Am I eligible to refinance my student loans?

Private Student Loan Consolidation FAQs

Private Student Loan Refinancing FAQs

  1. Can you consolidate private student loans?
  2. What are the benefits of refinancing private student loans?
  3. Is a cosigner required for a private refinance loan?
  4. Do private refinance loans offer cosigner release?
  5. What types of private loans are eligible for refinancing?
  6. What is the interest rate on a private refinancing loan?
  7. Does a private refinance loan save the borrower money?
  8. How long does it take to get a private refinance loan?
  9. What are the loan limits for private refinance loans?
  10. How long is the repayment term for private refinance loans?
  11. Are there any penalties for prepayment of private refinance loans?
  12. Are there any fees on private refinance loans?
  13. Are there any repayment discounts for private refinance loans?
  14. Does the private refinance loan have to be approved by the school?
  15. Does private loan refinancing affect the borrower's credit rating?

Can you consolidate private student loans?

Yes, it is possible to consolidate private student loans. This process is also known as refinancing and is done through a private lender. You can choose to work with the lender (or one of the lenders) you originally borrowed from, or select a new lender altogether. You can also merge all of your student loans together, including federal and private loans you borrowed, should you choose. But you must be sensitive to some important things. 1) Private student loan consolidation (a.k.a. refinancing) is based on credit worthiness and income criteria, which can mean a cosigner (such as a spouse) is warranted. 2) Should you choose to include federal loans in a private consolidation, be prepared to forfeit certain borrower benefits such as deferments, income-based repayment plans and possibly loan forgiveness programs.

What are the benefits of refinancing private student loans?

A private refinance loan can make it easier to manage student loan payments after graduating by combining several loans into one, reducing the number of monthly loan payments. It can also lead to a lower loan payment by stretching out the term of the loan. (Increasing the term of the loan may increase the total interest paid over the life of the loan.) Some borrowers may be able to qualify for a lower interest rate or switch from a variable rate to a fixed rate (or vice versa). Borrowers who don’t like their private student loan lender can use private refinancing to switch to a different lender.

Is a cosigner required for a private refinance loan?

Private refinance loans are similar in many ways to private student loans. If the primary borrower does not satisfy credit criteria, a cosigner may be required. Recent college graduates may not have long enough of a credit history to qualify without a cosigner. Even if the borrower can qualify for a private refinance loan without a cosigner, adding a cosigner may yield a lower interest rate. A cosigner is a co-borrower, equally obligated to repay the loan. The private refinance loan will be reported on the credit history of both the borrower and cosigner and may affect the eligibility for other forms of consumer debt.

Do private refinance loans offer cosigner release?

Some lenders offer cosigner release as an option on their private refinance loans. Typically, these require 12, 24, 36, or 48 months of consecutive on-time payments by the primary borrower. The primary borrower must also satisfy credit criteria.

If the borrower qualifies for the private refinance loan on their own, without a cosigner, refinancing the private student loans effectively releases the cosigner from the obligation. The new refinance loan pays off the old loans.

What types of private loans are eligible for refinancing?

Most private student loans are eligible for refinancing, including loans taken out for undergraduate and graduate studies. Some lenders may determine loan eligibility based on the college attended, degree level or field of study.

What is the interest rate on a private refinance loan?

Interest rates on private refinance loans vary with the lender, and may be variable or fixed. Typically, the interest rate is based on the credit score of the borrower and the cosigner (if any). Generally, a better credit score will lead to a lower interest rate.

Does a private refinance loan save the borrower money?

It depends.

A private refinance loan may reduce the monthly payment by increasing the term of the loan. This may make the monthly payment more affordable, enabling the borrower to redirect those extra funds to pay off higher-interest debts. This would save the borrower money. However, increasing the term of the loan often leads to more interest being charged over the life of the loan. 

If the borrower qualifies for a lower interest rate, the total cost of the loan will be lower, and the borrower will save money.

How long does it take to get a private refinance loan?

Typically, it takes 30-60 days from loan approval until the private loan refinance is complete.

Borrowers should continue making payments on their old loans until the lender notifies them that the old loans have been paid off. Any overpayments will either be forwarded to the new lender or refunded to the borrower.

What are the loan limits for private refinance loans?

Loan limits and minimum balance requirements vary by lender. Some will allow borrowers to get a private refinance loan for as little as $7,500 or $10,000. Others require a higher initial loan balance.

The loan limits may vary based on whether the borrower has an undergraduate or graduate degree. It may also depend on the borrower’s credit scores and income.

How long is the repayment term for private refinance loans?

The length of the repayment term varies by lender, typically 15, 20, or 25 years. Lenders offering fixed interest rates may have shorter repayment terms. The repayment term may depend on the amount borrowed.

Are there any penalties for prepayment of private refinance loans?

As with all federal and private student loans, there are no prepayment penalties for making extra payments or paying off the balance early.

Are there any fees on private refinance loans?

Many lenders do not charge fees on their private refinance loans. Some lenders roll the fees into the interest rate.

Are there any repayment discounts for private refinance loans?

Some lenders provide auto-debit discounts for making automatic monthly payments by direct debit from a bank account. Typical discounts include an interest rate reduction of 0.25% or 0.50%.

Does the private refinance loan have to be approved by the school?

Private refinance loans are generally not school-certified since they are refinancing existing private student loan debt after the student has graduated or is no longer enrolled.

Does private loan refinancing affect the borrower's credit rating?

Refinancing can increase or decrease the credit score or leave it unchanged. Refinancing reduces the number of loans, but is usually not treated as new indebtedness since it is replacing existing loans. If refinancing reduces the monthly payment through a longer repayment term, it may improve the borrower’s credit score by reducing the debt-service-to-income ratio.

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Am I eligible to refinance my student loans?