There are different ways to refinance student loans, including refinancing part of your loans. Partial refinancing means you could choose to refinance some of your loans but not all of them. Or you could decide to refinance a portion of just one student loan.
But first, you need to determine if refinancing your student loans makes sense for you. Here’s how refinancing works, including partial refinancing.
What Is Student Loan Refinancing?
With student loan refinancing, you take out a new private loan to cover the cost of your current loans. Refinancing may allow you to get a lower interest rate or better loan terms. Borrowers who qualify for a lower interest rate may consider refinancing student loans to save money.
It’s possible to refinance both private and federal student loans, but be aware that if you refinance federal loans with a private lender, you are no longer eligible for federal programs and protections like income-driven repayment.
Benefits of Refinancing Student Loans
Student loan refinancing can be beneficial for some borrowers. For instance, you might be able to lower your monthly loan payment if you qualify for a lower interest rate, or you may be able to change the length of your repayment term.
Refinancing might also help simplify your loan payments. By refinancing multiple loans into one new loan, you’d have just one loan payment to make instead of several.
This student loan refinancing guide spells out the potential benefits and drawbacks.
Reasons to Refinance Part of Your Student Loans
A borrower might choose to refinance part of their student loans if it makes repayment easier or more affordable. Some popular reasons to refinance include:
Lower Interest Rate
If you qualify for a student loan with a lower interest rate, you could save money by paying less in interest over the life of the loan. Shop around for the best student loan refinancing rates.
Simplify Multiple Loan Payments
If you have several student loans with different lenders, it may be difficult to keep track of all the payments and due dates. Combining loans with a partial refinance can streamline the process and make payment easier to manage.
Change Repayment Terms
With student loan refinancing, you may be able to lower your monthly payments by extending your loan term. Essentially, you are stretching out the loan over a longer period of time, which could ease the stress on your budget each month.
However, there is a trade-off. Lowering your monthly loan payments will increase the total amount you’ll pay over time because you’ll be accumulating interest on the loan over a longer period. Be sure to take that into consideration as you’re thinking about refinancing.
Qualifying to Refinance Part of Your Loans
If you decide to refinance part of your student loans there are eligibility criteria you’ll need to meet.
Credit Score and Income Requirements
When you apply for student loan refinancing, a lender will base the interest rate they offer you in part on your credit score and income. Typically, the higher your credit score, the better your chances of getting a lower interest rate.
To be approved for student loan refinancing, many lenders require you to have a credit score in the mid-600s or higher. And to get a lower interest rate, you’ll typically need a credit score in the upper-700s — or you may have to enlist a cosigner for refinancing. The cosigner agrees to repay the loan in the event you can’t.
Before applying to partially refinance, check your credit report to make sure it doesn’t have any errors. If it does, correct them before you apply. If your credit score is low, it may be beneficial to work on building your credit before you refinance. For instance, you could pay down other debt you owe (like credit card debt) and make on-time bill payments.
Lenders will also ask for proof of your income, such as pay stubs, to ensure that you can repay the loan. In addition, they’ll look at your debt-to-income (DTI) ratio, which is the amount of monthly debt you have compared to your monthly income. Aim for a DTI of 36% or lower.
Loan Types and Eligibility
The type of student loans you currently have are another important factor in refinancing. Borrowers with federal student loans may not want to refinance if they believe they’ll need access to federal programs and protections like income-driven repayment plans.
However, for borrowers with private student loans who think they may be able to qualify for a lower interest rate or more favorable terms, refinancing could make sense.
Student Loan Refinancing Process
Refinancing is fairly straightforward. You’ll do some comparison shopping to choose your lender and then submit your application.
Compare Lenders and Rates
In order to get the best rates, shop around with several different lenders and then prequalify for refinancing. During prequalification, the lender does what’s called a soft credit check. This won’t impact your credit score, but it will give you a better sense of the interest rate you might qualify for.
Apply for Refinancing
Once you’ve decided on a lender, you can fill out an application on their website. In general, you’ll be asked for:
• Information about your student loan debt
• Government-issued photo identification
• Proof of employment
• Proof of where you live
• Recent pay stub
• Loan statement from your current lender or loan servicer
If you are refinancing part of your student loans, indicate on the application which loans you want to refinance.
Managing Old and New Loans
With partial student loan refinancing, you’ll have a mix of new and old loans to stay on top of. Consider setting up automatic payments for each of them to ensure that all the payments are made on time. Just log into your accounts online and change your payment settings to autopay. That way you won’t have to worry about forgetting or missing a payment.
Potential Drawbacks of Partial Refinancing
Along with the potential benefits, partial refinancing also has some drawbacks. Consider each of these factors carefully before you decide whether to move ahead.
• Lose access to federal loan benefits: When you swap your federal loans for a private loan with refinancing, you’ll no longer be able to take advantage of federal benefits and protections, such as Public Service Loan Forgiveness, deferment, and forbearance. If you think you might need any of these things, refinancing may not be the best option for you.
• No guarantee of better rate or terms: If you don’t have good credit or a steady income, you may not qualify for refinancing. And even if you do qualify, you might not get a favorable rate. A student loan calculator can help you figure out if partial refinancing makes sense for you.
• Won’t achieve full student loan consolidation: Refinancing all your student loans into one, known as consolidation, can make them easier to manage. But with partial refinancing, you’ll still be juggling different lenders, due dates, and payments. You can use autopay to simplify the process, but it’s worth considering this downside.
The Takeaway
Refinancing your student loans isn’t an all or nothing endeavor. Partially refinancing your loans is possible. It could be beneficial if you have both private loans and federal loans and want to keep your access to federal programs, and also get a lower interest rate. In that case, you could refinance your private loans and leave your federal loans as they are.
Just be sure to weigh the pros and cons of refinancing. If you decide to go ahead with the process, shop around for the best rates and terms.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Can you refinance federal and private student loans together?
Yes, you can refinance federal and private student loans together. You can combine private and federal loans by refinancing them with a private lender.
And if you’re partially refinancing your student loans — for instance, maybe you’re refinancing one federal loan and two private loans, and leaving your other federal loans as is — you can typically indicate on the application which loans you want to refinance. But if you have any questions, check with the lender.
Is it better to refinance all or part of your student loans?
Whether you should refinance all or part of your student loans depends on your specific situation and the type of loans you have. You may want to refinance your private loans if you can qualify for a better rate and terms. And you might want to hang onto your federal loans in case you need the federal programs and protections they provide access to. Consider all the possibilities before you make your final decision.
How soon can you refinance student loans after graduation?
You can typically refinance student loans as soon as you graduate from school. However, you might want to consider refinancing right before the end of the six-month grace period, when you don’t have to make any student loan payments. That way you can take advantage of the six months of no payments before your new refinancing loan rates and terms kick in.
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SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.
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