When to (and Not to) Refinance Student Loans

Cosigning/ Student Loan Refinancing | By Ron Hancock

Once you understand a few basics about which student loans to refinance – and when it makes sense to do it – you can save thousands and simplify repayment for yourself. Take a few tips from us.

When it comes to saving money by refinancing student loans, #TimingIsEverything. Here are some easy tips to help you decide when it makes sense to refinance your student loans with a private refinance loan – and when it doesn’t.

3 Times When You Should Refinance with a Private Student Refinance Loan

  1. Wait until after student loan grace periods. Federal student loans, and some private student loans, offer a six-month grace period right after you graduate from your undergraduate program where principal and interest payments are not yet required. You may want to wait until your grace period is over – you don’t want to make payments before you have to!
  2. Use refinancing to reduce interest rates. If you have high loan balances with high interest rates, refinancing loans at a lower rate could save you thousands in interest over time – and could reduce your monthly payments now. The sooner you start benefitting from lower interest on your large balances, the better.
  3. Take advantage of your good income and credit. Once you have a stable job with a steady income, have established good credit, and are confident you can make monthly payments, it’s a good time to look at interest rates on all your student loans. Compare your current rates with refinance rates you qualify for with various lenders. A student loan refinance calculator like U-fi’s can help you estimate monthly payments based on your loan balance, potential rates, loan types, and terms to help you consider options that may work for your situation.

3 Times When You Shouldn’t Refinance with a Private Student Refinance Loan

Obviously, when interest rates are higher than what you currently have, you won’t want to refinance your private or federal student loans. But here are three other important scenarios when you don’t want to shop around for refinancing loans – at least not for all of your student loans.

  1. (For private student loans) You have bad credit. You may have trouble finding a better rate than you already have when your credit is bad. Work on improving your credit and then think about refinancing your private student loans. However, if you can find a cosigner with good credit who’s willing to take responsibility for your debt if you don’t make payments, refinancing and making on-time payments with that cosigner can help you build your credit. Plus, some lenders (like U-fi) offer cosigner release after 24 on-time payments.
  2. (For Direct loans) You work in the public service sector (government or nonprofit) and you plan to stay there. After you’ve made 120 payments toward your loan, you could qualify for federal loan forgiveness. (This could also apply if you’re a teacher in a low-income district, are or were in the military, or are a doctor or nurse in certain states.) Learn more at FSA’s Forgiveness, Cancellation, and Discharge
  3. .

  4. (For federal loans) Your federal loans are in a repayment plan based on your income (either one of the income-based repayment plans or pay-as-you-earn plans). These help you qualify for low or no payments while you’re earning less money. These highly flexible payment plans are options that are not available with private loans, so if you need this flexibility (or think you may), don’t refinance your federal student loans. Keep your options open with them.

If you are thinking about refinancing your student loans, be smart about it. That’s what U-fi is here for. Get started with U-fi today.

Ron Hancock

Written By:

Ron Hancock is the Regional Director for U‑fi Student Loans and is an expert in many aspects of financial aid, student loans, and debt management. A graduate of the University of Oklahoma, Ron has worked in a number of areas of higher education finance, including positions in a college financial aid office, training and development for a state agency, and most recently as National Manager for Nelnet’s Partner Solutions team. Ron has spoken at numerous financial aid conferences all across the United States.

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