How Many Times Can You Refinance Your Student Loans?

Renee Layberry
May 4, 2021

Refinancing your student loans is one of the simplest and smartest things you can do to save money - now and in the future.    If you find a lower interest rate, refinancing can save you hundreds or even thousands of dollars over the life of your loan. And refinancing doesn't have to be a one-time thing; in fact, there's no limit on the number of times you can refinance. So if you're wondering how many times you can refinance your student loans, there's your answer.   But before you do anything, you need to know what you should do before you refinance your student loans for the first or third time alike.  

Why should you refinance your student loans multiple times?

Just as the market ebbs and flows, so do student loan refinancing interest rates.  Looking at the basics of what student loan refinancing is - it's a means of combining your loans into one by getting a new private loan that comes with either better terms, a lower interest rate, or both.   The point of refinancing is to save you money and make your life easier.   Even small rate decreases can add up to big savings, so following the market given you have the stability of a job and credit score could be your ticket to being more financially savvy.   More >> Compare possible savings using our student loan refinancing calculator.    

What steps should I take before refinancing again? 

Now that you know you can refinance your student loans as many times as you want, you now need to know what steps you should take in between each student loan refi period.  You should use the time between refinancing to improve your credit score and decrease your debt-to-income ratio as best you can.   Improving those will make you eligible for even lower interest rates the next time you want to refinance.   While you are working on improving your financial profile, make sure you are making your student loan payments on time, every time. Sign up for automatic bill payments. Many lenders will offer a small discount if you autopay. Plus, you'll never miss a payment if the money is coming right out of your checking account like clockwork.   The more you demonstrate your ability to pay your loans on time and handle your regular living expenses (including rent, car payments, and credit card payments), the higher your credit score will rise. High credit ratings will likely yield even lower interest rates in the future.   Don't plan to refinance every month or even every year. But keep an eye on your credit rating, and when you start to move up significantly, it might be time to start shopping around for another refinance.   Here are a few things you should look at when choosing to refinance your student loans.   Compare >> Student loan refinance offers from competitive lenders  

Which loans can I refinance? 

If you have student loans from a private lender (a bank or loan company), your loans can be refinanced as long as you have a good credit score and income.   If your credit score is low, you may still qualify if you can find someone to co-sign. If your parents or grandparents are willing to co-sign the loan, for example, you may be eligible for a new loan with lower interest rates than your existing loan.   If you have federal loans, you cannot refinance them with the federal government. Congress sets the interest rate for federal student loans, so there's no other interest rate option.   It's important to mention that Congress has set interest rates to 0% during the economic and national crisis caused by the coronavirus. For more information on student loan interest rates during the coronavirus check out this article on how the feds offer relief on student loan repayments.   You can, however, refinance a federal loan with a private lender. Generally speaking, though, your federal interest rate will be lower than a private lender rate. Plus, if you move your federal loans to a private lender, you will give up the perks that go along with federal loans. Most notably, you'll no longer have the option to participate in a loan forgiveness program or sign up for an income-driven repayment plan which allows you to pay lower monthly payments based on your income. Consider consolidating your federal loans instead.   person counting the money in their wallet Photo by @JulieK via Twenty20

When should I refinance?

If you have private loans, the best time to refinance is when interest rates drop and you qualify with a lender. Even a small drop in interest rates can make a huge difference to your wallet. In fact, the coronavirus has caused interest rates for student loan refinancing to drop significantly. If you're in the right financial position this could be the best time to look into this offer.   Let's do some math to illustrate just how much you can save with a refinance. Say you have a $30,000 student loan with a 4.66% interest rate for 10 years. That means you are paying $313 per month in interest and will pay $7,588 in interest alone over the life of the loan.   If you can secure an interest rate of 4% (which is just a little over a half a point drop), you'll take your payments down to $304 a month. That may be only a yearly savings of $108, but your total savings over 10 years is $1,140. While $1,140 won’t change your life, it's still money that stays in your pocket instead of going to the bank.   The lower the interest rate, the more you are paying directly to your loan's principal balance.   For a full run-down of how interest rates work, look no further.  

How do I get the best refinancing rate? 

Shop around. To get the best refinance rate for your private student loans, start by looking at interest rate comparisons among lenders.   And don’t forget about credit unions. If you (or your parents) belong to a credit union, check to see what their rates are. If you don’t belong, join. Credit unions sometimes have more flexibility with approval processes, so you may find it easier to qualify.   When you are looking for the best interest rate, be sure you try pre-qualifying before applying. That process will determine whether or not you're even eligible for a loan.   The additional benefit of pre-qualifying is that you don't have to let each financial institution do a credit check. Each time a credit inquiry is opened, your credit score will drop. It's better to pre-qualify first and then, once you’ve decided which lender to use, move to the application process which will include the hard credit check.   man signing a financial document with a pen Photo by Scott Graham

What questions should I ask? 

It's not enough to find a lender offering a lower interest rate. Be sure you ask the right questions before you apply for a new loan. These include:  

Are there any origination fees or costs?

Lenders may charge origination fees to cover credit checks, verification, processing, and underwriting. When you are shopping around, be sure you are also comparing origination fees.   You'll get a sense of who is overcharging when you compare. Keep in mind that many lenders will offer refinancing for no fee. Look for those lenders first.  

Is there an application fee?

Application fees are generally non-refundable, so if you apply for a loan and then don't qualify, you'll be out the application fee. Look for a lender that doesn't charge for applying.  

Are there prepayment penalties?

A prepayment penalty is an amount you must pay if you pay your loan off early. Sometimes you have to pay penalties just to make a larger loan payment when you have the money.   Any prepayment penalties are illegal for student loans, whether those loans are federal or private. However, you may find lenders who attempt to charge something similar. They may not call it a penalty, but that's what it is. And if that's the case, that lender is shady. Don't do business with them.  

Will refinancing extend the life of the loan?

If the life of your loan becomes longer in the refinance, you'll pay less monthly, but you'll pay more in interest over time. Ask the lender to run the numbers for a refinanced loan over the same amount of time as the existing loan.  

What are the disadvantages of refinancing multiple times?

Refinancing your student loans more than once does have possible downsides.   Here are two disadvantages that you'll want to factor into your decision to refinance:
  1. Frequent hard credit checks will lower your credit rating. Be mindful of how many lenders you are allowing to do a credit check. Remember that you can get around this by pre-qualifying with lenders before actually applying for a new loan.
  2. Refinancing takes time and energy. Don't spin your wheels if your credit rating is shaky and your income low. Unless you have a strong co-signer, you won't be approved for a new private loan. Establish your financial situation and credit history before actively researching lenders.