If you have federal student loans, you usually don’t need to start making payments until six months after you graduate. But that doesn’t mean you should wait until then to start figuring out a repayment strategy.
If you’re in school and thinking about how to manage your education debt, one smart option is refinancing your student loans. Potential benefits include qualifying for a lower interest rate, a single loan to repay and new loan terms.
Sounds promising, right? However, there’s still a lot to consider. Here’s what’s possible, and how to decide whether refinancing student loans is right for you.
Why you might want to refinance student loans while in school
Scoring a lower interest rate is often the top reason to refinance your student loans. After all, trimming down your rate could save you money on your debt.
Say you’re staring at $20,000 worth of loans on a standard 10-year repayment term. Dropping your average interest rate from 7.00% to 5.00% on a new, refinanced loan could save you $2,410, according to our student loan refinancing calculator.
Refinancing also lets you combine all of your loans into one new loan, simplifying your repayment. The process would even give you the opportunity to select a new repayment plan if you’re unhappy with your current one — you could opt for a shorter term to pay the loan off more quickly, or lengthen the term to reduce your monthly payments; however, you’ll pay more in interest throughout the life of the loan.
There are some downsides to refinancing student loans, however. Perhaps the biggest issue is that if you refinance federal student loans, they become private loans, losing access to useful federal programs, including income-driven repayment options and student loan forgiveness. But if you’re still in school, those might be the least of your problems when it comes to refinancing student loans.
Can you refinance student loans while in school?
Refinancing means taking out an entirely new and separate loan to replace your existing student loans. Unfortunately, it’s very difficult to refinance student loans while you’re still in college.
Lenders try to predict if you’re the kind of person who reliably repays your debt. They have underwriting standards to determine your ability to repay your debt on time, and being a graduate is chief among them.
Earnest is one possibility for refinancing while still in college, although the catch is that you must be a so-called senior, within one semester of graduating.
Even if you find a lender willing to refinance your debt without a college degree, you’d need to meet other standards central to lenders’ underwriting decisions, including:
- Payment history: If you’re still in college, you probably haven’t even started making payments on student loans yet. If so, there’s no way for you to show a history of on-time payments.
- Income thresholds: It can be difficult to prove that you could cover the payment on a new loan while you’re in school and not working full-time. A lender has no real way of projecting how likely it is you’ll graduate or get a job — and a full-time job is key to being able to afford your student loans in repayment.
If you’ve graduated and fall short on some of these requirements, it’s less of a problem, since in many cases you’d be able to bring in a cosigner with stronger credit, such as a parent, in order to secure the loan. Unfortunately, though, this option isn’t generally available for borrowers without a degree.
Student loan refinancing requirements from top lenders
Maybe you’re an older student who returned to school with a robust and lengthy credit history. Perhaps you already have a high-paying career despite still studying on campus. In cases like these, you might be champing at the bit to refinance.
Unfortunately, your options are still limited — unless you’re taking a break from school. In that case, Citizens Bank might be your best bet.
Unlike other top-rated lenders, Citizens Bank doesn’t require a degree to refinance student loans. However, you must have made at least 12 timely payments on your loans since leaving school.
Most other lenders require you to graduate before applying to refinance. For example:
- SoFi requires that you hold an associates’ degree or higher from a Title IV school.
- Laurel Road invites working professionals with four-year undergraduate or graduate degrees from Title IV accredited institutions to apply for student loan refinancing. It also works with associate’s degree-holders in medical fields, including dental hygienists and nurses.
- CommonBond states that borrowers need to have graduated from one of 2,000-plus Title IV colleges in order to refinance with them, so current students without degrees are out of luck.
- LendKey, a platform that connects borrowers with student loan refinancing lenders, says you must have a degree from a Title IV school to qualify for refinancing.
Graduate students might qualify for refinancing undergraduate loans
If you’re a current graduate student, you might be able to refinance student loans borrowed for your undergraduate degree.
Your chances will probably be best if you’re attending school part-time while continuing to work a day job, which will help satisfy income and employment requirements. Even so, it will still probably be easier to either refinance student loans before grad school or to wait until you’re done to start the process.
