Can You Refinance Student Debt Before You Graduate?
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An increasing number of student borrowers are looking for payment relief by reducing their interest costs through student loan refinancing. The question is, can you refinance your student loans before you graduate? The answer is yes.
Below, you will see why it may make sense to refinance before you graduate, which companies you can refinance with, and what to keep in mind before doing so.
On this page:
- What to consider when refinancing before graduation
- Lenders that refinance before graduation
- Income-driven repayment is an alternative
What to consider when refinancing before graduation
When you refinance student loans, you are taking out a new loan with new loan terms through a private lender. Oftentimes, the goal of refinancing is to lower your interest rate, therefore decreasing the overall cost of your loan.
For example, if the average rate on your existing student loan balance of $50,000 is 7% and you can reduce it to 5% through refinancing, it could save you around $50 a month over a 10-year repayment period, or more than $6,000 over the life of the loan. That’s money that can be put towards buying a car or a house, saving for retirement, or starting a family.
If you have federal student loans, refinancing them with a private lender will remove borrower protections such as income-driven repayment plans and the potential for loan forgiveness. Make sure to consider whether sacrificing these benefits is worth it.
In addition to the loss of federal benefits, private lenders have difficult eligibility requirements for students who have yet to complete their degree. These requirements can include an established credit history, steady income, and a low debt-to-income ratio amongst other things.
Since most students can’t meet these requirements, a cosigner will be necessary to receive approval. Your cosigner should have a strong, established credit history, and a steady income at the minimum.
Lenders That Do Refinance Before Graduation
The following private lenders will refinance student loans before the borrower has graduated.
Citizens Bank
Rates (APR)
2.72% – 8.63%
Loan Amounts
$10,000 – $500,000
Repayment Terms
5, 7, 10, 15, or 20 years
Citizens Bank, a national bank, will refinance school loans even if you haven’t completed your degree. However, you can no longer be enrolled in school to qualify. You must also be employed and have made 12 on-time payments on your original loan to be considered.
Citizens Bank checks your credit history, so you may want to check out your credit score and see what you can do to lift it up before applying. Paying down credit card debt and making additional on-time payments on your existing accounts will help.
- Minimum credit score: Not disclosed
- Minimum income: Not disclosed
- Variable rates: 2.72% – 8.38%
- Fixed rates: 3.49% – 8.63%
- Rate reduction: 0.25% automatic payment discount and 0.25% discount for having a bank account with Citizens Bank
- Fees: Late payment fee of 5% of payment amount for payments not made within 15 days of the due date
- Cosigner release: Yes
Earnest
Rates (APR)
2.39% – 6.67%
Loan Amounts
$5,000 – $500,000
Repayment Terms
5 – 20 years
Earnest is another option for student borrowers who have yet to graduate. While the lender still requires a college degree to be eligible for refinancing, you can qualify as long as you are scheduled to graduate by the next semester. You will also need to show proof that you have employment lined up within six months after you graduate.
In addition to your credit history, Earnest focuses on factors such as income, debt expense, and free cash flow to determine your ability to repay the loan.
- Minimum credit score: 650
- Minimum income: $35,000
- Variable rates: 2.39% – 6.67%
- Fixed rates: 3.20% – 6.67%
- Rate reduction: 0.25% for autopay
- Fees: None
- Cosigner release: No
Income-driven repayment may be an alternative
Alternatively, if you have federal student loans you can wait until your repayment starts after leaving school (with or without a degree) and enroll in an income-driven repayment plan.
These plans factor in your discretionary income to reduce your payment amount so it is more affordable. You don’t save anything in interest costs, but it makes the loan more manageable.
Once you are on one of the income-driven repayment plans you are also eligible for loan forgiveness after 20 or 25 years depending on the plan.
