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Typically, student loan borrowers cannot refinance their debt until they graduate or withdraw from school. At that point, federal student loans and the majority of private student loans have a grace period, so it can make sense to refinance right before the grace period ends.

Depending on your financial situation, the goal of refinancing may be to snag a lower interest rate and/or have lower monthly payments. Doing so can alleviate some of the stress you may feel when repaying your debt. In this guide, you’ll learn when you can refinance and what options are available, plus the potential benefits and downsides of each.

What Do Your Current Loans Look Like?

Before deciding whether or not to refinance your student loans, you need to know where your loans currently stand. Look at the loan servicers, loan amounts, interest rates, and terms for all loans before making a decision.

Contact Info for Most Federal Student Loans

The government assigns your loan to a loan servicer after it is paid out. To find your loan servicer, visit your account dashboard on studentaid.gov, find the “My Aid” section, and choose “View loan servicer details.” You can also call the Federal Student Aid Information Center at 800-433-3243.

Loans Not Owned by the Department of Education

Here’s how to get in touch:

•   If you have Federal Family Education Loan Program loans that are not held by the government, contact your servicer for details. Look for the most recent communication from the entity sending you bills.

•   If you have a Federal Perkins Loan that is not owned by the Education Department, contact the school where you received the loan for details. Your school may be the servicer for your loan.

•   If you have Health Education Assistance Loan Program loans and need to find your loan servicer, look for the most recent communication from the entity sending you bills.

Private Student Loans

Private student loans are not given by the government, but rather banks, credit unions, and online lenders. You’ll need to find your specific lender or servicer in order to find out your loan information.

Can You Refinance Student Loans While Still in School?

You may be able to refinance your student loans while still in school with certain lenders, but doing so may not make the most sense for your situation.

If you’re worried about interest accruing on your unsubsidized federal loans and/or private student loans while in school, you can most certainly make interest-only payments on them in order to keep the interest from capitalizing.

One important note: With federal student loans, any payments you make while still in school or during the grace period will not count as a qualifying payment toward loan forgiveness, if you plan on using that.


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Which Loans Can Be Refinanced While Enrolled?

You can refinance any type of student loan while enrolled in school, assuming that the lender allows it. If you’re still in school and want to refinance, a lender will want to make sure you have a job or job offer on the table, are possibly in your last year of school, and have a solid credit profile. You could also consider refinancing your student loans with a cosigner if you do not meet the lender’s requirements on your own.

A couple of important points if you are considering refinancing federal student loans with a private lender:

•   Doing so means you will forfeit federal benefits and protections, such as forbearance and forgiveness, among others.

•   If you refinance for an extended term, you may have a lower monthly payment but pay more interest over the life of the loan. This may or may not suit your financial needs and goals, so consider your options carefully.

Which Loans Can’t Be Refinanced While Enrolled?

If you find a lender willing to refinance your student loans while still in school, they most likely won’t exclude a certain type of loan. However, it is best not to refinance federal student loans while enrolled. Federal Subsidized Loans, for example, do not start earning interest until after the grace period is over. Since you aren’t paying anything in interest, it doesn’t make sense to refinance and have to start paying interest on your loans immediately.

If you plan on using federal benefits, such as income-driven repayment plans or student loan forgiveness, refinancing student loans could be a bad idea. Refinancing gives you a new loan with a new private lender, thereby forfeiting your eligibility to federal benefits and protections, as noted above.

Is It Worth Refinancing Only Some of Your Loans?

Yes, it can be worth refinancing only some of your loans. The student loans you may want to focus on refinancing may include ones that have a variable rate (and you prefer a fixed rate), ones with a relatively high interest rate, or ones where you’ve had a less-than-ideal relationship with the servicer and are looking for a new experience.

When you might want to think twice about refinancing:

•   If you have federal loans and plan on using an income-based repayment plan, for example, it makes sense not to include those loans in the refinance.

•   If you have a low, fixed interest rate currently, you should probably keep those loans as is. The main reason to refinance is to secure a lower interest rate or a lower payment. Keep in mind, though, that by lowering your payment, you typically are extending your term. This can mean that you end up paying more in interest over the life of the loan.

Examples of Refinancing Before Earning a Degree

As stated above, there are some lenders that may allow you to refinance before you graduate or withdraw from school. These lenders may currently include Citizens Bank, Discover, RISLA, and Earnest.

Graduate students are also eligible to refinance their undergraduate student loans, assuming they meet the lender’s requirements or use a cosigner. Parents with Parent PLUS Loans are also typically allowed to refinance their loans prior to their child graduating. Rules will vary by lender, so make sure to do your research and choose a lender that will work with your unique situation.


