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College Students and Recent Grads

Student Loan Disability Discharge: How to Make Your Debt Disappear if You’re Disabled

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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If you borrowed student loans for college or graduate school, you probably didn’t envision having to repay them while also staring at a stack of medical bills. But the good news is that you might not have to — thanks to something called student loan disability discharge.

Federal loan holders suffering from a serious physical or mental impairment are eligible to have their debt canceled. For private student loans, however, your pathway to debt forgiveness for disability is unfortunately more limited, though you might have some options, depending on the lender.

What is student loan disability discharge?

The Department of Education promises to cancel your debt (even if it’s in default and collections) if you’ve incurred a “total and permanent disability.”

Think of it as disability insurance, but for your federal student loans. Eligible debt includes:

  • Direct loans
  • Federal Family Education Loan
  • Perkins loans
  • TEACH Grant service obligations

Among private lenders, this option is rare, though Sallie Mae, Wells Fargo and Discover are known to discharge your debt in cases of disability. Check with your lender to learn about any support it might be able to offer — even something short of loan cancellation could still be a boon to your repayment.

How do you qualify for student loan disability discharge?

In terms of federal student loans, you must provide evidence of your disability to qualify for disability discharge:

SourceDocumentRequirement
Licensed physician, who is a doctor of medicine (M.D.) or doctor of osteopathy (D.O.)Certification of your loan discharge applicationYour disability can be expected to result in your death, has spanned at least five years, OR could be expected to last five (more) years
U.S. Department of Veterans Affairs (VA)VA disability determinationYou suffered a complete disability while serving or received an individual unemployability rating based on your disability
Social Security Administration (SSA)SSA notice of award or Benefits Planning QueryYou’re eligible for Social Security Disability Insurance or Supplemental Security Income

If the VA or SSA have your disability status up to date, they may contact the Department of Education on your behalf, taking away some of the legwork. The Department of Education would then reach out to request that you complete your discharge application, but you would no longer have to track down the required documentation.

Not eligible for student loan disability discharge?

If you don’t qualify for student loan forgiveness due to disability, explore other options to pay down debt, such as pausing your payments via deferment or forbearance. See what sorts of protections are offered by your private lender.

On the federal loan front, you could:

  • Request a deferment of up to three years if your disability has caused economic hardship
  • Apply for up to 12 months of forbearance at a time if your medical expenses are getting out of hand

Some private student loan lenders offer relief options too. But note that if you elect to pause repayment, whether with your private lender or with a federal loan servicer, interest will continue to accrue on your loans, increasing your balance by the time you resume payments.

How do you apply for student loan disability discharge?

To get disability discharge, complete a loan discharge application and submit it online — along with your required documentation — to federal loan servicer Nelnet. Simply visit DisabilityDischarge.com and click “Apply Now.”

You can also submit your application by other means:

  • Email: [email protected]
  • Fax:303-696-5250
  • Mail: U.S. Department of Education, P.O. Box 87130, Lincoln, NE 68501-7130

Nelnet will pause your due payments for up to 120 days while your application is under consideration. You can also have someone complete your application on your behalf by filling out the Applicant Representative Designation form.

Applications take as little as 30 days or less to be reviewed; if you’re denied, Nelnet is obligated to explain why, and you can also contact the servicer over the phone at 888-303-7818.

What else should you know about student loan disability discharge?

Receiving a discharge of your federal loans in the case of disability doesn’t prohibit you from working. It does, however, put a temporary cap on how much money you can earn from working.

In fact, your discharge could be revoked during a three-year monitoring period if you report annual income above federal poverty guidelines (or borrow a federal loan or are no longer disabled).

Aside from that restriction, there are plenty of benefit to loan discharge. Here are five that might answer questions coming to your mind:

  • No need to pay federal income tax on the forgiven amount if your loans are discharged between 2018 and 2025, thanks to the recently enacted Tax Cuts And Jobs Act (although your state could tax the forgiveness)
  • No loan payments necessary while your discharge application is under review
  • No effect on your access to Medicaid and Medicare
  • Potentially receive refunds on loan payments made after the VA or SSA determined you were completely disabled (and before you received the discharge)
  • Potentially return to school and receive federal financial aid once you’re three years removed from receiving the discharge

Disability and student loans don’t have to go together

If you’ve suffered a serious disability, you probably have a lot more on your mind than student loan repayment.

