Can You Refinance Student Loans Before You Graduate?

It’s possible to refinance your student loans before you graduate from college, but only certain lenders allow it. 

If you’re considering refinancing while you’re still in school, it’s important to consider whether it’s the right move, how it can affect your repayment, and your alternatives. 

If you believe it’s the right decision, we’ve provided details about lenders that can help you achieve your goal.

In this guide:

• Should you refinance student loans before you graduate?
• Are there types of loans you shouldn’t refinance while in school?
• How refinancing before graduation affects the terms of your student loan
• Alternatives
• Lenders that allow refinance before graduation

Should you refinance student loans before you graduate?

Can you refinance your student loans while in school? Absolutely. 

For most college students, though, it might not be the right decision. And unless you have excellent credit and a solid income—or a cosigner with those financial traits—it may not even be possible. 

Situations in which it might make sense to consider refinancing even if you haven’t graduated include the following:

• You can’t afford your in-school payment: Some private lenders—such as SoFi and College Ave—allow borrowers to make full monthly payments while they’re still in school. If you elected that repayment option when you first took out your loans and now can’t afford it, refinancing could allow you to get a longer repayment term and, therefore, lower monthly payment.
• You’ve dropped out of school: Most student loans offer in-school deferment, but if you drop out, even temporarily, you can expect to start making payments within six months. Certain private lenders don’t require you to have a degree to refinance your student debt
• You want a lower interest rate: If your student loans have a high interest rate and you can qualify for a lower one on your own or with a cosigner, it could make sense to refinance before you graduate to limit the accruing interest during your in-school deferment period.
• You want a new loan servicer: If you’ve had a negative experience with your loan servicer, refinancing can give you the chance to choose your lender based on customer satisfaction and other features that are important to you.
• You’re in graduate school: If you can qualify for better terms on your undergraduate student loans, it could make sense to refinance now rather than waiting until you earn your graduate degree.
  

Take the time to understand how refinancing may help or hurt your situation, both now and in the future.

Are there types of loans you shouldn’t refinance while in school?

In most cases, it’s wise to avoid refinancing federal student loans. Federal loans often offer lower interest rates than private loans, particularly to undergraduate students, and they come with a host of benefits you’ll lose if you refinance with a private lender.

For starters, all federal loans defer monthly payments until six months after you graduate, leave school, or fall below half-time enrollment. If you refinance your loans, you may lose that deferment.

You’ll also lose access to federal student loan forgiveness programs, income-driven repayment plans, and generous forbearance and deferment options. The latter two can be especially helpful if you’ve dropped out of school and can’t afford payments. 

How refinancing before graduation affects the terms of your student loan

When you refinance student loans, you’re taking out a new loan with new terms through a private lender. The goal of refinancing is often to lower your interest rate, therefore decreasing the overall cost of your loan.

For example, let’s say the average rate on your existing student loan balance of $50,000 is 7%, and you can reduce it to 5% through refinancing. 

Here’s what that can save you over a 10-year repayment period:

Savings over 10 years
Monthly	$51
Total	$6,026

That’s money you can put toward buying a car or house, saving for retirement, or starting a family.

Find out how much you could save by accessing our student loan refinance calculator.

When you refinance your loan, your new private lender will be qualifying you as a credit risk, regardless of whether you have finished your degree. Many students who are in school do not have enough income, an established credit history, or a low enough debt-to-income ratio to qualify for the new loan on their own.

Since most students can’t meet these requirements, a cosigner is necessary for approval. Your cosigner will be equally responsible for your loan and will need a strong, established credit history and a steady income.

Alternatives to refinancing student debt before graduation

Depending on your situation, you may have other options to help you accomplish your goal.

Income-driven repayment

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 (IDR) plan. These plans factor in your discretionary income to reduce your payment amount so it is more affordable. 

You’ll likely pay more in interest, but the monthly payments should be more manageable. Once you’re on an IDR plan, you are eligible for loan forgiveness after 20 or 25 years depending on the plan.

