Refinancing your student loans can be a good idea if you’re looking to save money with a lower interest rate or change your repayment term. But can you refinance student loans more than once, and how often can you refinance student loans?
If you qualify and it makes sense financially, you can refinance as many times and as often as you want.
Before you start shopping around for rates and terms, though, take some time to review your situation to determine whether it’s a good idea. Here’s what you need to know.
The benefits of refinancing your student loans
Refinancing student loans isn’t for everyone — but there are some clear benefits to people who can qualify to do it.
For starters, refinancing can give you the opportunity to get a lower interest rate than you’re currently paying. Some private lenders even offer lower interest rates than the U.S. Department of Education on federal loans.
Of course, you’ll typically need excellent credit and a strong income to qualify for the best rates. But if you do, you could potentially save thousands in the long run as you pay off your debt.
Refinancing also allows you to gain more control over your repayment schedule. For example, if you want to pay off your debt faster and can afford a higher monthly payment, you can apply for a loan with a shorter repayment term than what you have now. This will ensure you get out of debt faster and can also save you money on interest.
On the flip side, if you’re struggling to make your current payment or you want to free up cash for other important financial goals like buying a home, you could apply for a loan with a longer repayment term. This will result in you paying more interest, but a lower monthly payment can clear up some space in your budget and make it easier to get approved for other loans like a mortgage.
Keep in mind, though, that refinancing also comes with some potential drawbacks. If you have federal loans, refinancing them with a private lender cuts off your access to federal benefits. That includes loan forgiveness programs, income-driven repayment plans, and generous deferment and forbearance options.
Also, there’s no guarantee you’ll get approved for better terms than what you have now, and you may need a cosigner to qualify for the best rates available.
How often can you refinance student loans?
There’s no restriction on how many times you can refinance your student loans. However, that doesn’t mean you have to or even should refinance more than once. Here are some situations where it may make sense to refinance student loans that you’ve already refinanced in the past.
Your credit has improved
Student loan interest rates are determined using risk-based pricing. This means that your interest is directly related to how risky the lender views you as a borrower. Your credit score is important because it provides a quick snapshot of your overall credit health, and a high score typically means that you’re very likely to pay your debts as agreed.
If your credit score has improved significantly since the last time you refinanced, you may be able to get an even lower interest rate by refinancing them again.
Alternatively, if you have a cosigner on your current loan, refinancing with a better credit score could allow you to qualify for a loan on your own —effectively releasing your cosigner from their responsibility. Some private lenders offer a cosigner release program so you don’t have to refinance, but it can be difficult to qualify.
Interest rates have gone down
Student loan refinance lenders typically offer both variable and fixed interest rates. If you have a loan with a variable rate, it will fluctuate with market rates. But if you have a fixed rate, it stays the same for the life of the loan.
For most people, a fixed interest rate is the better option because it protects you from potential rate increases in the future. But if interest rates have gone down since you were approved for your loan, you may want to consider refinancing to take advantage of the savings.
Again, keep in mind that there’s no guarantee you’ll qualify for a lower rate. But if your credit hasn’t changed or has gotten better, you’ll have better approval odds.
You want to change your terms
Even if you don’t qualify for a better interest rate, it may make sense to refinance your student loans again to either shorten or lengthen your repayment term. This may be a good idea if you want to accelerate your repayment with a higher monthly payment or pay less every month than you are right now.
This can be especially worth considering if you’re thinking of buying a house. Mortgage lenders have strict requirements for your debt-to-income ratio — the sum of your monthly debt payments divided by your gross monthly income — and a lower monthly payment translates to a lower debt-to-income ratio.
You want to switch lenders
No lender is perfect, and if you’ve had some troubles with your current lender or want to take advantage of some of the features another lender offers, refinancing can be a good way to ensure you have the right fit for your needs.
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Plan to shop around before applying for a loan
Because every situation is different, there’s no one-size-fits-all answer to how often to refinance student loans. If one of the scenarios above describes your current situation, however, it may be worth considering.
But before you pick a lender, do your due diligence and compare rates, repayment terms, and other features from several lenders. Many lenders allow you to get prequalified with a rate offer, but visiting each lender’s website to go through this process can be time-consuming.
Instead, use Purefy’s rate comparison tool which allows you to find the lowest interest rate and other favorable terms from multiple lenders in one convenient place, with one convenient form. This process doesn’t require a hard credit check, and it can help you determine if refinancing again is a good idea — simply and quickly.