If you have federal student loans, you usually don’t need to start making payments until six months after you graduate. That doesn’t mean you should wait until then to start thinking about a repayment strategy.
If you’re thinking about how to manage your student loan debt, consider refinancing. Potential benefits include a lower interest rate, a single loan to repay, and new loan terms.
Sounds promising, right? However, there’s still a lot to figure out. Here’s what’s possible, and how to decide if refinancing student loans is right for you.
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 usually not possible to refinance student loans while you’re in college.
Lenders try to predict if you’re the kind of person who reliably repays your debts. They all have underwriting standards they use to decide if you’d be a safe bet to lend to.
But college students lack the qualifications that are usually central to lenders’ underwriting decisions:
- College student lack payment history. If you’re still in college, you probably haven’t even started making payments on student loans yet. So there’s no way for you to show a history of on-time payments.
- Current students have yet to complete a degree (and may not). Degree completion or no longer being enrolled in college are important requirements for most lenders. So most current college students simply won’t qualify. They’re still in school
- College students often won’t meet income thresholds. It can be difficult to prove that you can 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.
Student loan refinancing requirements from top lenders
As stated above, most lenders won’t approve you for student loan refinancing until you’re out of school.
In fact, almost all the top borrowers require you be a graduate or no longer enrolled in school:
- SoFi requires that you hold at least a Bachelor’s degree to refinance student loans.
- Laurel Road invites working professionals with a BA or BS degree to apply for student loan refinancing.
- CommonBond states that borrowers need to have graduated from a Title IV college to refinance with them, so current students are out of luck.
- Citizens Bank doesn’t require a degree to refinance student loans, but it states on its site that “eligible applicants may not be currently enrolled in school.”
- College Ave has several eligibility requirements for student loan refinancing, including being a college graduate.
- LendKey, a platform that connects borrowers with student loan refinancing lenders, states you must have a degree from a Title IV school to qualify for refinancing.
- Earnest is one possibility for refinancing while still in college. Per the lender’s FAQ section, the “debt you’re refinancing is for a completed degree or one that will be completed at the end of [the current] semester.” So you might be able to start the process before you’ve graduated, but you’ll need to be near the finish line.
Graduate students might qualify for refinancing in college
If you’re a current graduate student who has completed one degree and are working on a graduate degree, 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 going to grad school, or wait until you’re done to start the process.
Parents can refinance while their child is in college
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 this program. And unlike your college student, parents are more likely to have a full-time job with high pay. So, if you have a Parent PLUS loan, you’re probably already well-qualified 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 will still accrue interest on the loan.
Lastly, Parent PLUS loans can be expensive. According to Consumer Reports, “For the 2016-2017 school year PLUS loans taken out by parents have a 6.31[%] fixed interest rate and there is also a 4.276[%] fee tacked on to that.” That means parents paid over 10% last year for a PLUS loan. At the same time, these loans are ineligible for many federal repayment plans. These two facts combined can make it worthwhile for parents to refinance 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.
With unsubsidized Direct or Direct PLUS loans, you can make payments toward the interest while you’re still in school. And 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.
Another alternative to consider is a 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 when you graduate.
For federal student loans, these 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.
- Income-driven repayment plans. These include PAYE, REPAYE, IBR, and ICR. They determine your monthly payment amount based on your current income, making your student loan payments more affordable.
- Direct Consolidation Loan. This federal student loan option allows you to combine multiple federal student loans into a single, new loan. You can choose repayment period of 10 to 30 years, and the new loan’s rate will be a weighted average of your previous student loan rates.
Be sure to check out our comprehensive list of 70 repayment assistance programs for more options.
And don’t forget about student loan forgiveness programs – a great option if you fit the requirements.
Interested in refinancing student loans?
Here are the top 6 lenders of 2018!| Lender | Rates (APR) | Eligible Degrees | |
|---|---|---|---|
| Check out the testimonials and our in-depth reviews! | |||
 | 2.54% - 7.38% | Undergrad & Graduate | Visit SoFi |
 | 2.57% - 6.32% | Undergrad & Graduate | Visit Earnest |
 | 2.80% - 7.02% | Undergrad & Graduate | Visit Laurel Road |
 | 2.56% - 8.12% | Undergrad & Graduate | Visit Lendkey |
 | 2.72% - 6.49% | Undergrad & Graduate | Visit CommonBond |
 | 2.88% - 8.34% | Undergrad & Graduate | Visit Citizens |