Can You Refinance Student Loans When Self-Employed?
Although you might need to prove your income in different ways, self-employed individuals have options for refinancing their student loans.

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If you’re self-employed, we have good news: Self-employment on its own won’t block you from refinancing—but approval isn’t a guarantee.
When you refinance your student loans, you might tap into a lower interest rate, different repayment period, or lower monthly payment. If you can refinance into a loan with a lower interest rate (and the same repayment terms), you’ll save money.
Depending on your financial situation, the benefits of refinancing can be enticing. If you are self-employed, finalizing your refinance might be more complicated than those with a regular job. But in many cases, it’s possible. We’ll explain how to put yourself in a position with a high likelihood of getting approved for refinance.
In this guide:
- Can I refinance student loans if I’m self-employed?
- Should I refinance my student loans if I’m self-employed?
- Alternatives to student loan refinance for self-employed borrowers
Can I refinance student loans if I’m self-employed?
If your self-employment income can be volatile, you run a higher risk of hitting a financial dry spell that makes keeping up with your payments challenging.
As a student loan borrower, you might have private or federal student loans. You might even have a mix of both on your balance sheet.
Private lenders, such as banks and credit unions, issue private student loans.
The U.S. government issues federal student loans, which involve extra benefits and protections for borrowers. If you’re unsure which kind you have, look over your billing statements for details on your loan types.
Private student loans
For borrowers with full-time jobs, lenders often use pay stubs to confirm their income.
Self-employed borrowers who want to refinance their student loans can provide proof of income in a different way. In many cases, lenders ask self-employed borrowers to provide proof of income through tax returns, profit and loss statements, or federal 1099 forms.
For example, as of December 2022, Citizens Bank requires self-employed borrowers to provide two years of tax returns, Schedule C documents, and profit and loss statements with their loan applications.
Federal student loans
Federal student loans come with more borrower protections than private student loans. Although you might be able to tap into a lower interest rate through a refinance to private student loans, you’ll give up these protections.
For example, federal student loans come with the following:
- Forbearance and deferment options due to financial hardship, continuing education, and military service
- Access to income-based repayment plans
- Loan forgiveness possibilities
Before pursuing a refinance, take a close look at all your options through the federal loan program. You might be able to lower your student loan payments through an income-driven repayment plan or by consolidating your federal student loans.
If you decide to move forward with refinancing your federal student loans through a private lender, the income verification document requirements should be similar.
Should I refinance my student loans if I’m self-employed?
Like borrowers with more traditional employment arrangements, the decision to refinance your student loans boils down to the specifics of your loan and your financial goals.
Significant advantages of refinancing can include tapping into a lower monthly payment or lower interest rate.
But the downsides might involve giving up access to income-driven repayment options through your federal student loans.
Let’s explore two scenarios where the self-employed borrower weighs their refinancing choices.
Scenario 1 (Sally) | |||
Pre-refinance federal student loan balance | $25,000 | Post-refinance private student loan balance | $25,000 |
Pre-refinance fixed interest rate | 7% | Post-refinance fixed interest rate | 4% |
Pre-refinance repayment term | 10 years | Post-refinance repayment term | 10 years |
Pre-refinance monthly payment | $290 | Post-refinance monthly payment | $253 |
Scenario 2 (Bob) | |||
Pre-refinance federal student loan balance | $25,000 | Post-refinance private student loan balance | $25,000 |
Pre-refinance fixed interest rate | 7% | Post-refinance fixed interest rate | 5% |
Pre-refinance repayment term | 10 years | Post-refinance repayment term | 15 years |
Pre-refinance monthly payment | $290 | Post-refinance monthly payment | $165 |
Sally and Bob both found lower monthly payment options. However, Sally comes out ahead financially by tapping into over $4,000 in interest savings over her 10-year repayment term.
In contrast, Bob’s monthly budget has more wiggle room, but he’ll pay over $4,700 more in interest due to his longer repayment term.
If you’re considering a refinance, it’s helpful to run the numbers for your unique situation. Only you can decide whether a refinance is the right fit for your current budget and future financial goals.
Refinancing your federal loans with a private lender might be worth it to you for the savings. Just be sure you are comfortable with the benefits you’ll lose if you go this route.
Alternatives to student loan refinance for self-employed borrowers
Refinancing your student loans isn’t the only way to restructure your payment obligations. If you have federal student loans, applying for an income-driven repayment plan is another avenue to pursue.
Two income-driven repayment plans are income-based repayment (IBR) and income-contingent repayment (ICR). Both offer ways to add room to your monthly budget.
Either plan requires your monthly payment to be a percentage of your discretionary income. Here’s a closer look at both:
ICR | IBR |
Either: 20% of discretionary income per month | 10% of discretionary income per month |
Discretionary income calculated as: Annual income – (100% x poverty line for household size) | Discretionary income calculated as: Annual income – (150% x poverty line for household size) |
Or: Monthly payments equal to what you would pay on a 12-year repayment plan |
Let’s consider two examples of borrowers making the switch to income-driven repayment options:
Scenario 1 (Sam) | |
Federal student loan balance | $25,000 |
Fixed interest rate | 5% |
Monthly payment | $265 |
Income | $40,000 |
New monthly payment on IBR | $182 |
Difference in interest paid over life of loan (assuming no change in income) | +$11,760 paid |
Scenario 2 (Max) | |
Federal student loan balance | $20,000 |
Fixed interest rate | 5% |
Monthly payment | $212 |
Income | $40,000 |
New monthly payment on ICR | $158 |
Difference in interest paid over life of loan (assuming no change in income) | +$3,799 paid |
As you can see, both borrowers would pay more over the life of the loan on an income-based repayment plan, but Sam would pay $7,961 more than Max for a balance $5,000 higher.
If you have private student loans you can’t refinance, consider reaching out to your current lender.
Depending on your situation, it might be willing to work out a new payment schedule, even allowing you to change your deadline or lower your payment amount for a stated period.
Author: Sarah Sharkey
