Every one in eight Americans has student loans. One popular relief option, especially if you have private student loans, is refinancing. If you’re looking to lower your monthly payments, save money on interest, release a co-signer, or all three, refinancing can certainly help you achieve this.
But what if you don't want to refinance the full amount? Fortunately, there are some options.
Whenever you're considering refinancing student loans -- or otherwise -- it's a good idea to rely on an online marketplace like Credible. Credible can help you compare rates and private lenders with the click of a button. Learn more about the process here.
Can I refinance a portion of my student loans?
You don’t have to refinance your entire loan balance and you may not want to. By doing a partial student loan refinance, you can target any high-interest or high-balance loans you might have. Here’s how it works.
Typically, when you refinance your student loans, you get a new lender who pays off your balance with the old lender. Moving forward, you will make payments to the new lender hopefully at a lower interest rate.
With a partial student loan refinance, you can choose to only refinance some of your student loans. If you have five different loans for example but only want to refinance three of them, a partial student loan refinance would help you do this. If you have a single student loan, you could ask the new lender to pay off a portion of the balance during the refinancing process.
Initiating a partial student loan refinance is simple and straightforward. You can partner up with a financial company like Credible that lets you compare personalized refinance loan offers from multiple vetted lenders.
How to partially refinance student loans
Again, you can use a multi-lender marketplace like Credible to complete this process. It just takes two minutes to request up to 10 different quotes from eligible private lenders and it won’t affect your credit. From there, you can compare your options and see which lender you’d like to complete an application with.
Completing a student loan refinancing application with Credible typically takes less than 10 minutes. If your loan is approved, you can get your offer in as little as one business day. The lender will wire the money to your bank account or send you a check so you can pay off the old student loan or a portion of it if you’re doing a partial refinance. Get started on your refinance application via Credible today.
Keep in mind that partially refinancing your student loans may still involve origination fees (cost of underwriting and processing) which will add to the cost of your loan. However, if you go through Credible, you can rest assured that your new lender will not charge prepayment penalties, loan application fees or origination fees.
When to consider a partial student loan refinance?
You may want to consider a partial student loan refinance for a number of reasons. According to Argenis Bouza, who works at the Chief Investment Office at Bank of America, the primary reason why someone will only refinance a portion of their total debt could be due to approval limits, their credit score or a lack of other qualifications.
“In some cases, students who have a lot of outstanding debt quoted at high interest rates and a bad FICO score will not qualify for a full refinance,” Bouza said. “So in this case, they can refinance a portion of their debt at lower interest rates and still find some relief.”
Another reason why you may want to consider a partial student loan refinance is when you have a mix of federal and private student loans. If you have federal student loans, in most cases, it’s best not to give up benefits like deferment, forbearance and loan forgiveness options. Plus, interest rates for federal student loans are often fixed and lower than private loans.
Whereas, your private loans can come with fewer protections and a higher interest rate which makes refinancing seem like a viable option.
If you don't qualify for federal benefits like loan forgiveness or forbearance, then you may want to consider refinancing with private student loan lenders. Credible can help compare rates you find a lender that fits your financial needs.
Why you may want to refinance your student loans
For some borrowers, refinancing student loans can be an excellent idea. You can save money by lowering your interest rate or even lower your monthly payments while shortening or extending your repayment term. Another benefit is potentially releasing a cosigner especially if your credit score has significantly improved.
On the flip side, refinancing federal student loans can make you lose access to helpful government relief options like deferment and forbearance. Private lenders offer less of these protections so consider refinancing your private loans first if you feel burdened by the payment.
To start the refinancing process, it’s important to carefully weigh all the factors and browse through offers from different private lenders. Credible can help you get started through their refinancing comparison tool.