💡 Quick Tip: Federal parent PLUS loans might be a good candidate for refinancing to a lower rate.

Alternatives to Refinancing

If refinancing your student loans isn’t the right option for you, there are alternatives to refinancing you can explore.

•   The main alternative is student loan consolidation, which combines your federal student loans into one loan with one monthly payment. The main difference between consolidation and refinancing is the interest rate on a federal loan consolidation is the weighted average of the rates of the loans you are consolidating, rounded up to the nearest one-eighth of a percentage.

•   You typically won’t save on interest, but you can lower your monthly payment by extending the loan term. Doing this, however, means you’ll probably pay more in interest over the life of the loan.

•   Student loan refinancing refers to paying off current loans with a new loan from a private lender, preferably with a lower rate. This rate is not the weighted average of the loans, but rather is based on current market rates, your credit profile, and your debt-to-income ratio.

•   Other alternatives to refinancing include making interest-only payments while still enrolled in school or requesting a student loan forbearance if you’re struggling to make your payments. Forbearance means you can reduce or pause payments for a designated period of time.

You’ll want to know all your student loan repayment options — and the pros and cons of consolidating or refinancing your loans, prior to making a decision.

A calculator tool for student loan refinancing can come in handy when estimating savings, both monthly and over the life of your loan.

Weighing Perks and Interest Rates

Before deciding whether refinancing is right for you, it’s important to again highlight this important point: If you refinance your federal student loans with a private lender, those loans will no longer be eligible for programs like income-driven repayment plans, federal forbearance, and Public Service Loan Forgiveness.

But if you can get a lower interest rate, refinancing may be a good fit. Most refinancing lenders offer loan terms of five to 20 years. Shortening or elongating your loan term can affect your monthly payment and the total cost over the life of your loan.

For some borrowers, lengthening the term and lowering the monthly payment will be a valuable option, even though it can mean paying more interest over the life of the loan. Only you can decide if this kind of refinancing makes sense for your personal finances.

The Takeaway

When can you refinance student loans? As soon as you establish a financial foundation or bring a solid cosigner aboard. Can you refinance your student loans while in school? Yes, however, not all lenders offer this and it may not make sense for your situation. It’s also important to understand the implications of refinancing federal student loans with a private lender. If you do not plan on using federal benefits and protections and are comfortable with the possibility of paying more interest over the loan’s term, it might be a move worth considering.

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.

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.

If you are motivated, you may decide to pursue a PhD program in your given field of study. However, you are probably aware that doing so not only requires time and energy but can also be an expensive proposition. According the Education Data Initiative, the average cost of a doctorate degree (which typically takes four to eight years) is $150,835. The average student loan debt for this kind of degree is $112,080.

That can be a daunting sum, but a fully funded PhD program can offset part or all of these costs. In addition to financing tuition and fees, these programs usually provide a stipend to help cover living expenses. Some may also pay for any research and travel necessary for students to complete their graduate degrees.

Since this can make a huge difference in a prospective student’s financial outlook, here’s a closer look at fully funded PhD programs, how they work, and how they can help lower the cost of a degree.

What is a PhD Program?

PhD programs, also known as doctoral programs, are often a next step after a master’s degree. They give students the opportunity to do graduate-level research in the field of their choice and earn the highest degree possible (sometimes referred to as a terminal degree). They span a variety of subjects, such as engineering, English, public health, and computer science.

The application process for a PhD program can be competitive, and the programs themselves can be very time-consuming, taking (as mentioned above) on average between four and eight years. Working while pursuing these specialized degrees can be challenging, which is why it can be so helpful when a program offers an annual stipend.


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What Does Fully Funded Mean?

In a fully funded PhD program, the student typically receives full tuition reimbursement and a stipend to help cover the cost of living while pursuing the degree. Programs have varying funding requirements.

In some cases, students may receive a “no-strings-attached” fellowship. This means they receive funding but don’t owe the university anything aside from their research.

In many cases, to receive funding, a student will need to work part-time for the university by providing teaching or administrative assistance. These experiences can give students an opportunity to build out their resume while helping them pay for graduate school.

More often than not, these graduate fellowship positions are the main way to receive full funding to attend a PhD program and are commonly offered in research-based degree programs. Some fellowships may be offered in the form of scholarships or stipends, which are not usually taxed as income by the IRS (Internal Revenue Service).

Schools may also offer assistantships, where students earn an income from the university. Generally, these positions are given to doctoral students who are doing research in order to complete their theses or dissertations. Assistantships can be taxed as income.