Make interest-only payments

If your primary concern is a high interest rate, and refinancing isn’t an option, consider whether you can make interest-only payments while you’re in school. 

Paying off interest as it accrues will prevent the lender from capitalizing the interest once your repayment term begins and adding it to your balance, which can save you money. 

Request forbearance

If you’re making in-school loan payments or you’ve dropped out and can’t afford your payments, contact your loan servicer or lender to ask about forbearance options. 

Even if you have private student loans, many lenders offer some form of short-term relief for borrowers experiencing financial hardship.

Apply for a Direct Consolidation Loan

If you have federal student loans and want a new loan servicer, or if you want a lower monthly payment, you can consolidate them through the Direct Loan Consolidation program. 

This will allow you not only to get a new loan servicer, but also to extend your repayment term to 30 years, which can reduce your payment. 

Keep in mind: Longer terms often result in paying more interest over the life of the loan. What’s more, you can’t secure a lower interest rate this way. Your new loan servicer will take the weighted average of the interest rates on the loans you’re consolidating and round it up to the nearest eighth of a percent.

You cannot consolidate private student loans. Those loans can only be refinanced.

Lenders that allow refinance before graduation

Some lenders don’t require you to have a degree to refinance, even if you left school.

Refinancing your student loans while in school is also an option with certain lenders. 

We’ve included a handful of examples. 

Earnest

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• Rates (APR): 3.99% – 8.99%
• 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: 3.99% – 8.29%
• Fixed rates: 4.39% – 8.99%
• Rate reduction: 0.25% for enrolling in automatic payments
• Fees: None
• Cosigner release: No

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Discover

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• Rates (APR): 5.49% – 10.49%
• Loan amounts: $5,000 – $150,000
• Repayment terms: 10 or 20 years

You can refinance your student loans with Discover while you’re still in school, during your six-month grace period, or after you begin repayment. Keep in mind: You’ll need to start making payments 30 to 45 days after the loan is disbursed, even if you’re still enrolled. 

The lender only offers two repayment terms: 10 and 20 years. 

While it holds most borrowers to a $150,000 limit, Discover will entertain higher amounts for certain fields of study. To qualify, you must be a U.S. citizen or permanent resident with a U.S. address, be at least 18 years old, have sufficient, verifiable income, and pass a credit check. 

You can also apply with a cosigner if you can’t meet all the requirements on your own.

• Minimum credit score: Not disclosed
• Minimum income: Not disclosed
• Variable rates: 5.49% – 9.24% 
• Fixed rates: 5.99% – 10.49%
• Rate reduction: 0.25% for autopay
• Fees: None
• Cosigner release: No

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RISLA

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• Rates (APR): 5.29% – 7.74%
• Loan amounts: $7,500 – $250,000
• Repayment terms: 5 – 15 years

The Rhode Island Student Loan Authority (RISLA) is a state-based organization, but it offers refinance loans to borrowers across the country. The lender offers a specialized option for in-school students that allows them to defer their payments until six months after they leave school.

However, you can opt for a loan with immediate repayment, which can allow you to get a lower interest rate. RISLA only offers fixed interest rates with a 15-year term for deferred payment plans and 5, 10 or 15 years for immediate repayment plans. 

You must be a U.S. citizen, pass a credit check, and meet other credit-related criteria to get approved.

• Minimum credit score: Not disclosed
• Minimum income: $40,000
• Rate reduction: 0.25% for autopay
• Fees: Late payment fee of 6% of the payment amount; returned check fee of $10
• Cosigner release: No

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Citizens Bank

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• Rates (APR): 5.09% – 11.88%
• 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 it may be wise to check out your credit score and see what you can do to raise it before applying. Paying down credit card debt and making additional on-time payments on your accounts will help.

• Minimum credit score: Not disclosed
• Minimum income: Not disclosed
• Variable rates: 5.09% – 11.68%
• Fixed rates: 5.39% – 11.88%
• Rate reduction: 0.25% automatic payment discount and 0.25% discount for having an eligible bank account with Citizens Bank
• Fees: Not disclosed
• Cosigner release: Yes