Refinancing your student loans can be a great way to improve your financial situation. Student loan refinancing means taking out a new loan to pay off one or more existing education loans. Whether or not you refinance your education loans should be based on your individual circumstances. If any of the following factors resonate with your current situation, then refinancing may be for you. Just be sure to thoroughly review any benefits tied to your federal and private loans before you refinance them with a private lender.

Reasons to Consider Refinancing

• You Need to Free Up More Cash Every Month: Education loan repayment can use up a lot of your paycheck, and you may find it harder to pay your other bills and expenses while staying current with your education loan payments. Refinancing may allow you to decrease that payment amount by lowering your interest rate and/or adjusting your loan term. And a lower monthly payment means more money in your pocket.
• You Pay Multiple Student Loans Per Month: Keeping track of multiple loan servicers and payments each month can become overwhelming. Refinancing your loans will bring all your education debt under one servicer, which means you’ll only need to make one payment every month.
• You Want to Lower Your Interest Rate: Whether you’re paying back federal or private loans (or both), you might have an interest rate that seems higher than normal in today’s market. If your credit score has improved or market interest rates have dropped since you took out your loan, you may qualify for a better rate. Education refinancing loans, like MEFA REFI, are designed to give you a lower interest rate—and thereby save you money. With MEFA REFI, you can get a rate quote without impacting your credit score and you can use our Student Loan Refinancing Calculator to estimate your potential savings. 
• You Want to Remove Your Co-Borrower from Your Loans: You may have borrowed your education loans with a co-borrower and now want to remove that person from your loans. Whether you co-signed with a parent, child, or other family member or friend, as long as your credit profile supports it, you can refinance your loans and release your co-borrower completely from that debt. You can also choose to add a new credit-worthy co-borrower to potentially secure more favorable terms with the new refinance loan.

Refinancing Limitations

There is no legal limit on how often you can refinance your loans, but the loan lender may have their own requirements or a waiting period, often referred to as “seasoning,” before you can refinance. This waiting period typically requires several months of consecutive on-time payments before you can refinance. This helps demonstrate a reliable payment history to the lender.

Impacts of Refinancing

Every time you refinance, you may need to pay an origination fee to the lender. Research lenders for what fees they charge to refinance and be sure to weigh your potential savings against these fees. Some lenders, including MEFA for the MEFA REFI, will not charge these fees for refinancing.

Refinancing will temporarily impact your credit score. While prequalification typically involves a soft credit check with no effect on your score, completing a full application triggers a hard credit inquiry, which may cause a slight, short-term dip in your credit.

Refinancing with a lower interest rate can usually provide you with lower monthly payments and more money in your pocket each month. But doing so can increase the total amount you pay over the life of the loan. Be sure to consider your long-term budgetary priorities before moving forward. 

Losing Benefits

Refinancing a student loan means you will lose any current and future benefits and/or protections associated with that loan. Be sure to weigh these potential losses before proceeding with refinancing.

What to Consider Before Refinancing a Federal Loan

A federal student loan offers unique benefits that will expire if the loan is refinanced. These benefits include:

• Repayment Options Based on Income: You may qualify for a reduced monthly payment if you have a low level of income.

• Loan Forgiveness for Public Employees: If you hold a public service job, then you may qualify to have portions of your federal student loans forgiven.

• Medical and Economic Forbearance: Federal loan payments may be excused for up to 24 months in the case of medical or economic hardship.

• Rehabilitation of Defaulted Loans: If your federal loan is in default, then you may be able to have the default removed from your credit report.

To preserve these federal loan benefits, you may want to consider a Federal Direct Consolidation Loan as an alternative way to simplify your federal student loan debt. Review our article, Student Loan Consolidation vs. Refinancing to make sure you understand the difference between the two options.

There are many lenders that offer student loan refinancing options, but for more detailed information about MEFA’s Education Refinancing Loan, including its benefits, FAQs, and how to apply, review our MEFA REFI page and MEFA REFI Loan Application and Solicitation Disclosure. And once you’re ready to refinance your student loans, check out our article How to Refinance Student Loans to find out your next steps.

If you’d like to speak with someone, we’re happy to answer your questions and walk you through the process. You can reach us at (855) 433-REFI (7334) or [email protected].