While all PhD programs have their own unique funding packages, many fully funded programs are designed to help students cover a variety of costs. Here are some common ones.

Tuition and Fees

Typically, fully funded PhD programs provide students with so-called “tuition waivers.” The waivers cover the cost of attending the university, including tuition and fees. In some cases, book stipends, reduced-fare transit passes, and other benefits are included to lessen the student’s financial burden.

Recommended: How to Pay for Grad School

Living Expenses

Whether through fellowship funding or a university job, students in a fully funded PhD program can receive a stipend to pay for food, rent, transportation, and other living expenses.

Depending on a student’s cost of living and lifestyle choices, these lump sums might not be enough to fully cover costs. This may be especially true during the summer, when stipends are less likely to be given out. If their program does not offer summer funding, students might choose to work part-time or take out loans to make ends meet.

Recommended: Using Student Loans for Living Expenses Off Campus

Health Insurance

While many doctoral programs include health insurance benefits, some do not. As you’re exploring graduate school programs, it’s a good idea to find out if it provides this important type of coverage.

Generally, student health insurance packages only cover care and services at on-campus facilities. Some programs automatically enroll their students in one type of healthcare plan, and others allow students to choose their plan during the annual open enrollment period.

If a student is married or has dependents, they may be able to add them to their student health insurance plan for an additional cost.

Research and Travel Funding

If necessary, some programs allow doctoral students to apply for funding to help them conduct their research or travel to conferences, archives, or summer programs. This is something students apply for on an as-needed basis and is not a guarantee.

In some cases, students will pay the costs up front and then be reimbursed. Grants and scholarships can also help cover research and travel expenses.

How to Find a Fully Funded PhD Program

There are sites that allow you to search for various PhD programs around the world. But one of the best ways to discover which programs are fully funded can be by conducting your own research.

•   Before submitting an application to a PhD program, learn more about the university’s resources, faculty members, and requirements for graduation. Look into the specifics of the funding options available at each university you plan to apply to, as PhD programs may address funding differently. Often, schools will include information about these opportunities on their website.

•   While some universities automatically give grants or fellowships to their admitted students, others make their students complete a separate funding application. These applications can require submitting letters of recommendation or personal statements and can have deadlines that are different from the application deadline for the doctoral program.

Examples of Fully Funded PhD Programs

It’s possible to find fully funded PhD programs across a variety of subjects at many different schools. From a PhD in biological sciences at Harvard to education at Stanford to nursing at Duke, fully funded PhD programs cover an array of study areas.


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Paying Down Student Loan Debt

If you have student loan debt from an undergraduate or master’s degree that you want to pay down before or during a PhD program, you might consider exploring student loan refinancing. Refinancing could help you save money in interest over the life of the loan and pay down your debt faster.

Student loan refinancing involves taking out a new loan at a new interest rate and/or a new term that can be more favorable than the current rate or terms you currently have. It is possible to refinance both federal and private student loans.

But there are two important caveats:

•   When you refinance federal student loans with private loans, you forfeit access to federal benefits and protection, such as forbearance, forgiveness, and income-driven repayment plans.

•   Also, if you refinance for an extended term, while your monthly payments may decrease, you can pay more in interest over the life of the loan.

Think carefully about these points when deciding if refinancing could be the right option for you.

The Takeaway

Pursuing the highest possible graduate degree can be expensive, but a fully funded PhD program can offset all or part of the costs. Programs vary from school to school, but they typically cover the cost of tuition and may include a stipend to help finance living expenses and more. In some cases, PhD candidates will be required to do research or teach as part of the agreement to receive funding. Students can also explore other ways to cover the cost of school, including scholarships or grants.

In addition, PhD candidates who are paying off student loans from an undergraduate or master’s degree may want to consider student loan refinancing. Doing so with federal loans via a private loan means forfeiting federal benefits and protections. Also, refinancing for an extended term could mean paying more interest over the life of the loan.

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.

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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If you have federal student loans, you can enroll in an Income-Driven Repayment (IDR) plan, which may make your monthly payments more affordable. That’s because the amount is calculated based on your income and the size of your family.

Income-Driven Repayment is the umbrella term for several federal repayment programs tied to salary, while Income-Based Repayment refers to one specific plan. (Yes, it’s a bit confusing.)

Once you are enrolled in an IDR, you will need to “recertify” annually, by providing updated information about your salary and family size — essentially reapplying for the plan. The government uses this information to calculate your payment amount and adjust it if necessary.

You can easily recertify online or by mail. Read on to find out when to recertify your income-driven repayment, how to do it, and more.

What Is Income-Based Repayment?