Take some time to gauge your eligibility for loan discharge, however, as it could put an end to your debt — then you’ll be able to focus on more important aspects of your life.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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College Students and Recent Grads, Pay Down My Debt

7 Best Options to Refinance Student Loans – Get Your Lowest Rate

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Are you tired of paying a high interest rate on your student loan debt? You may be looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn. We have created the most complete list of lenders currently willing to refinance student loan debt. We recommend you start here and check rates from the top 7 national lenders offering the best student loan refinance products. All of these lenders (except Discover) also allow you to check your rate without impacting your score (using a soft credit pull), and offer the best rates of 2019:

LenderVariable APRFixed APRMax Loan Amount 
Laurel Road Bank

2.43% - 6.65%

3.50% - 7.02%

No Max

Visit Lender Secured

on Laurel Road Bank’s secure website

Earnest

2.27% - 6.89%

3.47% - 7.59%

No Max

Visit Lender Secured

on Earnest’s secure website

SoFi

2.27% - 7.55%

3.49% - 7.94%

No Max

Visit Lender Secured

on SoFi’s secure website

CommonBond

2.37% - 7.95%

3.48% - 8.24%

No Max

Visit Lender Secured

on CommonBond’s secure website

LendKey

2.24% - 6.67%

3.49% - 7.50%

$125k / $175k

Visit Lender Secured

on LendKey’s secure website

Citizens Bank

2.46% - 9.24%

3.45% - 9.62%

$90k / $350k

Visit Lender Secured

on Citizens Bank (RI)’s secure website

Discover Student Loans

$150k

Visit Lender Secured

on Discover Bank’s secure website

*Discover’s lowest rates shown include a 0.25% interest rate reduction while enrolled in automatic payments.

You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score.

We have also created:

But before you refinance, read on to see if you are ready to refinance your student loans.

Can I get approved?

Loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loans and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.
LenderMinimum credit scoreEligible degreesEligible loansAnnual income
requirements
Employment
requirement
 
Laurel Road Bank

Not published

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Laurel Road Bank’s secure website

Earnest

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Earnest’s secure website

SoFi

Good or Excellent
score needed

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on SoFi’s secure website

CommonBond

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on CommonBond’s secure website

LendKey

680

Undergraduate
& Graduate

Private & Federal

$24K

Yes

Learn more Secured

on LendKey’s secure website

Citizens Bank

680

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

$24K

Yes

Learn more Secured

on Citizens Bank (RI)’s secure website

Discover Student Loans

Not published

Undergraduate
& Graduate

Private & Federal

None

Yes

Learn more Secured

on Discover Bank’s secure website

Diving Deeper: The best places to consider a refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a single shopping period (which can be between 14-30 days, depending upon the version of FICO). So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

Here are more details on the 7 lenders offering the lowest interest rates:

1. Laurel Road

LEARN MORE Secured

on Laurel Road Bank’s secure website

Laurel Road Bank : Variable Rates from 2.43% and Fixed Rates from 3.50% (with AutoPay)

Laurel Road Bank offers a highly competitive product when it comes to student loan refinancing.

Pros Pros

  • Forgiveness in the case of death or disability: They may forgive the total student loan amount owed if the borrower dies before paying off their debt. In the case that the borrower suffers a permanent disability that results in a significant reduction to their income,Laurel Road Bank may forgive some, if not all of the amount owed.
  • Offers good perks for Residents and Fellows: Laurel Road Bank allows medical and dental students to pay only $100 per month throughout their residency or fellowship and up to six months after training. It is important for borrowers to keep in mind that the interest that accrues during this time will be added on to the total loan balance.

