When Is the Deadline for Refinancing a Student Loan?
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By Mark Kantrowitz

August 3, 2020

Is there a deadline for refinancing your student loans? Can you refinance a student loan after 3 years or 13 years?

No Deadlines for Refinancing a Student Loan

There are no time limits on when you can refinance a student loan

However, some lenders will not refinance a borrower’s student loans if the borrower is still enrolled in college. These lenders require the borrower to have already graduated before they will consider the borrower’s application to refinance their student loans. 

A minimum balance may be required to refinance, so borrowers who are close to the end of their repayment term might not be able to refinance. 

Refinancing Affects the Remaining Repayment Term

When you refinance your student loans, the new loan will come with a new repayment term. If the new repayment term is longer than the remaining terms on your previous loans, you will be stretching out the repayment term, which may reduce the monthly loan payment. This can also increase the total interest paid over the life of the loan, even if the interest rate is lower.

For example, if you are 3 years into a 10-year repayment term and refinancing into a new 10-year loan, you will have increased the remaining time in repayment from 7 years to 10 years. On the other hand, if you refinance into a 5-year loan, you will have reduced the remaining repayment term. 

The length of the repayment term affects the size of the monthly loan payment. A longer repayment term yields a lower monthly loan payment, but also more total interest paid over the life of the loan. 

See also: Risks of Refinancing Student Loans

Interest Rates May Be Higher Soon after Graduation

The interest rate on a private refinance depends on your credit score. If you are applying to refinance your student loans with a cosigner, the interest rate will also depend on your cosigner’s credit score. Most lenders use the higher of the two credit scores. 

Generally speaking, it takes a few years after graduation for your credit score to improve enough for you to qualify for a lower interest rate, especially if you are trying to refinance without a cosigner. If you refinance immediately after graduation, you may not qualify for a lower interest rate. 

To improve your credit score, pay all of your debts on time (not just the student loans) and maintain steady employment. Lenders prefer borrowers who have been employed by the same employer for two or more years.  




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Better to Refinance Sooner

If you will qualify for a lower interest rate, it may be better to refinance your loans sooner and not wait to refinance. 

Reducing your interest rate will save you money on your student loans. The savings start immediately. 

For example, if you are able to refinance a $30,000 student loan from 6% to 3%, you will reduce the monthly loan payment from $333.06 to $289.68 a month, saving $43.38 a month and $5,206 over the term of the loan. 

See also: Why You Should (and Shouldn’t) Refinance Student Loans

Sometimes a lower interest rate involves a shorter repayment term. Suppose that the 3% loan involves a 7-year repayment term. The shorter repayment term increases the monthly payment to $396.40 a month. The total interest savings, however, also increases, to $6,670 over the life of the loan. That’s almost $1,500 in extra savings. 

Use our loan comparison calculator to evaluate the tradeoffs between a lower interest rate and a shorter repayment term. 

If interest rates drop again after you refinance, nothing stops you from refinancing again. There are no prepayment penalties on student loans and lenders do not charge fees for refinancing student loans.

See also: How to Qualify for Refinancing Student Loans

Refinancing a student loan could possibly lower your interest, saving you money. Consider the pros and cons of student loan refinance before you decide. Refinancing federal loans into a private loan means a loss of all of the federal loan benefits – income-driven repayment options, potential for loan forgiveness, generous deferment period if you lose your job or have an economic hardship, possibly loans that are subsidized, and potential widespread forgiveness. 

If you have decided that student loan refinance is right for you, check out our list of the best lenders to refinance student loans

Credible allows you to compare rates from 10 lenders without impacting your credit for free. Splash Financial is a student loan refinance marketplace that matches you with a lender with a low interest rate.

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