As noted above, the correct umbrella term is Income-Driven Repayment, which encompasses four different plans. These are available to federal student loan borrowers to help make their payments more manageable. It’s an option to keep in mind when choosing a loan or if your current federal loan payments are high relative to your income. The program is intended to make the amount you pay on your student loan each month more affordable.

The four income-driven repayment programs offered for federal student loans are:

•   Saving on a Valuable Education (SAVE) Plan — formerly the REPAYE Plan

•   Pay As You Earn (PAYE) Repayment Plan

•   Income-Based Repayment (IBR) Plan

•   Income-Contingent Repayment (ICR) Plan

For all of these plans, your payment amount is generally based on a percentage of your discretionary income, which is defined by the U.S. Department of Education (DOE) as “the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.” There is a Loan Simulator tool you can use to see what your payments would be for each of the repayment programs.

IDR payments are determined as 10% of your discretionary income if you are a “new borrower,” who received their loan on or after July 1, 2014. You must also have no outstanding balance on a Direct Loan or Federal Family Education Loan (FFEL).

If you’re not a new borrower, payments are generally 15% of your discretionary income.

With an IDR plan, your payment will never be more than the 10-year Standard Repayment Plan amount, which is the typical repayment plan for the Federal Direct Loan program and FFELs.

Each income-driven repayment plan has a different loan term. For IDRs, it’s 20 years for new borrowers and 25 years for those who aren’t considered new borrowers. Any loan balance that remains unpaid at the end of the repayment period will be forgiven.

Recommended: Guide to Student Loan Forgiveness

Which Federal Loans Are Eligible for an Income-Driven Repayment Plan?

IDR plans are available for the following types of federal loans:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans made to graduate or professional students

•   Direct Consolidation Loans that did not repay any PLUS loans made to parents

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans made to graduate or professional students

•   FFEL Consolidation Loans that did not repay any PLUS loans made to parents

•   Federal Perkins Loans, if consolidated.

Income-Driven Repayment plans are not available to FFEL PLUS loans or Direct PLUS loans that are made to parents. They are also not available for Direct Consolidation Loans or FFEL Consolidation Loans that repaid PLUS loans to made parents.

You don’t need to consolidate your student loans to apply for an income-based repayment plan.

Recommended: Refinancing Student Loans Without a Cosigner

The New SAVE Plan

The DOE recently rolled out a new income-driven repayment plan called SAVE (Saving on a Valuable Education). It replaces the old plan known as REPAYE (Revised Pay As You Earn). Under the SAVE plan, the income exemption increases from 150% to 225% of the poverty line.

Those enrolled in SAVE pay 5% to 10% of their discretionary income toward their monthly student loan payments, and their loans will be discharged after 20 years for undergraduate loans, and 25 years for graduate loans. For comparison, on an IDR plan, borrowers pay between 10% and 15% of their discretionary income and loans are forgiven after 20 to 25 years.

Borrowers who have $12,000 or less in federal loans will receive forgiveness after 10 years of on-time payments (even if their payment is $0 each month). Borrowers with more than $12,000 in loans should add a year for every additional $1,000 of debt they owe. So if they have $14,000 in loans, they will receive forgiveness after 12 years of on-time payments under the SAVE plan.

Under SAVE, if you are a single borrower earning $32,800 or less or a family of four earning $67,500 or less (amounts are higher in Alaska and Hawaii), your monthly payments will be $0. According to the DOE, borrowers earning more than this will save at least $1,000 per year compared to the other income-driven repayment plans.

What’s more, under the SAVE plan, interest will not accrue if you make your payment on time each month. For example, if your interest charge is $50 each month, and your payment is $30, you won’t be charged the remaining $20.

Like other IDR plans, the SAVE plan will need to be recertified every year.

What Is Student Loan Recertification?

Since your repayment plan is based on your income and the size of your family, you need to reconfirm these details every year.

If you apply for an income-driven repayment plan online, the DOE will ask you for consent to access your tax information. If you give consent, they will automatically recertify your loan every year.

If you choose to apply manually (printing out a PDF and mailing it into your loan servicer), you will need to manually recertify every year with your loan servicer.

If your financial situation changes ahead of recertification — like you lose your job — you can reach out to your loan servicer and ask them to immediately recalculate your payments.

How to Recertify Income-Driven Repayments

You can apply for income-driven repayments and recertify your status by going online to StudentAid.gov. Filing your application online ensures that it is sent to each of your loan servicers if you have more than one. Alternatively, you may send paper applications to each of your loan servicers if you haven’t filed a tax return in the last two years or your income has changed significantly since you filed your last return.

