How Many Times Can You Refinance Student Loans?
If you’re a student or recent graduate, it’s likely that your debt load is significant. And while it’s tempting to just pay off the highest interest loan first, it’s not always the best strategy. In fact, some financial advisors recommend against it—and they have some good reasons!
In this article we’ll explore how many times you can refinance student loans and what that might mean for your overall financial picture.
How Often Should You Refinance Student Loans
You can refinance your student loans as often as you’d like. It can make sense to refinance multiple times — especially when your finances improve or private lenders decrease their rates.
Refinancing typically doesn’t carry any origination fees or other costs, and student loans don’t come with prepayment fees. If you can find a lower interest rate, you can save yourself money each time.
Refinancing means you combine your student loans into a new private loan with a lower interest rate. A lower rate will save you money over time by decreasing the amount you pay in interest. If you refinance again at an even lower interest rate, you can save more.
For example, say you graduate with private student loan debt of $40,000 at an 11% interest rate. You’ll make $551 payments every month for 10 years and pay $26,120 in interest by the time the loan is repaid.
But even without a huge rate decrease, you could save money by refinancing student loans immediately after college. For instance, you’d pay $76 less a month and $9,143 in interest over 10 years by refinancing to an interest rate of 7.5%.
You may eventually qualify for a better rate as you begin earning more money and building your credit, or if interest rates drop. If you refinanced the loan a second time at 4% after two years had passed, you’d save an additional $68 a month and $6,507 in interest over an eight-year term.
It’s not bad to refinance student loans multiple times if you’re going to save money or get a more manageable payment.
Refinancing federal loans will cost you access to loan forgiveness programs and income-driven repayment options. But if you already gave up those benefits, refinancing private student loans again can be a no-brainer.
The primary downside to refinancing often would be that lenders do a “hard” credit check before approving each new loan, and too many inquiries can lower your credit scores. Still, it’s in your best interest to shop around for the lowest rate possible.
You can avoid a bigger ding on your credit than necessary by limiting your shopping to a short window — typically up to 45 days — or prequalifying with multiple lenders before officially applying. Prequalifying won’t impact your credit score, but it will let you know what rate you qualify for.
student loan refinance calculator
Whether you’ve been paying off your student loans for six months or six years, refinancing your student loans could seem like a good idea. You could save hundreds or thousands of dollars, but it’s not for everyone. A student loan refinancing calculator can help you determine how much you can save. Once you have an idea of the APR and terms available to you from lenders, you can input those new terms, plus your current loan terms, into the calculator — from there, you can see how your monthly payment, total interest costs and payoff period will change.
Current monthly payment
Balance left on loan
Current interest rate
Remaining loan term
New interest rate
New loan term
New Monthly Payment
Difference in Interest
Refinancing your student loans might be a good idea if:
- You’re eligible: If you have a solid credit score and a steady job, you may qualify for an interest rate that’s lower than what you’re paying now.
- You’d save money: It’s a good idea to refinance your student loans if you would either save money each month or lower the total interest costs of your loan.
If you don’t qualify for refinancing — whether you have poor or little credit — or you won’t get an interest rate lower than what you’re paying now, you may want to look at alternatives. For federal student loan borrowers, refinancing also means that you lose out on federal protections and benefits. For instance, if you ever need to pause payments, many private lenders don’t offer deferment or forbearance like federal student loans do. If you refinance your federal loans, you’ll also lose the ability to sign up for an income-driven repayment plan.