If you have a history of bankruptcy, double check with the lender before applying that enough time has lapsed for your application to be eligible.

Can I refinance if I’m a co-signer on the original loan?

This also varies by lender. Earnest doesn’t offer the option for anyone but the primary borrower to refinance, but other lenders such as MEFA will allow any signer on the loan to refinance.

Check with the lender you’re interested in to see what their policy is.

Can I postpone payments if I go back to school or lose my job?

While private lenders are not required to offer deferment or forbearance, many of them do. Citizens Bank, for example, offers up to twelve months of deferment for borrowers struggling with economic or medical hardship. MEFA, on the other hand, offers no deferment or forbearance protections. It’s always worth checking with the individual lender before applying to refinance.

Which is the best lender to refinance with?

This really depends on your priorities.

If you’re in the camp of wanting to save the most amount of money possible, the best lender is likely the one that offers you the lowest rate. This is where applying to a number of different lenders can be useful, as you’ll be able to pick the lowest rate from multiple offers.

On the other hand, if you think you might have trouble repaying your loans—perhaps your job is unstable or you’re thinking about going back to school—you might want to choose a lender that offers some flexibility when it comes to repayment protections.

What does student loan refinancing cost?

Refinancing your student loans doesn’t cost anything, and generally, lenders won’t charge you any prepayment, origination or application fees.

In fact, since 2008, it’s illegal for private lenders to charge prepayment penalties on education loans (meaning it won’t cost you anything to make early or extra payments). Lenders will also typically display the interest rates on the loans as APR, rather than the interest rate, so what you see is what you get — the APR, or Annual Percentage Rate of change, reflects the interest you’ll actually pay each year.

Can my child refinance parent PLUS loans on my behalf?

This varies by lender. Earnest and EDvestinU do not offer the option to transfer ownership of student loans. iHelp does allow borrowers to consolidate a parent PLUS loan into their consolidation loan, and RISLA allows any “obligated borrower” on the original loan to refinance.

It’s best to check with the lender you’re interested in to verify whether they will give you this option.

Will the federal reserve raising interest rates affect my decision to refinance?

If you’re already planning to refinance and you’re shooting for the lowest interest rate, it’s not a bad idea to refinance before rates go up. This is particularly pertinent if you have variable rates, which could increase with a Fed rate hike.

Why was my application for refinancing rejected? What should I do now?

Refinancing lenders will generally reject applicants they believe might have trouble paying back their loan. While each lender uses a proprietary set of criteria for evaluating applicants, the three primary factors are credit score, income (higher, stable income is preferable), and debt-to-income ratio. This can make it harder for those with high loan balances and lower incomes, those with poor credit, or students who are just starting out and haven’t had a chance to establish a solid credit history yet.

However, some rejections have to do with not meeting eligibility criteria (for example, only certain lenders will refinance loans for borrowers who are still in school, so you may have received a rejection if you’re still a student), so it’s always worth checking with the lender to see how you can improve your application.

If you believe you might have been rejected for not having a high enough credit score or because you have a limited credit history, adding a cosigner with excellent credit can help you improve your chances of receiving an offer.

What will my interest rate be when I refinance my loans?

Your refinanced interest rate will depend on a variety of factors, including your creditworthiness and earning potential.

Lenders on the Credible platform offer rates starting from 3.35% fixed APR and 2.78% variable APR, but keep in mind that these rates are generally reserved for the most qualified borrowers. Read more about fixed vs variable interest rates here.

You can use Credible’s prequalification tool to get a sense of the rates you may be offered.

What will my monthly payment be when I refinance?

Your monthly payment will depend on the loan term you select, as well as the interest rate you’re offered. Once you have a sense of what your new interest rate might be, you can use Credible’s student loan repayment calculator to estimate your new monthly payment.

Do I need a cosigner to refinance my loans?

While some borrowers may be eligible to refinance without a cosigner, those with less-than-stellar credit or lower income can increase their chances of being approved by adding a cosigner.

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