To file online, go to the student aid website above, click on “Manage My Loans,” and then click on “Recertify an Income-Driven Repayment Plan.” You’ll need to log in with your federal student aid ID.

Next you’ll answer questions about your family, including family size, your marital status, and your spouse’s income, if applicable. You can connect your account directly to your tax return to verify your income information. And if your income has changed since your last tax return, you can upload more recent pay stubs.

To recertify by mail, you can download the Income-Driven Repayment Plan Request form, which you can find in the Federal Student Loan Forms library. Fill out the form and attach the required documents. You’ll send the request to the address provided by your loan servicer.

When to Recertify Income-Driven Repayment Plans

The government paused income-driven repayments as part of its COVID-19 relief program. Paused payments still count toward IDR forgiveness.

Borrowers were not required to recertify before payments restarted. So if a borrower’s recertification date fell between October 2023 and March 1, 2024, it was pushed out by one year. For example, if your recertification date was January 1, 2024, your new recertification date is January 1, 2025.

If your income has decreased or your family status has changed in the past three years, you may want to recertify earlier. You can fill out a recertification form at any time if you’re struggling to make your payments because your financial situation has changed.

If you fail to recertify your IBR plan by the annual deadline, your monthly payment will switch to the amount you will pay under the Standard Repayment Plan. You’ll be able to make payments based on your income again when you update your income information.

The Takeaway

Income-Driven Repayment plans are available to most federal student loan borrowers and can be a great way to make sure your student loan repayments work with your budget. Recertification is a critical step borrowers need to take each year to inform the government of changes to your situation that might affect your payment size.

Refinancing is another way to manage your student loan debt, especially if you have private student loans that don’t qualify for government assistance programs.

If you’re considering refinancing federal loans, just be sure the amount you save outweighs the benefits of income-driven programs, potential student loan forgiveness, or other federal loan protections, all of which you lose access to when you refinance with a private lender. Our Student Loan Refinance Calculator can help you run the numbers.

Visit SoFi to explore options for student loan refinancing. SoFi offers a competitive rate, flexible terms, no hidden fees, and no prepayment penalty — and you can view your rate in 2 minutes.

FAQ

Can you recertify student loans early?

Federal student loan borrowers who are on an income-driven repayment plan need to recertify their loans once a year. You can recertify early, and it may be a good idea if your family has grown or your income has decreased.

How do I recertify my student loans?

You can recertify your student loans online at the Federal Student Aid website (studentaid.gov), or by downloading and mailing in the Income-Driven Repayment Plan Request form with any supporting documentation. If you mail in the request, you’ll need to send a copy to each of your loan servicers.

When should I recertify my student loans?

Your recertification date is the date one year after you started or renewed your IDR plan. Your loan servicers will send you a notice that it’s time to recertify your loan.

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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Applying for a student loan consolidation can take approximately 30 minutes for borrowers who have their financial information on hand, according to the Federal Student Aid website. Repayment of the consolidated loan usually begins within 60 days after the loan is disbursed.

When you need to simplify your monthly student loan payments, you don’t want to waste a minute. Let’s cover the definition of consolidation, examine how long it takes to consolidate student loans, and go over the steps in the student loan consolidation process. We’ll also discuss whether it’s possible to speed up how long student loan consolidation takes.

What Is Student Loan Consolidation and How Does It Work?

“Consolidation” is just a fancy word for combining, and that’s a great first step to understand how student loan consolidation works. If you have multiple federal loans, you can combine them into a single loan using a Direct Consolidation Loan. After a free application process, consolidation gives you a single monthly payment instead of multiple bills.

A Direct Consolidation Loan may lower your monthly payment by giving you a longer repayment period (up to 30 years) or access to income-driven repayment plans — but not by lowering your interest rate. The rate you receive will be a weighted average of your prior loan rates, rounded up to the nearest ⅛ of a percent.

You can consolidate most federal student loans, including the following:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Parent Loans for Undergraduate Students

Check the Federal Student Aid website for a complete list of qualified loans.

How do you consolidate your student loans?

•   Gather your loan records, account statements, and bills so you have everything in front of you to complete the Direct Consolidation Loan Application and Promissory Note.

•   Fill out borrower information, such as your name, address, and Social Security number, as well as the names of two adult references.

•   Next, you’ll enter the loans you want to consolidate (including requested information and codes) as well as the loans you don’t want to consolidate.

•   You’ll also walk through how you want to repay your loans and review the borrower understandings, certifications, and authorizations. Finally, sign the note, which promises that you’ll repay your loans.

How Long Does Student Loan Consolidation Take?

