How often can you refinance student loans?

You can refinance your student loans as often as you want. But weigh the cost against the benefits to see if you’ll save money.

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How often can you refinance your student loans? As often as you want. But before you refinance them, consider the pros and cons. (iStock)

Refinancing your student loans could lower your monthly payment, reduce total interest costs and help you pay them off faster. But if you’ve already refinanced once, you may wonder: How often can I refinance my student loans?

The answer is as many times as you want. But whether or not you should refinance multiple times depends on your unique circumstances. 

Let’s look at the pros and cons of refinancing your student loans more than once, steps to take before refinancing them and some alternative options to consider.

Credible lets you easily compare student loan refinancing rates from various lenders.

How often can you refinance student loans?

You can refinance your student loans as many times as you want. You can refinance with the same lender or shop around with several different lenders. The only thing that can stop you from refinancing is not meeting a lender’s eligibility requirements.

For example, say you no longer have income, or your credit score suffered major damage. In those cases, you might have a tough time getting a lender to approve a student loan refinance without a cosigner.

How does student loan refinancing work?

To refinance your student loans, you take out a new loan with a private lender to pay off all or a portion of your existing private or federal student loans. The new loan often has different terms, and hopefully a lower interest rate than the old ones. If you secure a lower rate, it can save you a lot of money.

For example, imagine you had 15 years remaining on a student loan with a balance of $10,000 at 8% interest. Your monthly payment would be $96 and you would have $7,202 in interest left to pay. If you refinanced to a 15-year student loan with an interest rate of 4.25%, your monthly payment would fall to $75, and your total interest would be $3,541 —  a savings of $3,661. 

To see how much you could save by refinancing your student loans, use a student loan refinance calculator.

Student loan consolidation vs. refinancing

Direct Consolidation Loans are available only for federal student loan borrowers. If you have multiple federal student loans, you can combine them into one loan with a single monthly payment. Similar to refinancing your student loans with a private lender, you can choose a shorter or longer loan term.

But consolidating your federal loans is different in that your interest rate might not change — the new loan will be a weighted average of the rates on all your combined federal student loans. So while you can simplify your monthly payment with federal loan consolidation, you might not save any money on interest.

With Credible, you can compare student loan refinancing rates without affecting your credit score.

Pros and cons of refinancing student loans

Although you can save money by refinancing your student loans, it comes with disadvantages as well. It’s important to weigh the pros and cons when deciding if refinancing your student loans is the right move for you.

Pros of refinancing student loans

  • Save money — If you qualify for a lower interest rate than your existing student loan, you can save money on interest over the life of the loan.
  • Pay off your loans faster Refinancing to a shorter loan term will help you pay off your loan faster. For example, if you refinance from a 10-year student loan into a five-year student loan, you can cut your repayment term in half. Just keep in mind that a shorter repayment term will mean a higher monthly payment.
  • Remove a cosigner — If you want to remove a cosigner and your lender doesn’t offer cosigner release, your cosigner will be removed when you pay off your old loan with the new one.

Cons of refinancing student loans

  • May have to pay fees — Some private lenders may charge origination fees to cover the cost of underwriting and administering the new student loan. If a lender charges this fee, it’s typically deducted from the total loan amount, which reduces the amount you can put toward paying off your previous student loans.
  • More interest — If you refinance and choose a loan with a longer repayment term, you may lower your monthly payment, but you’ll pay more interest over the life of the loan.
  • Loss of federal student loan protections — When you refinance your federal student loans into a private student loan, you lose access to federal benefits not available to private student loan holders, such as income-driven repayment (IDR) plans and student loan forgiveness programs. So weigh your options carefully before refinancing your federal student loans.

Should you refinance your student loans more than once?

The answer to this question depends on your unique circumstances. That said, here are some things to consider when deciding whether to refinance your student loans again.

  • Make sure the benefits outweigh the cost. Before you refinance your student loan, examine all the costs (interest rate, plus any fees) involved. If the costs to refinance outweigh any potential savings, it may not be a good idea to refinance.
  • Make sure you can afford the new monthly payments. If you refinance your student loans into a loan with a much shorter loan term, make sure you can comfortably afford the higher monthly payments.
  • Make sure you’ve considered alternative options. Refinancing your student loan isn’t your only option. You have alternative options available, especially if you have federal student loans (more on this later).

Steps to take before refinancing again

Here are four steps you should take before refinancing your student loans.

1. Review your existing loan terms

Log in to your student loan account and review your current loan terms, including your interest rate and payoff date. This information will come in handy when estimating how much you can save by refinancing into a new loan.

2. Check your credit reports

Inaccurate negative information on your credit reports (like a paid-off account reported as delinquent) can lower your credit score. This will reduce your chance of securing a lower interest rate when refinancing your student loans. To catch any mistakes, review your credit reports from Equifax, Experian and TransUnion by visiting Dispute any errors with the respective credit bureau.

3. Review your finances

Your income and debt-to-income ratio are two other key factors lenders consider when you apply for a student loan refinance. If your income has increased, this improves the chance you’ll receive a lower interest rate when you refinance. But if you have more debt than before, this can hurt your ability to score a better rate. If that’s the case, try to pay down some of your debt to decrease your DTI ratio before applying.

4. Shop around and compare quotes from multiple lenders

To get the best deal for your situation, compare interest rates, loan terms and fees from multiple lenders. You can do this by submitting a prequalification application with an individual lender or an online marketplace that connects you with several lenders. 

When you’re ready to refinance your student loans, you can use Credible to compare student loan refinancing rates to find the best one for your situation.

Alternatives to student loan refinancing

If you don’t want to refinance your student loans but want to save money, here are some alternative options to consider.

  • Look into federal student loan forgiveness programs. If you have a federal student loan and you work for a non-profit or government organization, you may qualify for the Public Service Loan Forgiveness (PSLF) program. After you make 120 qualifying monthly payments, the remaining balance on your student loans can be forgiven.
  • Enroll in an income-driven repayment plan. An income-driven repayment plan allows you to make payments based on your income and family size. Like PSLF, it’s only available to borrowers with federal student loans. Repayment terms range from 20 to 25 years. Once the repayment period ends, any remaining loan balance you have is forgiven.
  • Pay more than the minimum monthly payment. Another way to save money on your student loans without refinancing is to make extra payments. Since student loans don’t have prepayment penalties, you can pay them off as early as you want. Paying off loans early means you save interest.