Many graduate students borrow to fund the cost of their degrees, and it’s no wonder why: Average annual tuition fees for graduate programs cost nearly $20,000, according to the National Center for Education Statistics.
For many borrowers, managing their debt involves refinancing. Refinancing can potentially reduce your interest rate, monthly payment, or otherwise save you money on your loan’s total costs — but it’s important to understand how refinancing works and make sure it’s the right choice for you.
Here’s how you can refinance graduate student loans, and what to consider before doing so.
1. Determine if refinancing is right for you
2. Check your credit score and financial history
3. Shop around for the best offers
4. Gather documentation and apply
1. Determine if refinancing is right for you
Before you refinance graduate student loans, you must first decide if doing so makes financial sense.
A major factor to consider is the type of loans you have. In general, you have more to lose if you refinance federal student loans. That’s because loans from the Department of Education come with unique borrower benefits, including loan forgiveness programs and the option to set your monthly payment based on your income.
If you refinance federal loans, they become a form of private debt and you’re no longer eligible for these perks. For that reason, you should only refinance federal loans if you’re sure you won’t need any federal benefits in the future.
| Note: You may be able to consolidate your federal loans, but that’s a separate process from refinancing and comes with different risks and benefits. |
If you have private loans, however, refinancing carries fewer risks — especially if you can reduce your interest rate or gain other advantages. You may be able to lower your monthly payment, total borrowing costs, or both, depending on your circumstances.
Say, for example, you had $20,000 in graduate student loans with a 6.8% interest rate and nine years left in repayment. If you refinanced into a new loan with a 10-year term at 4.25%, you could reduce your monthly payment from $248 to $205 and save a total of $2,210 in total interest costs. Though you’d make payments on your new loan for an extra year, you could save more than $40 each month and thousands over time.
2. Check your credit score and financial history
Most reputable lenders review your credit and income before approving you for a new loan and interest rate. You’re more likely to qualify for a loan at a competitive rate if you have good or excellent credit, which is usually defined as having a credit score of around 670 or higher. You’ll also need to prove you have sufficient income to comfortably pay off your new loan.
You can check your credit score for free with services like Credit Karma or your own credit card companies, many of which offer a free glimpse of your score. You can also obtain a free copy of your credit report from AnnualCreditReport.com, which compiles your financial history.
3. Shop around for the best refinance offers
One big difference between private and federal loans is that different private lenders each offer different loan rates and terms. As a result, it’s important to shop around among many different lenders that refinance graduate student loans.
Most lenders allow you to compare rates and terms without a hard inquiry on your credit. Look at several factors when comparing refinance loans, including:
- The new interest rate you’re offered
- Whether the rate is fixed (won’t change during the life of the loan) or variable (can change over time)
- The minimum and maximum loan amount
- The new repayment term
- Any applicable fees for refinancing
- Whether the lender has a good reputation
By researching carefully, you can find the most favorable new refinance loan.
4. Gather necessary documentation and apply for refinancing
Next, you will need to gather the necessary information to apply for your refinance loan. Depending on the lender, these documents might include:
- Government-issued ID
- Proof you obtained a degree
- Proof of your residency
- Recent loan statements showing how much you owe, your payment history, and the payoff amount on the loans you want to refinance
- Proof of employment and income, such as tax returns, a W-2 form, or pay stub
Most lenders allow you to apply online, and you can typically complete your application within a few minutes. Once you submit your information, the lender will usually perform a hard credit check to determine your eligibility.
5. Manage your new refinanced loan
Once you’re approved and have signed any final paperwork, your refinancing lender will work with your current lenders to pay off your existing loans. This process can take time, so keep making payments on your current debts to avoid any late payments.
When your old loans have been paid off, your new lender should provide instructions to start making payments on your refinanced debt.
Frequently asked questions
Can you refinance other student loans while in graduate school?
You may be able to refinance other student loans in graduate school, but not every lender will allow you to refinance before you’ve earned your degree.
To be eligible to refinance, you’ll typically need to provide proof of earnings and have good credit. If you can’t do that, you may be asked to apply with a cosigner.
When should you refinance graduate student loans?
Refinancing graduate student loans may make sense if you have private student loans and can qualify for a new loan at a lower rate. When you refinance private loans, you don’t give up borrower benefits as you would if you refinance federal student loans.
You might also refinance to get a lower monthly payment. However, if you lengthen your repayment period, you may pay more in total interest over the life of the loan.
Which graduate student loans can you refinance?
You can refinance any graduate student loans you want, including both federal and private student loans. However, refinancing federal loans means giving up benefits such as income-driven payment plans or loan forgiveness. You will also need to qualify for a refinance loan based on your income and credit.
Should you refinance graduate student loans?
If you want to make your debt payoff easier and cheaper, refinancing graduate school loans could be a useful solution. If your credit has improved or your income has gone up since you originally borrowed, or if you borrowed at a time when interest rates were high, you may be able to lock in lower rates by refinancing.