The federal Direct Consolidation Loan application process takes approximately six weeks from the day it is submitted. Consolidating private student loans — called refinancing – typically takes less time. Read on for details.

Federal Loans

Federal student loans come from the federal government through the U.S. Department of Education. Terms and conditions are set by law, including the interest rate.

To consolidate federal student loans, you first must fill out the Federal Direct Consolidation Loan Application and Promissory Note, which should take about 30 minutes to complete. From there, the process of consolidation takes approximately six weeks. Borrowers can check the status of their application at StudentAid.gov.

Until the consolidation process is complete, you must continue to make payments on your current loans. Once the servicer determines your loans are eligible for consolidation, you may begin paying your new loan instead.

Private Loans

Private student loans, unlike federal student loans, originate from a private lender — a bank, online lender, or credit union. You cannot change private student loans into federal student loans through the federal loan consolidation process. You also cannot consolidate private and federal student loans together.

However, you can refinance private loans. Refinancing means switching to a private lender to get a better rate or term. You can refinance a single loan or combine a number of loans to give you one new loan.

Refinancing federal student loans means that all of your loans become private loans. As a result, you lose access to federal student loan benefits like interest rate discounts and loan cancellation benefits. (You can learn more about the pros and cons in our student loan refinancing guide.)

Refinancing with a private student loan lender typically takes less time — sometimes just a few business days. However, this timeline can be longer if additional documentation is needed or if you have a coapplicant. In these cases, the timeline can vary depending on the lender and the time it takes the borrower to gather and submit the documents.

Recommended: Consolidating vs. Refinancing Student Loans

Is There Any Way to Accelerate the Student Loan Consolidation Process?

Unfortunately, you cannot accelerate the federal student loan consolidation process.

You may want to consider skipping the consolidation process altogether and refinance your student loans with a private lender, which will likely take less time. You can take a look at a student loan refinancing rate calculator to make sure it will financially work to your advantage.

Pros and Cons of Consolidating Student Loans

Why might you want to consolidate federal loans into a single federal Direct Consolidation Loan? Or why might you want to steer clear of consolidation altogether? Review the pros and cons below to get a better understanding of whether consolidating student loans is right for you.

Alternatives to Student Loan Consolidation

If you think it might take too long to consolidate your student loans or you just want a more options, you may have these alternatives available to you:

•   Deferment: If you can claim medical or financial hardship, or you’re back in school or between jobs, you may be able to pause your student loan payments through deferment.

•   Forbearance: Forbearance means that you won’t have to make a payment or that you’ll be allowed to make a smaller payment on your federal student loans.

•   Income-driven repayment plans: Income-driven repayment plans allow you to make payments based on your family size and income.

•   Modification: A student loan modification changes the terms and conditions of an existing student loan. Unlike consolidation, a modification means you keep the same loan but adjust it.

You might also consider keeping your plan and improving your financial situation in order to comfortably be able to make your payments. This will avoid the potential downsides of consolidation, like paying more in interest due to a longer loan term.

The Takeaway

If you’re tired of making multiple federal student loan payments, consolidation might be the answer. In general, the process takes about six weeks after submitting the application.

You may also consider student loan refinancing to help you manage your monthly payments. SoFi makes it easy to see what rates you may be eligible for. Plus, with SoFi, you can skip paying origination fees, application fees, and prepayment penalties.

FAQ

Does it take longer to consolidate federal or private student loans?

It typically takes six weeks to consolidate federal student loans — longer than refinancing — but you retain your federal benefits. If you’re uncertain whether you want to consolidate your federal student loans or refinance with a private student loan lender, consider shopping around before you make a final decision.

When can consolidating student loans make sense?

Consolidating can make sense if you want to reduce multiple student loans into one monthly loan payment. Additionally, if you want to lower your monthly payments, switch loan servicers, or change to a fixed-rate loan, consolidation might be worth exploring.

Why would you consolidate rather than refinance student loans?

When you’re weighing the pros and cons of consolidating vs. refinancing, it’s important to determine your goals. If simplification is your major goal, you may want to consolidate. Additionally, if you have federal student loans and don’t want to lose protections, it might be wise to forgo refinancing and instead opt for student loan consolidation.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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.

It’s possible to refinance your student loans with bad credit, but you may face challenges getting approved with a low credit score. This may also lead to a higher interest rate.

When you refinance your student loans, a private lender will take a look at your credit score to evaluate how well you’ve paid off debt in the past. A higher credit score may improve your chances of approval and could help you secure a more competitive interest rate. But your credit score isn’t the only factor lenders review. Lenders typically also take a look at your income, current employment situation, and financial history.

