In recent years, student loan interest rates have varied, and currently, they’re at a relative low. This makes refinancing a more attractive option than ever, especially for those who have multiple loans with different interest rates. But, the prospect of refinancing your loans can seem intimidating, especially if you’ve already gone through the process once before. What happens if interest rates continue to drop? Is there a limit to the number of times you can refinance your loans? Learn more about how to make this important decision and what to expect from the refinancing process.
Refinancing Your Student Loans
There are many different reasons to refinance, from lowering your interest rate, to changing the length of time it would take you to pay off your loan. But what if you refinance now and find that a few years down the road conditions have changed? For example, the interest rate may decrease even more, or your income could increase, giving you the ability to pay your loan off quicker. Are you stuck with your initial refinance decision?
Can You Refinance Student Loans More Than Once?
The short answer is: yes. It’s important to note that refinancing doesn’t have to be forever. As long as you meet a lender’s requirements (like having a steady source of income, suitable credit score, etc.), you may be able to refinance your loans more than one time, whether with the same lender or with several different ones.
What Can You Expect When Refinancing For the Second (or Third, or Fourth) Time?
If you’re interested in re-refinancing your student loans, there are a few things you’ll want to prepare for.
First, note that you can’t refinance student loans through the U.S. Department of Education—only a private lender. If you’ve already refinanced your student loans once, this means that any federal loans that were part of the refinance have already been converted to private loans. Therefore, factors like public service loan forgiveness and other federal loan benefits are no longer on the table. This can make the choice to refinance much easier. Trading one private loan for another one involves fewer decision points than trading a federal loan for a private loan.
You’ll also be expected to provide up-to-date information about your employment, your income, your credit history, and other financial factors. Additionally, the lender will usually review your credit report to determine the interest rate and terms it can offer you. One thing to keep in mind is that too many credit inquiries from multiple lenders within a short period of time can impact your credit score.
Conditions and Requirements You’ll Need to Meet
Refinancing student loans isn’t just an option for those with good to excellent credit scores. Even borrowers with fair to poor credit may qualify to refinance if they meet other requirements.
In general, lenders will consider:
- Your income. Whether you earn a W-2 wage, work as a contractor in the gig economy, or receive benefits like Social Security Disability or an annuity or pension, it’s essential to have enough income to be able to meet your monthly student loan obligation. This means it’s tough to refinance if you’re currently in default on your student loans or you don’t have a regular source of income.
- Your other debt obligations and debt-to-income ratio. Even if you have a high enough income to easily make your student loan payments, having high levels of other debt (like a mortgage, car loan, credit card, or tax arrearage) can skew your debt-to-income ratio.
- Your credit score. For most borrowers, a higher credit score means lower interest rates and more favorable terms. However, there may be loan options available even for borrowers with lower scores that meet other underwriting requirements. For example, refinancing with a cosigner can help you get more favorable terms.
- Your employment (or employability). Borrowers who have completed their degrees and obtained a job are considered the “best risk” for lenders, as this employability usually indicates a lower risk of default.
Choosing a Lender
With the wide range of student loan refinancing options at your disposal, choosing a single lender can seem overwhelming. You may wonder whether it’s worth getting deep into the application process before you know what rate you’ll be offered, or how you can know you’re getting the best options and terms for your unique situation. LendKey is unique in its approach because it works with a network of trusted lenders to find the best loan options from these lenders for each borrower.
Do You Have to Stay With the Same Lender?
When you’re refinancing a student loan, there’s no requirement that you stick with your original lender—although in some cases, this lender might still be offering the lowest interest rates or the most user-friendly payment options. Seeking quotes from a range of different lenders is usually the best way to explore all of your available options.
In choosing a lender, you may want to ask the following questions, among others:
- Are there forbearance options if I go back to school or lose my job?
- Do you offer online payment?
- What fees are associated with the refinancing process?
- Can I choose my loan due date?
Make sure that you’re in the most informed position possible by exploring all the possible contingencies of the loan option you choose- regardless of whether you pay off your refinanced loan early, complete the repayment schedule, or refinance again in the future.