How to Refinance Student Debt, and When You Shouldn’t

It’s my pleasure to feature this guest post by Patty of Working Mother Life. I have never had student loans, so it makes sense for somebody else to write on the subject. Patty’s got some great info here and more at her website.  Keith “Shin” Schindler


Student loan refinancing is one of the options available to you when you have student loans that are in good standing. You will be able to save money through a process where you basically trade in your current student loans for a loan that has a lower interest rate. Below, we will talk about the process of student loan refinancing and what you can expect from it.

What is Student Loan Refinancing?

Like refinancing a mortgage, student loan refinancing is a way for you to adjust your current student loans and receive a lower interest rate. You can also reduce your monthly payment, if you choose, and you can restructure your repayment terms as well.

To show you how much money student loan refinancing can save you, let’s take a look at an example below.

Loan Amount: $50,000

Current Annual Interest Rate: 6.80%

Original Loan Terms: 10 years

New Refinanced Loan Amount

Loan Amount: $50,000

New Annual Interest Rate: 3.75%

Original Loan Terms: 10 years

You would save $80.23 per month and a total lifetime savings of $9,627.60.

Eligibility Requirements for Student Loan Refinancing

There are criteria that must be met before you can refinance your student loans. Not everyone will be approved for refinancing, so it is important that you work closely with your lender to determine if you are eligible.

Student loan refinancing takes place through a private banking institution or lender, so it is vital that you understand what the eligibility requirements are. Let’s take a look below at some of those criteria.

  • Loan must be greater than the minimum amount allowed by the lender, which is usually $10,000
  • You cannot currently be enrolled in school when you refinance your student loans
  • Your student loans must not be in default and they must be current on payments
  • You must have a credit score of 560, though the average is 757 according to
  • You must hold a stable job
  • Your income must support the new payments

According to, if you cannot meet the credit and job requirements, then you will need to have a cosigner apply with you. This can be tricky because you need to make sure the cosigner meets the minimum eligibility as well.

Reasons NOT to Apply for Student Loan Refinancing

If you are considering student loan refinancing, you may want to think long and hard about it before you settle on it as the right choice for you. The reason behind this is because there are sometimes that you do NOT want to apply for it because it will only hurt you. Let’s see what those reasons are.

You Lose Your Federal Benefits

One of the reasons why you may not want to apply for student loan refinancing is because you will lose your federal benefits. This means that you will no longer have the option to enroll in income-driven repayment plans, have access to student loan forgiveness, and more. It should be noted, however, that many borrowers may never use these benefits – especially if they are in a good financial situation.

You Do Not Have Any Secure Income

When you do refinance your student loans, it is always through a private lender, so that means that you need to make sure that you have secure income to make the payments. As mentioned above, you will lose your federal student loan benefits, which can drastically affect you, should you run into financial trouble.

If you think that you may lose your income in the future or you foresee financial difficulty, do not apply for refinancing.

Your Loans Will Be Paid Off Soon

Refinancing is not always a good idea unless you have a while to pay on your student loans. If you only have a couple of months left, then it would not make much sense to switch to a new lender. However, if you have 5 or more years left, then it would be a good idea for you.

Final Thoughts on Student Loan Refinancing

Student loan refinancing is a good idea for those individuals who have a while left to pay on their student loans. If you meet the criteria to apply for student loan refinancing, then you should try.

The amount of money that you will save on interest alone is worth the attempt. However, if you have poor credit or you do not have a secure income, then you will likely need to have a cosigner for approval.

Refinancing is able to help lower your interest rate, monthly payment, and allow you to readjust your repayment terms and options.

You can find more parenting and career articles from Patty over at Working Mother Life. In her free time, Patty enjoys playing with her daughter, doing yoga, and experimenting with new recipes.

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One Response to How to Refinance Student Debt, and When You Shouldn’t

  1. Keith says:

    As I mentioned in the intro, I’ve never had student debt, so I can’t relate. I have had debt, though. Patty offers some great insight into when and when not to refinance. Thanks, Patty!

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