Cons Cons

  • Higher late fees: While many lenders charge late fees,Laurel Road Bank’s late fee can be slightly steeper than most at 5% or $28 (whichever is less) for a payment that is over 15 days late.
  • You lose certain protections if you refinance a federal loan: While not specific to Laurel Road Bank, it is important to keep in mind that you will give up certain protections when refinancing a federal loan with any private lender.

Bottom line

Bottom line

As a lender,Laurel Road Bank prides itself on offering personalized service while leveraging technology to make the student loan refinancing process a quick and simple one. Consider checking out their low-rate student loan refinancing product, which is offered in all 50 states.

2. Earnest

LEARN MORE Secured

on Earnest’s secure website

Earnest : Variable Rates from 2.27% and Fixed Rates from 3.47% (with AutoPay)

Earnest focuses on lending to borrowers who show promise of being financially responsible borrowers. Because of this, they offer merit-based loans versus credit-based ones. 

Pros Pros

  • Flexible repayment options: Earnest offers some of the most flexible options when it comes to repayment. They allow you to choose any term length between 5-20 years. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.
  • Ability to switch between variable and fixed rates: With Earnest, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later.
  • Loans serviced in-house: Earnest is one of just a few lenders that provides in-house loan servicing versus using a third-party servicer.

Cons Cons

  • Cannot apply with a cosigner: Unlike many of the other lenders, Earnest does not allow borrowers to apply for student loan refinancing with a cosigner.
  • No option to transfer Parent PLUS loans to Child: If you are a parent that is looking to refinance your Parent PLUS loan into your child’s name, it is important to note that this cannot be done through refinancing with Earnest.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

Earnest, who was recently acquired by Navient, is making a name for themselves within the student refinancing space. With their flexible repayment options and low rates, they are definitely an option worth exploring.

3. SoFi

LEARN MORE Secured

on SoFi’s secure website

SoFi : Variable rates from 2.27% and Fixed Rates from 3.49% (with AutoPay)*

SoFi was one of the first lenders to start offering student loan refinancing products. More MagnifyMoney readers have chosen SoFi than any other lender. The only requirement is that you graduated from a Title IV school. In order to qualify, you need to have a degree, a good job and good income.

Pros Pros

  • Borrowers can refinance private, federal and Parent PLUS loans together: Through SoFi, borrowers have the ability to combine all of their student loans (private, federal and Parent PLUS) when refinancing. Along with the ability to refinance Parent PLUS loans, parents can also transfer the PLUS loans into their child’s name.
  • Access to career coaches: SoFi offers their borrowers access to their Career Advisory Group who work one-on-one with borrowers to help plan their career paths and futures.
  • Unemployment protection: SoFi offers some help if you lose your job. During the period of unemployment they will pause your payments (for up to 12 months) and work with you to find a new job. However, just remember that any unemployment protection offered by SoFi would be weaker than the income-driven repayment options of federal loans.

Cons Cons

  • No cosigner release: While they offer you the opportunity to refinance with a cosigner, it is important to know that SoFi does not offer borrowers the opportunity to release a cosigner later on down the road.
  • You lose certain protections if you refinance a federal loan: This con is not unique to SoFi (and you will find it with all other private lenders). Federal loans come with certain protections, including robust income-driven payment protection options. You will forfeit those protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

SoFi is really the original student loan refinance company, and is now certainly the largest. SoFi has consistently offered low interest rates and has received good reviews for service. In addition, SoFi invests heavily in building a “community” – which means you can start to get other benefits once you are a SoFi member.

SoFi has taken a radical new approach when it comes to the online finance industry, not only with student loans but in the personal loan, wealth management and mortgage markets as well. With their career development programs and networking events, SoFi shows that they have a lot to offer, not only in the lending space but in other aspects of their customers lives as well.

4. CommonBond

LEARN MORE Secured

on CommonBond’s secure website

CommonBond : Variable Rates from 2.37% and Fixed Rates from 3.48% (with AutoPay)

CommonBond started out lending exclusively to graduate students. They initially targeted doctors with more than $100,000 of debt. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university (graduate and undergraduate).