Read on for strategies to refinance student loans with bad credit.

What Is Student Loan Refinancing?

Refinancing student loans means that you take some or all of your student loans and replace them with one new loan to achieve a repayment advantage. For example, you may refinance in order to get a lower interest rate and, as a result, pay less over the life of your loan. You may also refinance to extend your loan term, which will lower your monthly payments (but doing so will also result in paying more interest over time).

You can refinance both private and federal student loans. As you are deciding when to refinance student loans it’s important to understand that if you refinance federal student loans, you lose certain benefits with your loan, such as deferment and public service-based loan forgiveness.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

What Is Considered Bad Credit?

Your credit score is a three-digit number that shows how well you pay back debt.

What is a bad credit score? The definition of “bad credit” varies depending on the credit scoring model used. A credit scoring model is a statistical analysis used by credit bureaus to evaluate your creditworthiness. “Bad credit” simply means that your credit reports, or records of how well you’ve paid off debt, reveal negative credit actions that you’ve had in the past.

According to FICO®, one of the most popular scoring models, a bad credit score is anything below 670. Another popular scoring model, VantageScore, considers a bad credit score below 661. To put it in perspective, a credit score ranges from 300 to 850.

Some lenders require a minimum credit score to refinance student loans. Requirements vary by lender, so check in with the lenders you are considering to understand their minimum requirements. And keep in mind that lenders evaluate factors beyond just your credit score when making lending decisions.

Strategies for Refinancing With Bad Credit

If you plan on refinancing student loans with bad credit, you may want to consider backtracking and checking your credit reports. There may be mistakes on your credit reports that are hurting your credit score. For example, you have already paid off a particular loan but your credit report shows that you haven’t yet.

You can obtain a free copy of your credit report at AnnualCreditReport.com from each of the three major credit bureaus — Equifax, Experian, and TransUnion — which track your credit.

There are other strategies you can consider as well: refinancing with a cosigner, improving your credit score or debt-to-income (DTI) ratio, looking into credit unions, considering nonprofit debt consolidation, checking into secured loans, and looking for lenders with lower credit requirements. Let’s take a look at each option for student loan refinance for bad credit.

Refinance With a Cosigner

If you have a relatively low credit score, applying with a cosigner increases your chances of getting approved for a student loan refinance.

Refinancing student debt with a cosigner means that you ask someone else to agree to help you repay a loan along with you. Cosigners are equally obligated to repay a student loan and are liable if you fail to repay your loan. Any missed payments will affect both you and your cosigner’s credit history.

Build Your Credit Score

You can build your credit score by making payments on time to your creditors, catching up on accounts for which you still owe money, and limiting credit applications. Let’s take a look at all of these student loan refinance need to know opportunities to build your credit score:

•   Make on-time payments: Making all payments on time is one of the best ways to improve your credit score. You may want to consider setting up auto pay to avoid missing or making late payments.

•   Pay off delinquent or defaulted accounts: If you have accounts for which you still owe money, pay them off. Pulling all accounts up to “paid” status can help your credit score. If you think you need help organizing and prioritizing, you may want to reach out to a credit counselor for assistance. It’s also a good idea to get current on revolving credit balances (such as credit cards and other lines of credit) because paying late or skipping payments can hurt your credit as well.

•   Limit credit applications: Continually applying for credit can hurt your credit score because every time a lender does a hard credit check, your credit takes a small hit. All of those credit checks can slow your progress in improving your credit score.

Building credit by doing things like making on-time payments is one of the best ways to improve your credit score. Use credit cards responsibly and pay off the balance each month, get a secured credit card, or become an authorized user on another individual’s credit card.

Improve Your Debt-to-Income Ratio

What is a debt-to-income (DTI) ratio? DTI refers to your monthly debt payments divided by your gross monthly income — the amount of money you have coming into your household.

The best way to improve your DTI is to reduce your debt payments each month or add more income to your household each month. There are several ways to make this happen: paying off your debt (including credit cards, personal loans, auto loans), adding a second or side job to your already-existing income, negotiating a raise at work, working overtime, or applying for a higher-paying job.

Recommended: Why Your Debt to Income Ratio Matters

Check Credit Union Requirements

In addition to banks, online lenders, and other types of lenders, credit unions also offer student loan refinancing opportunities. A credit union is a non-profit financial services cooperative that exists to serve its members. You must be a member of a credit union in order to borrow money from it.

If you already belong to a credit union, consider finding out the credit qualifications necessary for refinancing student loans with that credit union. Shop around among credit unions or other alternative banking solutions to learn more about interest rates, overall payoff amounts, repayment flexibility, and how well each institution treats its customers.

