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Knowledge Hub / Refinance Your Student Loans in 6 Steps
Refinance Your Student Loans in 6 Steps

Refinance Your Student Loans in 6 Steps

Living with Student Loans
ELFI | November 14, 2022
Refinance Your Student Loans in 6 Steps

If you’re sick of so much of your student loan payments going toward the interest rather than the principal, student loan refinancing may be for you. When you refinance your student loans, you apply for a new loan from a private lender and use it to pay off your old ones. The new loan has different terms than the loans you had before, so the benefits of refinancing student loans are numerous:

Some people put off refinancing their debt because they’re intimidated by the application process. However, student loan refinancing is actually very simple; you can refinance your loans in very little time from your couch.

Steps to Refinance Your Student Loans

Refinancing your student loans will likely be easier than you think. You can refinance your debt by following these six simple steps:

1. Decide if Refinancing Your Student Is Right for You

Although student loan refinancing has several benefits, it’s not a good idea for everyone. There are some things to keep in mind before refinancing your debt:

Carefully weigh the pros and cons to decide if student loan refinancing is right for you.

2. Shop for the Best Rates and Lenders

Student loan refinance rates, repayment options, and eligibility requirements vary between lenders, so it’s wise to shop around and request quotes from several companies.  Some lenders, such as ELFI, offer prequalification tools that allow you to check your rates with a soft credit inquiry, which doesn’t affect your credit score. Only if you decide to proceed with the loan application and consent to a credit check will the lender perform a hard credit inquiry.

3. Choose the Best Lender and Loan Offer

Once you’ve done your homework and gotten quotes from multiple lenders, you can choose the student loan refinance terms that work for you.  To narrow down your list, consider the following factors:

4. Complete the Loan Application

Once you’ve selected a lender, you need to complete a full loan application. The loan application is more in-depth than the pre-qualification form. Lenders will also perform hard credit inquiries, which can cause your score to drop by a few points.  When filling out the application, the lender will ask for the following information and documents:

If you will apply with a cosigner, they will need to fill out a separate application and submit the above information too.

5. Sign the Final Documents

After you complete and submit the application, the lender will check your credit and review your information to decide whether to approve you for a loan. If you’re approved, the lender will also use that information to determine your interest rate.  You will receive a notification of your approval and the loan terms. Review the loan conditions carefully; it may be different from the rates quoted on the pre-qualification form since the loan application is more detailed and uses a hard credit inquiry.  If you agree to the terms and conditions of the loan, sign the agreement and return it to the lender. Some lenders require you to sign forms and mail them in, but many allow you to sign the loan documents electronically.

6. Loan Payoff and Repayment

If you’re wondering how student loan refinancing works after the loan agreement is signed, you should know that your work is done; the lender handles the rest. The lender will reach out to your existing loan servicers to pay off your current loans. If there are any overpayments, the extra amount will be refunded to you.  Continue making all of the necessary payments on your existing loans until your new lender confirms they’re paid in full; otherwise, you may incur late fees and penalties.  Once the old loans are closed, you will make payments on the loan toward your new lender under the terms of the refinancing loan agreement. Refer to that agreement to find out when your payments are due.

Should You Refinance Your Student Loans?

Besides the issues mentioned above, like the loss of federal loan benefits and credit score requirements, there are some factors to consider before refinancing your student loans:

Everyone’s situation is different, so think carefully about whether it’s the best time for student loan refinancing right now.

Refinance Your Student Loans with ELFI

As you shop for a student loan refinancing lender, keep ELFI on your list.* With ELFI, you can refinance undergraduate, graduate, and even parent student loans, and it offers competitive fixed and variable interest rates. Plus, there are no application fees, origination fees, or prepayment penalties.  If you need help navigating the student loan refinancing process, you’ll be connected to an ELFI student loan advisor. They provide personalized, one-on-one assistance throughout the refinancing process, and they’re available by text, email, or phone.

FAQs About Refinancing Student Loans

How Long is the Student Loan Refinance Process?

The actual application process takes 30 minutes or less to complete. You’ll usually receive a response within one to three business days and if approved, it can take a few weeks for the lender to pay off your existing loans.

How does Refinancing Student Loans Affect Credit?

Refinancing can affect your credit score in the following ways:

Can I Refinance Federal Student Loans?

You can refinance both private and federal student loans. However, refinancing federal student loans has some significant drawbacks. You’ll lose access to federal protections, including access to income-driven repayment plans, loan forgiveness programs, and federal forbearance and deferment options.

Can You Refinance Student Loans with the Same Company?

You can refinance your loans multiple times. And if your credit or income changes, you can even refinance with the same refinancing lender you worked with before to potentially get a lower rate or different repayment term.

Can You Refinance Student Loans While Still in School?

Although there are some lenders that allow you to refinance your student loans while you’re still in school, most student loan refinancing companies require you to graduate with a degree before you’re eligible. However, you can refinance as soon as you graduate, even if your loans are still in their grace period, as long as you meet the lender’s eligibility requirements or have a creditworthy cosigner.

How Many Times Can I Refinance My Student Loans?

Many borrowers wonder, “how often can you refinance student loans?” The good news is that there isn’t a limit; you can refinance several times over the course of your repayment. Refinancing more than once can make sense if your credit score improves, if you pay down existing debt, or if your income substantially increases since those factors will affect your interest rates.

Can You Consolidate Student Loans by Refinancing?

When you refinance, you can consolidate your student loans into one. Refinancing means you’ll have just one loan to manage.

Do I Have to Refinance All of My Student Loans?

There’s no rule that says you have to refinance all of your existing loans. You can do a partial student loan refinance and only include some of your loans. For example, you may decide to refinance your higher-interest loans but leave your federal student loans alone.

Can You Refinance Student Loans With Bad Credit?

In general, lenders require good to excellent credit, meaning a score of 670 or above. If your credit is lower than that, you might wonder how you can refinance your student loans with bad credit and what steps to take to better your credit score. You can improve your credit score by making all of your monthly payments on time, paying down existing debt, and limiting new credit applications.