Pros Pros

  • Hybrid loan option: CommonBond offers a unique “Hybrid” rate option in which rates are fixed for five years and then become variable for five years. This option can be a good choice for borrowers who intend to make extra payments and plan on paying off their student loans within the first five years. If you can a better interest rate on the Hybrid loan than the Fixed-rate option, you may end up paying less over the life of the loan.
  • Social promise: CommonBond will fund the education of someone in need in an emerging market for every loan that closes. So not only will you save money, but someone in need will get access to an education.
  • “CommonBridge” unemployment protection program: CommonBond is here to help if you lose your job. Similar to SoFi, they will pause your payments and assist you in finding a new job.

Cons Cons

  • Does not offer refinancing in the following states: Idaho, Louisiana, Mississippi, Nevada, South Dakota and Vermont.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

CommonBond not only offers low rates but is also making a social impact along the way. Consider checking out everything that CommonBond has to offer in term of student loan refinancing.

5. LendKey

LEARN MORE Secured

on LendKey’s secure website

LendKey : Variable Rates from 2.24% and Fixed Rates from 3.49% (with AutoPay)

LendKey works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders.

Pros Pros

  • Opportunity to work with local banks and credit unions: LendKey is a platform of community banks and credit unions, which are known for providing a more personalized customer experience and competitive interest rates.
  • Offers interest-only payment repayment: Many of the lenders on LendKey offer the option to make interest-only payments for the first four years of repayment.

Cons Cons

  • Rates can vary depending on where you live: The rate that is advertised on LendKey is the lowest possible rate among all of its lenders, and some of these lenders are only available to residents of specific areas. So even if you have an excellent credit report, there is still a possibility that you will not receive the lowest rate, depending on geographic location.
  • No Parent PLUS refinancing available: Unlike several of the other student loan refinancing companies, borrowers do not have the ability to refinance Parent PLUS loans with LendKey.
  • You lose certain protections if you refinance a federal loan: As when refinancing federal loans with any private lender, you will give up your federal protections if you refinance your federal loan to a private one.

Bottom line

Bottom line

LendKey is a good option to keep in mind if you are looking for an alternative to big bank lending. If you prefer working with a credit union or community bank, LendKey may be the route to uncovering your best offer.

6. Citizens Bank

LEARN MORE Secured

on Citizens Bank (RI)’s secure website

Citizens Bank (RI) : Variable Rates from 2.46% and Fixed Rates from 3.45% (with AutoPay)

Citizens Bank offers student loan refinancing for both private and federal loans through its Education Refinance Loan.

Pros Pros

No degree is required to refinance: If you are a borrower who did not graduate, with Citizens Bank, you are still eligible to refinance the loans that you accumulated over the period you did attend. In order to do so, borrowers much no longer be enrolled in school.

Loyalty discount: Citizens Bank offers a 0.25% discount if you already have an account with Citizens.

Cons Cons

Cannot transfer Parent PLUS loans to Child: If you are looking to refinance your Parent PLUS loan into your child’s name, this cannot be done through Citizens Bank.

You lose certain protections if you refinance a federal loan: Any time that you refinance a federal loan to a private loan, you will give up the protections, forgiveness programs and repayment plans that come with the federal loan.

Bottom line

Bottom line

The Education Refinance Loan offered by Citizens Bank is a good one to consider, especially if you are looking to stick with a traditional banking option. Consider looking into the competitive rates that Citizens Bank has to offer.

7. Discover

LEARN MORE Secured

on Discover Student Loans’s secure website

Pros Pros

  • In-house loan servicing: When refinancing with Discover, they service their loans in-house versus using a third-party servicer.
  • Offer a variety of deferment options: Discover offers four different deferment options for borrowers. If you decide to go back to school, you may be eligible for in-school deferment as long as you are enrolled for at least half-time. In addition to in-school deferment, Discover offers deferment to borrowers on active military duty (up to 3 years), in eligible public service careers (up to 3 years) and those in a health professions residency program (up to 5 years).