Nonprofit Debt Consolidation

Nonprofit debt consolidation can help you put all of your debts into one manageable payment. It offers a two-pronged advantage: You lower your monthly payment and eventually eliminate unsecured debt, which is debt that isn’t backed by collateral.

Credit card debt is a good example of a debt not backed by collateral. A mortgage, on the other hand, is backed by collateral — the collateral is the home that you borrowed money to purchase. A student loan is a type of unsecured debt because it is not backed by collateral.

Why tap into a nonprofit credit counseling agency for help? They must act in your best interest, though you will have to pay fees for the service. Trained debt counselors can help you come up with a debt payment plan, debt settlement plan, debt consolidation loan, or, if absolutely necessary, declare bankruptcy.

It’s important to note that only unsecured debt is eligible for consolidation.

Secured Loans

Secured loans are backed by collateral, such as a car (in the case of an auto loan) or a house (in the case of a mortgage). If you stop making your payments, the lender can take the collateral backing your loan (the auto or home) to satisfy the debt.

Generally, personal loans are unsecured and can be used for almost any expense. However, some personal loans may be secured by some form of collateral. When evaluating a secured vs. unsecured personal loan, look at things like the interest rate and the type of collateral required to back the loan. Keep in mind that collateral can be seized by the lender if there are issues with repayment.

However, you can use a secured loan to pay for a student loan refinance if you find better terms through a secured loan. For example, you could choose to get a second mortgage to pay for educational expenses.

Unsecured debt is usually considered riskier by lenders (because it isn’t backed by collateral) and may come with a higher interest rate, which is why secured debt may seem more appealing.

Look for Lenders With Lower Credit Requirements

Think you’re ready to pursue a student loan refinance with lower credit requirements? Let’s take a look at the pros and cons of doing so.

In order to get the best rates and terms, you may want to consider beefing up your credit score before you apply for a refinance. Consider taking a look at a calculator for student loan refinancing to help you learn about the costs.

Alternatives to Refinancing Student Loans

Refinancing your student loans isn’t your only option. Keep in mind that refinancing federal loans eliminates them from federal programs and protection like income-driven repayment (IDR) plans. You may also want to consider a few alternatives, including consolidation, forgiveness, deferment, or forbearance (for federal student loans), or talk to your lender about your options.

•   IDR plans: The U.S. Department of Education has a website called Federal Student Aid where student loan holders can find four types of IDR plans. They are, with the repayment terms, as follows:

◦   IDR Pay As You Earn (PAYE) Plan: 20 years

◦   Saving on a Valuable Education (SAVE) Plan: 10 or 25 years

◦   Income-Based Repayment (IBR) Plan: 20 or 25 years

◦   Income-Contingent Repayment (ICR) Plan: 25 years

•   Consolidation: Consolidation allows you to combine all of your federal student loans into one monthly payment with one servicer. Consolidation won’t lower your interest rate — the new rate is the weighted average of your existing interest rates. You cannot consolidate private student loans — you may only refinance them.

•   Forgiveness: If you have federal student loans, you may want to consider looking into student loan forgiveness options, which means that you do not have to repay your loans in part or full if you meet specific requirements. For example, you may be able to tap into teacher loan forgiveness, Public Service Loan Forgiveness (PSLF), income-driven repayment plans, military service forgiveness, or other options.

•   Deferment or forbearance: Deferment and forbearance allow you to temporarily postpone or reduce your payments. Borrowers with federal loans may qualify to defer repayment due to cancer treatment, economic hardship, graduate school, military service and post-active student duty, rehabilitation training, unemployment, and more. Private lenders may have their own programs for forbearance. Check in with your private lender directly.

•   Talk to your lender or loan servicer: You can also talk through all your payment options with your loan servicer. If you’re having trouble making your payments, explain how and why (and be prepared to show proof).

The Takeaway

Borrowers with a low credit score (a bad credit score is defined as a FICO score below 670 or a VantageScore below 661), may find it challenging to get a student loan refinance with bad credit without a cosigner.

However, there are other avenues you can take for student loan refinancing with bad credit, including improving your credit score, improving your DTI, researching options with a credit union, non-profit debt consolidation, or getting a secured loan. You may also want to consider alternatives to refinancing private student loans with bad credit if you have federal student loans, through consolidation, forgiveness, deferment, or forbearance. You may also try talking to your lender or loan servicer for all your options, asking them about alternative options to refinance a student loan with bad credit.

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.

Photo credit: iStock/Vladimir Vladimirov

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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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