Student loan refinancing is still a fairly new industry and there are many things borrowers are learning about what they can and can’t do through refinancing. Read on to learn what is fact vs. fiction when it comes to refinancing your student loans.
You can’t refinance federal and private loans together.
Fiction. You can refinance and consolidate all of your loans, both federal and private, into one easy payment with the same rate and term. A lower rate and more favorable term are two key benefits of refinancing. Federal loans do not offer any refinancing opportunities – the only way to lower your interest rate on a federal loan is through refinancing with a private lender (hint: pick us).
You will lose federal benefits when refinancing.
Fact. You lose your federal benefits such as forgiveness after 10 years of payments for public sector work and programs such as income-based repayment. If you work in the public sector and are on a plan to have your loans forgiven, it’s probably best not to refinance your federal loans. However, you can refinance any private loans to lower your interest rate. If you do choose to refinance your federal loans, make sure you know exactly which payment programs you are on before refinancing. If you don’t qualify for (or need) federal protections and have no trouble making payments, refinancing may be a great fit for you.
Refinancing is only for those with large loan balances or advanced degrees.
Fiction. We can refinance loans for undergrad, and often do! Our borrowers with undergrad degrees save thousands in lifetime interest costs and get out of debt faster than if they had not refinanced. We do require a minimum balance of $20,000 to be eligible for refinancing and some undergraduates don’t have that amount of debt – which is not a bad thing. Graduate and specialty degrees tend to have very large balances, with a high income to match, so refinancing tends to save them bigger numbers. If you have taken care of your credit and have a steady income, refinancing can save you money by lowering your interest rate. See what you can save with our Find My Rate tool.
Refinancing with a spouse is possible.
Fact. It’s true, we can refinance spouse’s loans together! To do so, apply with one partner as the cosigner – it’s generally best to have the higher earner as the cosigner. We will then calculate your interest rate based on the higher credit score of the two applicants, which can be beneficial to one partner if the other has a higher credit score. With married couples, we combine the income and debts of both applicants, so that may increase your likelihood of approval. If you are ever in the position that you need to separate the loans, we can do that too.
Once you refinance, you are locked in.
Fiction. While we hope you don’t leave, you have the freedom to refinance again either through us or another lender. If you have a significant change in income from a new job or promotion, you can put more towards your loan without worrying about prepayment penalties. If your credit improves or you obtain a higher degree, you may benefit from refinancing again to a lower interest rate. We also offer a cosigner release and if you qualify for the loan on your own, let us know and we can remove them. No need to apply again.
Parent PLUS Loans can be refinanced.
Fact. Refinancing isn’t just for recent graduates or young professionals. Those with parent loans can save money too by refinancing their loans to a lower interest rate. We are also able to refinance and transfer parent PLUS loans to a child who is ready to take on the responsibility of the loan.
It’s difficult to get approved for student loan refinancing.
Fiction. We do have high credit standards, but if you have taken care of your credit and launched your career after graduation, it’s worthwhile to see what you can save by refinancing. Your income doesn’t affect your interest rate, but is used to calculate your debt-to-income ratio, or DTI. If you have a cosigner with a much higher credit score than yours, refinancing with a cosigner can help get you an even lower rate. If you are worried about getting approved, your DTI is the most important thing to focus on. Pay down credit card and other debt before applying to get the lowest rate possible. Our eligibility criteria can be reviewed here and you can always see what you can save before applying with our Find My Rate tool.