Cons Cons

  • Performs a hard credit pull: While most lenders do a soft credit check, Discover does perform a hard pull on your credit.
  • No Parent PLUS refinancing available: Discover does not offer borrowers the option of refinancing their Parent PLUS loans.
  • You lose certain protections if you refinance a federal loan: Be careful when deciding to refinance your federal student loans because when doing so, you will lose access federal protections, forgiveness programs and repayment plans.

Bottom line

Bottom line

If you’re looking for a well-established bank to refinance your student loans, Discover may be the way to go. Just keep in mind that if you apply for a student loan refinance with Discover, they will do a hard pull on your credit.

1. Discover’s lowest rates shown include a 0.25% interest rate reduction while enrolled in automatic payments.

 

Additional Student Loan Refinance Companies

In addition to the Top 7, there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders:

Traditional Banks

  • First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 1.95% – 4.45% APR. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 3.75% and fixed rates starting at 3.99%. You would likely get much lower interest rates from some of the new Silicon Valley lenders or the credit unions.

Credit Unions

  • Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 3.75% APR. You can borrow up to $100,000 for up to 25 years.
  • Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 4.81% and fixed rates start at 4.29%.
  • Thrivent: Partnered with Thrivent Federal Credit Union, Thrivent Student Loan Resources offers variable rates starting at 4.00% APR and fixed rates starting at 3.99% APR. It is important to note that in order to qualify for refinancing through Thrivent, you must be a member of the Thrivent Federal Credit Union. If not already a member, borrowers can apply for membership during the student refinance application process.
  • UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $150,000 and rates start as low as 4.05% (variable) and 3.99% APR (fixed).

Online Lending Institutions

  • Education Loan Finance:This is a student loan refinancing option that is offered through SouthEast Bank. They have competitive rates with variable rates ranging from 2.80% – 6.01% APR and fixed rates ranging from 3.29% – 6.69% APR.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 4.53% – 7.20% (fixed) and 4.30% – 6.97% APR (variable).
  • IHelp : This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.00% to 8.00% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Purefy: Purefy lenders offer variable rates ranging from 2.82%-8.42% APR and fixed interest rates ranging from 3.75% – 9.66% APR. You can borrow up to $150,000 for up to 15 years. Just answer a few questions on their site, and you can get an indication of the rate.
  • RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.

Is it worth it to refinance student loans?

If you are in financial difficulty and can’t afford your monthly payments, a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance student loans, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by refinancing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance your student loans to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance. You can also email us with any questions at [email protected]

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

Advertiser Disclosure

College Students and Recent Grads

Can I Refinance Student Loans While I’m Still in School?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

If you’re wondering whether you can consolidate student loans while in school, congratulations: By already asking great questions about your upcoming debt repayment, you’re at the top of your class.

Unfortunately, you might be too fast for your own good.

It’s difficult — albeit not impossible — to consolidate or refinance student loans while still in school. But that said, it’s still worth reviewing your options to adjust your repayment before you leave campus.

Can you consolidate student loans while in school?

To brush up on the basics, remember that student loan consolidation occurs when you group your debt into a new, single loan with a weighted, average interest rate. You could accomplish this via a federal direct consolidation loan.

To be eligible for federal loan consolidation, you must either be enjoying your six-month grace period or already be in repayment — in other words, off campus and into the real world.

Refinancing takes consolidation a step further. It, too, groups your loans into one new loan, but it also could lower your interest rate. By reducing your rate, you’d pay less interest over the life of your loan, potentially saving you significant money when kept at the same term.

Say you borrowed $20,000 on a 10-year term and with an average rate of 7%. By refinancing that amount at 5% and for the same 10-year term, for example, you’d shave off $2,410 in interest over the life of the loan.

Refinancing could also allow you to choose a new lender, but note that only private lenders offer refinancing. This means you’ll lose exclusive protections on your federal debt since only federal loans feature access to income-driven repayment plans, flexible deferment and forbearance options, as well as pathways to loan forgiveness.

For this reason, if you decide you want to refinance federal student loans rather than consolidate them, make sure the benefits outweigh the drawbacks for your particular situation. And if you do go ahead with it, try to shop around for a good refinancing rate.

