Refinancing your student loans is a process that involves applying for a new loan and using the money from that new loan to pay back your existing student debt. Depending upon your preferences, you can refinance private student loans, federal student loans, or both—although you will have to give up some important borrower protections if you refinance federal loans.
There are many reasons to refinance student loans, including to receive a lower interest rate, consolidate debt, change your loan servicer, or change the term of your loan.
If you’ve refinanced your student loans once, you may assume you can’t refinance again. But, in fact, that’s not true. You can refinance your student loans with private lenders as often as you’d like, as long as you’re able to qualify for a new refinance loan.
Not only can you refinance your student loans more than once, but often you should refinance your loans multiple times. Read on to find out why.
On this page:
- How Often Can You Refinance Student Loans
- Benefits of Refinancing Student Loans Multiple Times
- Downsides of Refinancing More Than Once
- Refinancing Multiple Times Is Fine—If You Get a Good Deal
How Often Can You Refinance Student Loans
As long as you can find a lender willing to give you a refinance loan, you can choose to refinance again. Of course, you’ll want to make sure the loans you’re paying off when you refinance don’t have a prepayment penalty—or that paying the penalty is worth it because you’ll drop your rates so much. That being said, most lenders do not charge prepayment penalties.
Refinancing a student loan will also likely have a minimal impact on your credit score. It may temporarily reduce your score by a few points if the lender performs a hard inquiry to check your report and, if you get a new loan, it’ll reduce your average age of credit. But as long as you make loan payments on time on your refinanced loan, your score shouldn’t take much of a hit and may even improve over time.
Of course, it only makes sense to refinance multiple times if you can reap benefits from doing so.
You earned a degree—now you deserve a better interest rate
- Rates start at 2.57% APR
- Refinance both federal and private student loans
- Skip one monthly payment each year if certain conditions are met
- 12-month forbearance period as well as academic and military deferment
Benefits of Refinancing Student Loans Multiple Times
The benefits you’ll get from refinancing student loans multiple times will vary depending upon your personal situation, current loan terms, and goals for refinancing. Here are some of the biggest benefits associated with refinancing a loan more than once.
Refinancing Allows You to Change Your Interest Rate
If interest rates have fallen since the last time you refinanced your loan or if you have a better credit score, refinancing could allow you to reduce the rate you’re paying on your debt. Dropping your rate even a small amount can save you a lot of money if you have a high student loan balance.
Refinancing could also allow you to switch from a variable rate loan to a fixed rate loan or vice versa. A fixed rate loan will have steady payments throughout the life of the loan because your interest rate never changes. A variable rate loan could have payments that rise or fall, as your interest rate is tied to a financial index and can change. Variable rate loans usually have lower starting rates than fixed-rate loans but some borrowers would rather have a fixed rate because it is more predictable.
If you’re worried about the uncertainty of your current variable rate loan or you think interest rates will be going up, refinancing to a fixed rate loan could be smart to lock in your debt at the current lower rate. Or, if you have a fixed rate loan but think you could drop your rate by switching to a variable rate loan, you may decide to do that despite the added risk a variable rate loan presents.
Refinancing Allows You to Change Your Other Loan Terms
Refinancing not only allows you to change your interest rate, but you could also change other terms and the repayment plan of your loan. For example:
- You could change the timeline you have to repay your loan. If you currently have a loan you’re scheduled to repay in five years, you could change to a new loan with a 10-year repayment term. This would cut your monthly payments, although it would also increase the total cost unless you can receive a substantially lower interest rate.
- You could change the borrower benefits you receive. A new loan may offer more options for forbearance or could offer career counseling or a discount on your interest rate for autopay that your current loan doesn’t offer. There are many borrower benefits, which vary from lender to lender.
Of course, you want to make sure your new loan has better terms, or it won’t make sense to refinance.
Refinancing Allows You to Switch Loan Servicers
If you’re not happy with the customer service your current lender is providing, refinancing allows you to get a new lender. Just be sure to check their reviews and the Consumer Financial Protection Bureau’s database of complaints to make sure the new lender has a good reputation and is likely to treat you better.
You Can Consolidate Your Student Loans
If you have multiple loans with different servicers—perhaps because you didn’t pay off all your student loans last time you refinanced—you could also use your new refinance loan to consolidate. By paying off all your outstanding loans this time, you could simplify your life by ending up with just one loan and one lender to make payments to.
Refinancing Allows You to Release a Cosigner
If you currently have a cosigner, your loans appear on their credit report. This could affect their ability to take out other loans for themselves because it looks like they have a lot of debt. If you pay late, that could also affect your cosigner’s credit. And the cosigner is jointly legally responsible for paying back the debt you owe, which means they could be stuck with a huge bill if you can’t pay.
Sometimes, your current lender will allow cosigner release, so your cosigner will be relieved of responsibility for your loan after you make a certain number of payments. But if your lender doesn’t allow this or you don’t want to wait, refinancing could be the answer.
If you’re able to qualify for a new loan on your own without a cosigner, you can get the new loan on your own and use it to pay off the debts the cosigner currently shares responsibility for. That will be a big weight off the cosigner’s shoulders.
Downsides of Refinancing More Than Once
While refinancing multiple times could have some clear advantages, there are also some potential downsides for student loan borrowers to consider as well.
You May Have to Pay Fees During the Refinancing Process
Though it is very uncommon for refinance lenders to charge any fees, in some cases, you may have to pay a prepayment penalty to pay off existing student debt. Or you may be charged application fees or origination fees for a refinance loan. If you’re charged these fees, it may not make financial sense to refinance unless you can drop your rate and costs by enough to make up for the fees you pay.
If You Refinance Federal Loans, You Will Lose Certain Benefits
If you refinance federal student loan debt, you will no longer to have access to income-driven repayment plans, federal student loan forgiveness programs, and forbearance and deferment protections that the government provides. If you currently depend on these or think you will in the future, it is in your best interest not to refinance your federal student loans.
Your Credit Score Could Be Damaged
When you apply for student loan refinancing, you will likely get an inquiry on your credit report. This will stay on your credit history for two years and will slightly reduce your credit score. You’ll want to minimize the impact of refinancing by shopping among lenders that give you rate estimates without doing a hard inquiry.
Opening a new account by refinancing will also reduce your score a bit because having a newer account means your average age of credit is lower. A longer average age of credit is better because it shows you’ve been responsible in paying your debt.
You Could Cost Yourself Money in the Long Run
It typically only makes sense to refinance if you’re able to get a loan that will cost you less in the long run. If you’ve already refinanced recently, you may not be able to find a loan with a new interest rate that’s lower than the original rate.
If you refinance to a new loan and extend your payoff timeline, you could also end up costing yourself money—even if your interest rate is lower. That’s because the longer it takes you to pay off your loan, the more interest you pay and the higher your total loan costs may be.
Think seriously before applying for a loan with a longer repayment term than you have now, as you don’t necessarily want to lock yourself into higher costs and a longer timeline to become debt free and continue making student loan payments.
Refinancing Multiple Times Is Fine—If You Get a Good Deal
If you’ve already refinanced your student loans once and you’re thinking about doing it again, it may be a viable strategy depending on your situation. There are plenty of legitimate reasons to refinance your loan multiple times and it may be a more common practice than you think.
Before you decide if refinancing again is right for you, be sure to research your options. Find out what lenders’ qualifying requirements are to see if you’ll be approved and can get a loan without a cosigner. Compare interest rates and any costs and fees to make sure you’ll actually save money by refinancing, and make sure you shop around for the best option.
Author: Christy Rakoczy
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