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How Often Should You Refinance Your Student Loans?

By Elizabeth Aldrich – Updated Feb 6, 2020 at 6:20AM

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Missing the opportunity to refinance could cost you hundreds. But if you refinance too often, you risk your credit.

College students holding caps and mortarboards

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Refinancing your student loans can be greatly beneficial, especially if you qualify with some of the best student loan refinance lenders. You can choose to refinance your student loans as many times as you want, but know that there are downsides. Here are some things to consider before you choose to refinance your student loans more than once.

What is student loan refinancing?

Student loan refinancing gives you the opportunity to replace an existing loan with a better student loan that has improved terms or a lower interest rate. There are many reasons to refinance your student loans, but there are also plenty of things to consider before refinancing your student loans.

If you are looking to lower your overall costs or are struggling with making your monthly payment, refinancing can often lower your interest rate or reduce your monthly payments. However, it can also extend your repayment period, which can cost you more over the life of the loan, and if you’re refinancing federal student loans, you lose out on a range of loan benefits. 

Can you refinance your student loans more than once?

In short, yes.

You can refinance your student loans multiple times, and, if executed smartly, it can save you money. You can choose to refinance with the same lender or explore opportunities with several different lenders. As long as you meet the lender’s refinancing requirements, like having good credit and a steady source of income, you can refinance your student loans as many times as you want. 

However, applying for refinancing too often can hurt your credit and may cost you more money in the long-run. Be careful that you aren’t refinancing to a new loan that will not benefit you long-term.

When to refinance your student loans

The most appealing reason to refinance your student loans is to qualify for a lower interest rate, which will save you money over the life of the loan. Lenders base your interest rate on your perceived level of risk for repaying the loan. You may be a great candidate for a lower interest rate if your credit score has improved or if your income has increased since you signed on for your existing loan.

Check and compare rates from multiple lenders to ensure you are receiving the lowest interest rate available before jumping into a new loan.

If your financial situation has changed since you took on your student loans, or even since the last time you chose to refinance, refinancing your student loans can lower your monthly payments and free up additional disposable income. Those extra funds can be used to pay off other debts or simply to meet your current financial obligations. If you are struggling, refinancing may be your answer.

You can also use student loan refinancing to consolidate your student loans. Student loan consolidation takes multiple existing loans and rolls them into one single loan. This streamlines the repayment process by giving you one monthly payment to remember instead of juggling multiple payments and lenders.

However, this shouldn’t be your primary reason for consolidating your loans. Only consider consolidation if you can also score a lower interest or better loan terms in addition to consolidating. 

What to watch out for when refinancing your student loans

While refinancing your student loans can be advantageous in certain scenarios, there are times that it can hurt you more than it can help you. Be on the lookout for the following loan terms that aren’t necessarily in your best interest.

  • Extending the life of your loan: Refinancing can extend your repayment period, which will leave you paying more when it’s all said and done. It may make sense for you if you need to lower your monthly payment, but keep in mind that you’ll pay significantly more in interest charges over the long run. Make sure you understand your new repayment terms and how they will affect your overall student loan debt.
  • Increasing your interest rate: It’s common to choose to refinance in order to reduce your interest rate. However, lenders don’t always offer a lower interest rate. You want to choose a loan that gives you the lowest interest rate possible. Aim for interest rates below 10%.
  • Origination fees: Origination fees cover the lender’s cost for processing the new loan, including underwriting, running credit, and verifying and processing the borrower’s documents. Some private lenders charge excessive origination fees, while others choose to offer loans without any origination fees. Do your research and compare fees so you aren’t adding to your loan balance straight out of the gate when you don’t necessarily have to.
  • Prepayment fees: Prepayment fees are illegal for student loans. All student loan lenders are required to allow penalty-free prepayment. Even though there are regulations in place, there are still lenders out there that are misleading and dishonest. If a lender claims there will be a charge for paying off your student loans early, move on to another lender.
  • Application fees: Most student loan lenders don’t charge application fees, but if you find a lender that does, know that this will be an up-front, non-refundable fee just to submit your loan application. If your loan is denied, you will have paid out-of-pocket for no reason.

Focus your search on lenders that don’t include excessive fees, but still offer you a reasonable interest rate. By understanding what each fee is you’ll be able to identify red flags and narrow down the best refinancing option possible.

Typically, it’s best to refinance your private loans separately from your federal loans. If you choose to refinance your federal student loans, you will lose certain benefits tied to your original loans. This includes flexible repayment plans, loan forgiveness options, and a variety of other repayment assistance features like deferment and forbearance.

You may not need those benefits today, but they are a valuable safety net if you were to ever lose your job or fall on hard times in the future. Be sure to compare the features of your new loan with the benefits you may be giving up from your original federal loans. 

Refinancing your student loans too often can hurt your credit

Refinancing your student loans involves a credit application, which results in a hard pull on your credit report. One inquiry is not a big deal, but a few in quick succession can drag your score down. Although the decrease is temporary and typically small, your score can take a more substantial dip if you’re applying to multiple lenders to explore your rates or choosing to refinance frequently.

There is no limit to the number of times you can refinance your student loans, but you shouldn’t refinance them just because you can. Limit the number of times you refinance your student loans to no more than once per year -- and even that is probably excessive.

Refinancing should be used as a strategic tool to improve your financial position. There are many lenders to choose from, so do your research and pay attention to the details. Be on the lookout for any potential red flags like excessive fees or other predatory terms. Refinancing your student loan debt can save you money, but only when done smartly.


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