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Should I Refinance My Student Loans?

How's it going since graduation? Got a new job? Have kids yet? Odds are that you still have student loans that you are repaying up to now.

How's it going since graduation? Got a new job? Have kids yet? Odds are that you still have student loans that you are repaying up to now. You are left thinking: should I refinance my student loans?

Logically, loans and debts get costlier the longer they remain. For you to finally move on and forward, you need to eliminate any outstanding student loan that may be hindering some life goals you have in life. It is good news that refinancing is now possible and is a great way to save money on your student loans. It makes sense —  Why not take a new loan to repay or consolidate all your student loans to make your interest rate and fees lower?

The intensifying competition among various student loan providers makes the current lending market all the more attractive. If you are now wondering if refinancing is for you, we will share helpful student loan tips that you can use to decide. At the end of this article, you will know if you should avoid refinancing or when you should refinance student loans.

Let’s start with when you shouldn’t refinance

While student loan refinancing can help you save money over the long term, it may not make you eligible for certain consumer protections.

You should avoid refinancing if:

You want to qualify for federal forgiveness programs.

Federal loans offer federal forgiveness programs that’ll help you pay off your student loan debt. The list below is a quick view of the types of forgiveness, cancellation, and discharge available for the different types of federal student loans.

Type of Forgiveness, Cancellation, or DischargeDirect LoansFederal Family Education Loan (FFEL) Program LoansPerkins Loans
Public Service Loan Forgiveness




Teacher Loan Forgiveness



Perkins Loan Cancellation (includes Teacher Cancellation)  


Total and Permanent Disability Discharge




Death Discharge




Bankruptcy Discharge (in rare cases)




Closed School Discharge




False Certification Discharge



Unpaid Refund Discharge




*FFEL Program loans and Perkins Loans may become eligible for Public Service Loan Forgiveness if they are consolidated into the Direct Loan Program.

Refinancing your student loans will repay your old federal student loans with a new loan from a private company. This means you won't be eligible for forgiveness, cancellation or discharge from the Federal Government.

In addition to the types of forgiveness, cancellation, and discharge shown above, you may also be eligible for discharge of your federal student loans based on borrower defense to repayment if you took out the loans to attend a school that misled you, or engaged in other misconduct in violation of certain state laws, and if the school’s act or omission directly related to your federal student loans or to the educational services that you paid for with the loans.

If you think you are eligible for federal forgiveness programs, contact your loan servicer. If you have a Perkins Loan, you should contact the school that made the loan or the loan servicer the school has designated.

You want a repayment plan based on your income

An income-driven repayment plan sets your monthly student loan payment at an amount that is intended to be affordable based on your income and family size. You can qualify for four income-driven repayment plans:

  • Revised Pay As You Earn Repayment Plan (REPAYE Plan)
  • Pay As You Earn Repayment Plan (PAYE Plan)
  • Income-Based Repayment Plan (IBR Plan)
  • Income-Contingent Repayment Plan (ICR Plan)

If you’d like to repay your federal student loans under an income-driven plan, you need to fill out an application here.

If you refinance your loans through a private company you will no longer be eligible for income repayment plans.

You have bad credit

Getting approved for refinancing usually means that you have good or decent credit. Many people can find a co-signer to avoid a bad credit situation. Even if you do have bad credit, if you have been making an effort to pay off your student loans regularly, you still may qualify.

When should you refinance?

You should refinance your student loans if you meet the following:

As soon as you have a stable income (and good credit)

As soon as you have a stable income and the ability to repay student loans you are likely eligible to refinance your student loans and save money.

It would be best if your credit score is high. That is because products for refinancing student loans are just like other types of loans: loan providers approve and provide amounts based on credit history. Thus, when you have plans to refinance a student loan, you should bolster your credit months before your effort.

If there are inaccuracies in the report, you should immediately seek corrections to remove accounts from your credit report. Your good credit standing would qualify you for more competitive rates and lower fees.

If you have loans with high interest rates

Two types of loans could be tapped: federal and private student loans. Logically, federal loans come with lower rates but the requirements could be stricter. You may also consider refinancing loans with longer terms, which come with lower rates. Many competitive private loan providers also offer more attractive rates and costs.

You have multiple, expensive loans

If you have multiple loans over $10,000 then it makes sense to look into refinancing options. Many lenders can help you consolidate multiple loans into one manageable monthly payment.

After grace periods

Many federal student loans offer a grace period for the first six months after you leave school. You don't have to make monthly payments on your loans during this period.

This is very helpful in allowing you time to find employment in order to be able to repay the student loans. After the grace period is over, it is wise to look into refinancing options.

Am I ready to refinance?

Compare the best lenders to refinance student loans like SoFi, Earnest, Laurel Road, Commonbond, or LendKey:

Once you have determined that refinancing is right for you, keep the following tips in mind.

Check and prepare all documentary requirements before applying for a refinance loan

It usually takes time for any borrower to verify eligibility requirements. Take note that different lenders have varying standards and requirements that should be met to make any loan applicant qualify for refinance loans. It would be best if you would not encounter any hassle when asked to submit documents as part of the refinance loan process.

Understand your rights as well as responsibilities before applying for and obtaining a refinance loan

You must fully understand all the rights and responsibilities that are usually imposed when taking a new loan before signing any loan contract. Again, take note that student loan repayment could be reduced by getting lower interest rates, prolonging the repayment term, or both. Review available options before making a decision.

Compare discounts and incentive offers from different loan providers

You would be surprised at how numerous lenders offer considerable markdowns for early payment, automatic or direct draft payment plans, and of course on-time payment. Imagine how much discount you could secure if such incentives and conditions are combined. Reducing rates by up to 1% or more would mean a lot to you.

Where to refinance

The lenders in the table below are our picks for the best banks to refinance student loans and consolidate student loans and start saving more money in 2019! These lenders don't charge origination fees or closing fees and provide the best rates.

Final word

Through these student loan refinancing tips, you could surely find and obtain an ideal refinance loan so you could finally pay off and clear all your outstanding student loans.

If you need more help with refinancing loans, you can check out our refinancing guide as we make the process of refinancing student loans could quite easy.

If you are still wondering “Should I Refinance My Student Loans?” then leave your question below and we'll get back to you.

Brian Meiggs
Brian Meiggs
Brian Meiggs is a personal finance expert, and the founder of Smarts, a personal finance site helping you easily explore your best money options. He helps readers follow the smart money in order to increase their earning potential and start building wealth for the future. He regularly writes about side hustles, investing, and general personal finance topics aimed to help anyone earn more, pay off debt, and reach financial freedom. He has been quoted as a top personal finance blogger in major publications including Business Insider, Yahoo! Finance, NASDAQ, Discover, and more.
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