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Requirements for student loan refinancing

Couple signs loan documents
Jacob Lund/Shutterstock
Couple signs loan documents
Jacob Lund/Shutterstock
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Refinancing your student loans — in other words, taking out a new student loan to pay off your existing loans — is one way to save money or get a different repayment term. Sometimes you can refinance with your current lender, but many times you’ll get a new one. Whatever the case, you’ll have to meet a lender’s minimum refinancing requirements, which could include a high credit score, a low debt-to-income ratio and a stable income.

What are the requirements to refinance a student loan?

Eligibility requirements for student loan refinancing vary by lender, but many have the same general qualifications.

A solid credit score

Your credit score and history are some of the biggest influences in your eligibility for student loan refinancing. If you have little to no credit history to your name, some lenders may not approve you. The ones that do will likely give you a higher interest rate, since the best rates go to borrowers with high credit scores. In general, aim to have a credit score in the mid-600s to qualify and one above 700 to get the lowest rates.

If you have a low score, it’s critical shop around. Many lenders offer prequalification, which lets you see your estimated APR and approval odds before applying without impact to your credit. Get prequalified with at least three lenders to find your best rate.

Stable income

If don’t have a steady income, lenders may assume that you don’t have the cash on hand to make payments on your bills. Many lenders require proof of employment and income to qualify.

Decent debt-to-income ratio

Your debt-to-income ratio (DTI) is the percent of your income that’s taken up by bills and necessary expenses. The lower your DTI, the more likely you are to get approved, since it means that you have more cash freed up to stay current on your payments.

Lenders might be more cautious if you have a high DTI. Try to keep your DTI to less than 50 percent, and pay off as much debt as you can right before you apply for your loan.

Minimum refinancing amount

Every lender has a different minimum amount you can refinance. Many lenders don’t have a maximum amount, but those that do will typically set a high ceiling, like $300,000.

A degree

Many lenders have requirements for how much schooling you’ve completed in order to refinance your loans. A number of them require you to hold a degree in order to be eligible for student loan refinancing, although some may be more lenient with these requirements.

If a lender doesn’t require that you hold a degree to get approved, it may have other eligibility criteria, like grade level or enrollment status requirements.

Other documents you’ll need to prepare

Once you’ve found the lender with the lowest interest rate, fewest fees and best repayment terms for your budget, it’s time to get your paperwork in order. Here’s what you’ll likely need for your application:

  • Proof of employment: A recent pay stub, a W-2 or your tax returns.
  • Government-issued ID: A license, passport or ID card.
  • Proof of degree: A transcript or diploma. May not be required with all lenders.
  • Proof of residency: A document confirming where you live.
  • Loan documents: Recent loan statements detailing your account and payoff information.

If you have a co-signer, they’ll need these corresponding documents as well.

After you’ve finished your application, your lender will run a credit check. If you’re approved, you’ll sign formal paperwork. This usually consists of giving the lender permission to pay off your current loans for you, with you agreeing to your new loan terms, interest rate and monthly payment.

Next steps

If you’ve decided that refinancing is the right move for your student loans, take these steps to prepare for your application.

  1. Check your credit reports and scores. AnnualCreditReport.com allows you to access all three of your credit reports weekly. Checking your reports is the only way to ensure that they are free of errors. Once you have an idea of your creditworthiness, you’ll have a better sense of which lenders are likely to approve you.
  2. Pay down debt. Where possible, eliminate as much debt as you can before you apply for your refinancing loan. Lowering your credit card balances or other debt could raise your credit score and boost your eligibility with lenders.
  3. Compare lenders. Get prequalified with a few lenders before making your decision; seeing your potential rates and terms is the only way to decide which loan is best for your individual situation. One lender may advertise low rates, but it may have stricter requirements for getting those rates.
  4. Send in an application. When you formally apply with a lender, you’ll be subject to a hard credit check, which could lower your credit score by a few points. However, in most cases, you could receive funds within a few weeks.
  5. Consider alternatives. If you don’t qualify for refinancing, or if you’d like to explore other methods of managing your student loans, you have options. If you have federal student loans, an income-driven repayment plan or a Direct Consolidation Loan could help you lower your monthly payment without giving up federal protections. If you have private loans, you could negotiate deferment or forbearance with your lender to temporarily reduce your monthly payments.
Written by
Dori Zinn
Contributing writer
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
Edited by
Student loans editor
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