Refinancing Your Student Loans Multiple Times- All You Need To Know

Refinancing your student loans can be done multiple times. All the details- the pros, the cons and what you can do is given in this article.

Updated by Anuroop Chowdar on 10th January 2020

You CAN refinance your student loans more than once. High-interest rate or bad experience with your lender, whatever be the reason, you have the option to refinance your loans more than once.

But just as the opportunities of this world, it has its own share of pros and cons. To make an informed decision, read more below:

Table of contents

What is student loan refinancing?

Ideally, “refinancing” is supposed to simplify the process of repayment of your loans. Refinancing can do this for you in one or many ways. If you are stuck with an existing difficult student loan (or multiple such student loans) whose demands are hard to meet either in terms of time constraints or financial constraints, refinancing it could be a good idea.

Refinancing is often the process of taking a new loan in order to repay existing loans, both private and federal. This process could allow you to benefit by helping you find a better rate of interest, by lowering your monthly payments and/or merging several loans into one efficient payment.


The Pros of refinancing your student loans multiple times

Based on your current financial status, current loan terms and your refinancing needs, the benefits you can get can vary for every individual. But the more popular and common Pros are as follows:

You can switch your loan servicer

Refinancing your federal and private loans together allows you to switch among loan servicers in case you feel that the service provided is not satisfactory and is misleading you with the wrong options. But know that all the Federal Servicers are like that and no one is better than the other. Still, you can choose your lender or servicer by checking out their reviews online and complaints on the CFPB (Consumer’s Financial Protection Bureau) database.

You can release your cosigner

We can agree that having a cosigner is a little uncomfortable and you truly want to bear your own hardships. Sometimes refinancing your loans can release your cosigner from the agreement. This can prove useful to them because they can turn eligible from loans and their credit score would not be affected by the payments that you missed.

Although in most cases your current lender schedules a co-signer release after a certain number of payments. But if they don’t, you can always go with refinancing your student loans.

Make a single payment a month- Loan Consolidation

All your loans can be drafted into one, including the Federal and Private Loans which allows you to make just a payment a month.

Switch interest type

You can change your Interest rate type- from variable interest rate to a fixed interest rate or vice-versa by refinancing your loans. If you think that you are paying a high and different amount each month and want to switch to a fixed amount or if you believe to be paying a higher amount because of your fixed-rate and want to switch to the market dependent variable rate, refinancing can be your option.

Fixed rates are Interest rates that stay the same throughout the loan repayment lifetime while variable rates are the interest rates that vary between a range of percentages based on the financial index of the market. 

Switch to a better Interest Rate

Refinancing allows you to opt for a better interest rate than the previous time you refinanced your loans. This may happen because your credit scores may have gone up or you might have noticed a better offer. Switching to a better and lower interest rate can save you potentially thousands of dollars.

You could increase your benefits

Refinancing your student loans to a different could potentially increase your benefits than the ones that are being provided by your current student loan lender. Many benefits such as more number of chances for forbearances, an autopay option(or the discount that comes with it), a free career counseling, etc can be provided by your new loan lender. 

Switch to a different timeline of your loan repayment

By student loan refinancing you can opt for an increase or decrease in the period of repayment based on your financial conditions. 

If your monthly loan payment is sucking out a huge chunk of your monthly income, you can opt to refinance to an increased period of repayment. Or if you just got a raise and want to complete your loan faster then you can refinance and opt for an increase in the monthly loan amount by selecting a shorter period of time.


Worried about your college tuition? Find the best student loan for you


The Cons of refinancing of your student loans multiple times

While all the pros have been lifted out above, here are the Cons that you might want to consider:

Yes. Refinancing can affect your credit

You should probably keep away from lenders that do a hard inquiry while giving a rate estimates during refinancing. 

An inquiry will appear on your credit report if you apply for student loan refinancing. That can stay on your credit report for two years and could plausibly decrease your credit score slightly. 

Opening a new account by refinancing will also reduce your credit score a bit. A newer account means your average age of credit is lower. A longer average age of credit is better because it showcases your timely loan payments.

Loss of Benefits

If you refinance your private loans or refinance your Federal loans, you can lose some potential benefits such as Income-Driven Repayment plans, student loan forgiveness program, forbearance and deferment protections that the government provides.

You should probably opt out of refinancing if you think you will utilize these benefits or thinking of utilizing them in the future.

Paying extra fees

Some lenders may charge prepayment penalties, though it is not a usual practice. They can also charge application fees or origination fees. Although it does not make sense paying extra money for lower interest rates, it can still be a viable option depending on the money you are about to save. 

Sometimes you can end up paying more

Although your interest rate decreases with refinancing your student loans, now, if the term is extended you could end up paying more in the long run as the period extends the amount of money paid increases. Please reconsider the extension of periods since you may not want to end up paying more for an extended period of time.

PROS

CONS

Change your loan servicer

Can affect your credit

Get a better interest rate or a better repayment plan

Loss of benefits, especially for Federal Loans

Release your cosigner

Paying extra fees such as origination fees, etc

Loan Consolidation

Can end up paying more if not careful

Increase your benefits

 

Looking for a refinancing lender? Choose from our list of best student loan refinancing lenders 


What can you do?

Depending upon your situation refinancing your student loans can be an efficient option. But please do enough research to find the lender that supports you. 

Compare the eligibility requirements, interest rates, fees,  benefits and be sure to make an informed decision.