Can you refinance student loans while still in school?

Unlike with federal loans, private lenders employ underwriting criteria to gauge your ability to repay your new, refinanced loan (along with your other debt, if you have any). You typically need to have a strong credit score and proof of a steady income — or a cosigner who has both.

Unfortunately, being a college graduate is also among most lenders’ requirements. Generally, lenders require that refinancing borrowers have graduated from a Title IV school. An associate degree is sometimes acceptable.

But if you don’t have a degree (yet), consider these two lenders:

  1. Earnest: If you’re within one semester of graduating, you could apply and be approved for refinancing a little ahead of schedule. You could also qualify if you’re a part-time student, enrolled less than “half-time.”
  2. Citizens Bank: If you take a break from school and make 12 on-time payments toward your loans, you could refinance them without having earned a degree.
  3. SunTrust Bank: If you only need to refinance private student loans, not federal ones, then SunTrust has an option too, so long as you loans are current.

Grad students eligible for refinancing

If you’re seeking a second degree, meanwhile, you might be looking to refinance your undergraduate loans.

In this case, your undergraduate degree will likely qualify you to refinance with most lenders. Keep in mind that both your current lender and your potential refinancing lender will typically allow you to defer your loan repayment once you re-enroll.

On the other hand, you might want to delay refinancing until you earn a second degree and perhaps establish a longer credit history or steady income stream. This way, you’d score a lower interest rate.

Parents could refinance PLUS loans

If your parent is looking to refinance federal PLUS loans, they won’t have to wait until you’re done with school to refinance. That’s because Mom or Dad is listed as the primary borrower.

PLUS loans are prime targets for refinancing because they’re tagged with relatively high interest rates. As of October 2018, parent PLUS loans carried a 7.60% fixed interest rate, plus a 4.25% loan origination fee.

Before your parent seeks a lower rate from a refinancing company, however, it might be worth reminding them about what they’d be giving up. Just as with private student loans, privately refinanced parent loans don’t always feature government-like protections such as deferment and forbearance options.

Perhaps you and your parent had a handshake deal that you’d eventually handle the repayment for the PLUS loan. In this case, they could refinance the loan under your name — but you’d have to finish school first.

Making in-school payments is the next best thing

If your goal of refinancing was to lower your interest rate, you’d likely have to wait until you’re a college grad.

With that said, there are measures you can take now to save money later.

Whether you have federal or private loans, making in-school payments can stop your balance from ballooning while you’re in the classroom.

For federal loans, contact your servicer to learn about how to make in-school payments. Although subsidized direct loans won’t accrue interest until you’re six months out of school, other federal loans will, so it’s wise to begin repayment ahead of schedule if you can afford it.

With a private lender, your in-school repayment options were (hopefully) presented at the time you decided to borrow. Lenders offer a mix of choices, including:

  • Deferring payment until graduation, allowing interest to pile up
  • Making small fixed payments to save some money on interest while you’re enrolled
  • Making interest-only payments to keep your balance from growing at all
  • Making full payments to attack your debt from the start

Of course, the more money you put toward your loan balance while you’re in school, the less you’ll have to pay when you graduate.

Laying the groundwork now to refinance later

If you begin making in-school payments, you’re not just saving money. You’re also building up your credit score.

In fact, 35% of your FICO score, one of the most commonly cited credit scores, is based on your debt payment history. If you start repaying your loans while you’re in school (and repay credit card debt on time), you’re starting to build that history.

That takes care of one of refinance companies’ underwriting criteria. However, there are more ways to put yourself in a position to refinance not long after receiving your degree.

Maybe you don’t have the bandwidth for a full-time job while in college, but scoring a part-time position or internship now could lead to a good-paying gig later.

Eventually, having that consistent paycheck will not only help you repay your loans, but also prove to refinance companies that you have the income to cover your newly consolidated debt.

That’s the silver lining of it all. Yes, you might not be eligible to refinance student loans while still in school, but you can begin strengthening your application for the future.

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Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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