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Can Refinancing My Student Loans More Than Once Save Me Money?

refinancing private student loans

If you already refinanced your loans once, you know that doing so can save you money and make it easier to repay your debt. It only makes sense to wonder if you can go through the process multiple times to save even more.

Can you refinance student loans at a lower rate more than once? The short answer is yes, but you need to take a closer look at the details before you approach a lender about refinancing your student loan debt again.

Make refinancing private student loans at a lower rate possible

Refinancing can help save money if you can get a new loan with a lower interest rate than your original debt — but just applying for refinancing isn’t enough to get that new rate.

Lenders want to see you have a strong, reliable source of income to repay your loan. You also need to have a great credit score to get the best available rate.

To improve your credit score, consistently take the following steps:

  • Make all payments on credit card balances and loans in full and on time.
  • Keep your credit utilization rate low on revolving lines of credit (like credit cards). In other words, try to only use 30 percent of your available credit at a time.
  • Don’t open lots of accounts at once, and avoid closing your oldest credit accounts if possible.

By completing these actions over time, you should see your credit score gradually rise.

How often can you refinance federal loans?

You can refinance federal loans, but you have to do so with a private lender. When you do, you lose access to any federal loan repayment or forgiveness program that you might want to use. Learn more about refinancing federal student loans here.

How often can you refinance? Only once on federal loans, because they simply won’t be federal loans after the first time.

Refinancing private student loans

When it comes to refinancing private student loans, the answer is more complicated.

Theoretically, you can go through the refinance process on private loans many times. But in reality, refinancing private student loans may only help you the first or second time. Beyond that, the costs will likely outweigh the benefits.

When you refinance, you take out a brand new loan with new terms and a new interest rate. The main benefit to this is to secure more favorable terms and a lower rate.

How many times you can (or should) refinance private loans will depend on a few factors, including:

  • How high the interest rate was on your original loans, and what interest rate you can refinance to over the years.
  • The terms of your original loan, the terms of your first refinanced loan, and the terms offered on a second or third refinance if you’re interested in going through the process again.
  • The fees of the new loan, and if the interest rate is low enough on the second or third refinance to make up for those costs.

You can refinance student loans at lower rates if you started with a very high interest rate on your debt. Going through one round of refinancing could lower that rate and save you money.

Refinancing private student loans multiple times would only make sense if you started with an extremely high interest rate. The interest rate environment would likely need to change dramatically over the years you paid down your debt, too.

Interest is the cost of borrowing money, and the complexities of economics mean there are lots of factors that go into determining whether rates go up or down. You can check out current average interest rates and historical rates here.

You’d also need to build a great credit history from the time you originally took out your loan to the point of refinancing private student loans more than once. Securing the best credit score you can is the only way to access the best interest rates available.

Lastly, you should be careful with how many times you refinance your loans and change the length of the repayment term. If you refinance multiple times, that originates a new loan each time. You essentially “start over” with your loan, which can extend the life of your debt.

Say, for example, that you’ve made payments for the last 2 years on a 7-year loan. If you refinance your debt to a new 7-year loan term, it will take you an additional 2 years to pay off your debt with this new plan.

The longer you take to repay your student loan, the more you’ll pay in interest over time — no matter how great of rate you can secure through refinancing. Do the math to ensure that the new interest rate really will save you money, or opt to refinance with a shorter repayment term.

Run your own numbers to determine how often you can refinance

There’s no set limit on how often you can refinance your student loans, but there will be a point when doing so no longer makes financial sense. That point will come when you can’t get a lower interest rate by refinancing private student loans, or when you extend the life of your debt and pay interest for additional months or years.

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Published in Federal Student Loan Refinancing, Private Student Loan Refinancing, Refinance Student Loans