Parents can refinance while their child is in college
On the other hand, if you’re a parent who borrowed for a child’s education with Parent PLUS loans, you might not need — or want — to wait until your child completes school to refinance.
Unlike other federal student loans, Parent PLUS loans carry credit and eligibility requirements that you must pass to borrow through the program. And unlike with college students, parents are more likely to have a full-time job with a high enough salary to qualify. So, if you have a Parent PLUS loan, you’re probably already eligible for student loan refinancing.
There’s another central difference for Parent PLUS loans: unlike student-borrowed loans, Parent PLUS loans enter repayment immediately upon disbursement — usually while your child is still in school. While you can defer these loans if your child remains enrolled at least half-time, you’ll continue to accrue interest on the loan.
In addition, Parent PLUS loans can be relatively expensive. In 2018, PLUS loans taken out by parents carried a 7.60% fixed interest rate, plus a 4.25% loan origination fee.
At the same time, these loans are ineligible for many federal repayment plans. That makes it even more worthwhile for parents to consider refinancing Parent PLUS loans while their child is still in school.
Alternatives to refinancing student loans
Thankfully, there are other ways to ease the burden of student loan debt while you’re in school.
For private loans, review your repayment plan options. With a lender like College Ave, for example, you could begin making full, interest-only, or low, flat payments to minimize the interest accruing on your debt while you’re in school. You wouldn’t be able to lower your interest rate as with refinancing, but starting to repay the loan while you’re still in college could make for a happier repayment once you’ve left campus.
Similarly, with federal unsubsidized direct loans or direct PLUS loans, you also could make payments toward the interest while you’re in college. Getting a head start on paying the interest can make a big difference in your monthly payment. It can also help you avoid paying capitalized interest.
Can you consolidate student loans while in school?
If all you’re seeking is to simplify repayment, your eyes might light up at the thought of consolidation. It allows you to group your loans into one new loan, although unlike refinancing, it won’t lower your rate.
A federal direct consolidation loan, for example, would be tagged with a weighted average of your previous loan rates. However, for this kind of loan, the federal government insists that you either be in repayment or in the midst of your six-month postgraduate grace period.
Another alternative to consider is a new repayment plan for your federal student loans. Use the time when you’re still in school to check out federal program options. That way, you’re prepared to make payments — or alter your repayment plan — when you graduate.
For federal student loans, these options include:
- Extended repayment plans: Borrowers can choose to repay federal student loans over 25 years instead of 10, and are eligible if they hold more than $30,000 in student loans.
- Graduated repayment plans: Payments start low and gradually increase. You’ll most likely pay more for your student loans over time, however.
- Income-driven repayment plans: These include PAYE, REPAYE, income-based repayment and income-contingent repayment. They determine your monthly amount due based on your current income, making your student loan payments more affordable.
Check out our comprehensive list of repayment assistance programs for more options.
And don’t forget about student loan forgiveness programs — a great opportunity if you fit the requirements.
Kali Hawlk contributed to this report.
Interested in refinancing student loans?
Here are the top 6 lenders of 2019!| Lender | Variable APR | Eligible Degrees | |
|---|---|---|---|
| Check out the testimonials and our in-depth reviews! 1 Important Disclosures for Earnest. Earnest DisclosuresTo qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application. Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility. Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on ourstudent loan refinance product. © 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America. 2 Important Disclosures for Laurel Road. Laurel Road DisclosuresFIXED APR However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account. VARIABLE APR However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account. 3 Important Disclosures for SoFi. SoFi Disclosures
4 Important Disclosures for LendKey. LendKey DisclosuresRefinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution. 5 Important Disclosures for CommonBond. CommonBond DisclosuresOffered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018. 6 Important Disclosures for Citizens Bank. Citizens Bank Disclosures
|
|||
 | 2.47% – 6.97%1 | Undergrad & Graduate | |
 | 2.56% – 7.30%3 | Undergrad & Graduate | |
 | 2.68% – 8.96%4 | Undergrad & Graduate | |
 | 3.23% – 6.65%2 | Undergrad & Graduate | |
 | 2.61% – 7.35%5 | Undergrad & Graduate | |
 | 3.00% – 9.74%6 | Undergrad & Graduate | |