Key takeaways

  • In order to refinance a student loan, lenders tend to require a strong credit score, a stable income, a degree and a decent debt-to-income ratio.
  • Lenders require a minimum refinancing amount, which is the amount you still have to pay on the loan. This is so the lender can make enough interest.
  • As part of the refinance, you’ll likely need to provide detailed paperwork, such as tax documents, bank statements, transcripts and IDs.

If you’re struggling to make student loan payments or want to free up more space in your monthly budget, refinancing could help. Refinancing your student loans could give you a lower interest rate, lower monthly payments and different repayment terms than your current student loans offer. However, you may need to find a new lender to do so.

Most requirements to refinance student loans include a good credit score and proof of stable income. If you don’t meet the credit score and income guidelines, you may be asked to apply with a co-signer. Along with that, not all student loans qualify for refinancing, especially if the balance exceeds a certain amount or if you did not graduate from your degree program.

Consider seven common requirements before you get started.

1. A strong credit score

In order to qualify to refinance a student loan, you will need a good credit score. Your credit history and credit score are some of the biggest influences on your eligibility for student loan refinancing. The higher your credit score, the more likely you will qualify for competitive terms when refinancing your student loan.

If you have little to no credit history, 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. Aim for 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 to shop around. Many lenders offer prequalification, which lets you see your estimated APR and approval odds before applying without impacting your credit. Get prequalified with at least three lenders to find your best rate. If you do have a low credit score, you might think about using a co-signer, which can help you get approved or could even lower your interest rate.

2. Stable income

Lenders also take into account what your income source(s) or payment schedule look like. Common reasons for fluctuating income can include self-employment, working on contract, receiving disability or being employed sporadically.

If you 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 consistent income to qualify– you may use bank statements or pay stubs to provide a record of regular, steady deposits into your account.

If you have income outside traditional employment, you may be required to prove your earnings through documents like tax forms or bank statements, as lenders are still looking for steady income in these situations. If you cannot prove a stable income, you may need a co-signer.

3. Decent debt-to-income ratio

Your debt-to-income ratio (DTI) is the percent of your income taken up by bills and necessary expenses. The lower your DTI, the more likely you are to get approved since you have more cash freed up to stay current on your payments. You can even calculate DTI yourself.

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.

4. Minimum refinancing amount

You might see minimum amounts, which is how much money you still need to repay that the lender will take on. Every lender has a different minimum amount you can refinance. For many, this starts between $5,000 and $10,000. Many lenders don’t have a maximum amount, but those that do will typically set a high ceiling, like $300,000. Minimum amounts help lenders determine if the loan will return enough interest.

Bankrate tip

Inquire about the minimum amount you can refinance to ensure the lender is a good fit. If not, explore other options to find a lender willing to let you refinance a smaller amount of student loan debt.

5. A degree

Many lenders have requirements to refinance student loans for how much schooling you’ve completed. Some require you to hold a degree to be eligible for student loan refinancing, although some may be more lenient with these requirements. You can even refinance after an associate degree in many cases.

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.

6. A co-signer

You may need a co-signer if you do not meet the loan requirements yourself. A co-signer is usually required when the primary borrower has low or unestablished credit, a high debt-to-income ratio or unstable income. The co-signer legally agrees to repay the loan along with the primary borrower.

It’s common to have a co-signer for student loans since student loans are made with younger people in mind who have not had time to build credit. The co-signer in these cases is usually a creditworthy adult, like a parent or guardian.

Check into whether the lender offers a co-signer release. If the primary or student borrower makes a certain number of payments or meets credit requirements, the co-signer may be released from the loan.

7. Paperwork

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 submitting your application, the 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.

How to refinance

If you’ve decided that refinancing is the right move for your student loans, there are five steps to refinancing your student loan.

In general, you’ll want to start by checking your credit score and report and paying down as much other debt as you can. Once you have a firm grasp of your credit score, it is important to compare a number of lender options.

Also, consider alternatives like income-driven repayment or a Direct Consolidation Loan for federal student loans. For private loans, forbearance or deferment are other suitable routes.

The bottom line

By making sure you meet the above student loan refinance requirements, you can better ensure that you are finding the right student loan option for you. Choosing to refinance might lower your interest rate and monthly payments, as well as potentially allow for terms that work better for your situation.

Remember to check your credit score and compare refinance lenders to help make payments easier to manage.