Student Loan Refinancing: How Often Can You Do It?

Student loan refinancing can be an attractive prospect for many borrowers, whether it is to lower their interest rates, change their repayment period, or add or release a cosigner. Refinancing allows you to refinance one or more federal and private student loans into a single loan with new terms, including a new interest rate, monthly payment amount, or repayment length. This article offers a quick overview of reasons to refinance, guides you through how often you can refinance, and lists some reasons why a borrower might refinance multiple times.

Understanding Student Loan Refinancing

Refinancing is the process of changing the terms of your current loan, whether it be striking a new agreement with your current lender or having another lender pay off your debt and open up a new agreement with you. So, although the balance owed does not change with refinancing, it can impact the total amount you’ll end up repaying. For people with multiple student loans, consolidation can help simplify payments by combining these separate loans into one. When you use an Education Refinance Loan, lenders will combine these separate loans into a new, single loan. This new loan will have new terms, such as a new monthly payment amount, interest rate, and repayment length. Student loan consolidation is for people carrying multiple student loans with separate due dates, payment amounts, and interest rates.

Refinancing Multiple Times: Is It Possible?

The answer is as many times as you want. You can continue your quest to score the lowest rate possible until all of your debt is gone. Our survey showed that awareness around refinancing multiple times is increasing. Refinancing student loans multiple times isn’t bad in and of itself. Of course, whether it’s a good idea depends on your personal situation.

You can refinance student loans as many times as you qualify. There is no legal or regulatory limit on how often you can refinance. While the law doesn’t cap the number of times you can refinance, practical limitations-such as credit score requirements, income stability, and individual lender policies-will determine your eligibility.

Why Refinance Student Loans?

There are many different reasons why a borrower might refinance. Interest rates are constantly fluctuating with the economy. If a student takes out a fixed-rate loan during a period of high interest rates, it seems only natural that they would have some buyer’s regret when rates dip. Luckily, refinancing serves to remedy just that. This could work in one of two ways. If you find that you are now able to afford higher monthly payments, you may decide to refinance to a shorter repayment schedule in order to pay less in interest over the lifetime of the loan. Either way, refinancing (as well as, in some cases, consolidation) can help solve these issues.

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In general, lenders offer the best interest rates to the borrowers with the best credit histories. Since many students do not have a developed credit history, they ask their parents or another adult to cosign on the loans. However, these loans take many years to repay, and situations may change over that time. In either of these cases, the student may want to refinance. Borrowers may also want to take advantage of a new cosigner or release a previous cosigner from their contract. A new cosigner may open the possibility of loans with better interest rates, whereas a released cosigner may be someone who is no longer willing to be on the same contract as the borrower.

Factors to Consider Before Refinancing

When you refinance a student loan, you take out a new private loan with a specific refinancing lender. That means if you have federal student loans, you forego borrower benefits during repayment, such as forgiveness and income-driven repayment, in exchange for lowering your interest rates. If you’re considering refinancing for the first time and have federal student loans, it’s wise to wait until the student loan payment pause is over to reassess your student loan situation.

When refinancing your student loans, there are a few things to keep in mind to ensure that you are making a beneficial decision in the long run.

Credit Score

Your credit score is the most significant factor determining your interest rate. To refinance again and get a better deal, your score typically needs to be in the “good” to “excellent” range (usually 670 or higher). If your credit is on the borderline, adding a cosigner can be a strategic move.

Debt-to-Income Ratio (DTI)

Lenders want to ensure you aren’t overleveraged. Your DTI ratio compares your total monthly debt payments to your gross monthly income. Lenders typically look for a DTI ratio below 40% to 50%.

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Income Stability

Consistent income is key. If you have recently switched jobs, become self-employed, or have irregular income, lenders may view you as a higher risk than when you were a salaried employee.

Loan Amount

As you pay down your debt, your balance decreases. Eventually, you may hit a floor where refinancing is no longer an option. According to lender disclosures, minimum refinance amounts commonly range from $5,000 to $10,000.

Lender-Specific Rules

Each individual lender sets its own rules regarding how often you can refinance your student loans. Typically, these limits fall somewhere between once every month or once every quarter. Some lenders impose a “seasoning” period on loans. This is a required amount of time-or a specific number of on-time payments-that must pass before a loan is eligible to be refinanced.

A common question is whether you can refinance student loans with the same lender to get a lower rate. Policies here are mixed. Some lenders allow current borrowers to modify their loans or apply for a new loan if rates have dropped significantly. However, many lenders will not refinance their own loans because it reduces their profit margin on an existing debt.

The Refinancing Ladder Strategy

Through the refinancing ladder strategy, you start out with a longer term and refinance several times more with shorter repayment terms. Let’s assume you have $300,000 in student loan debt with a 7% interest rate with 10 years to pay off your loan. By refinancing alone, your monthly payment is reduced. Imagine what you could do with that amount of money each month. Paying down your debt faster is just one option. Let’s say you owe $180,000 with an interest rate of 6% and had 10 years to pay it off. During a refinance, you choose a repayment term of 10 years at 5% interest.

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Potential Savings

Let’s go back to our example of a high-debt student loan borrower with $300,000 of debt at a 7% rate. Refinancing at a 6.5% rate with a 10-year repayment term results in savings in the first year alone. Over the life of the loan, that’s a significant amount!

How Often to Refinance

Although refinancing student loans multiple times is possible, it’s best to avoid refinancing too frequently. But a good refinancing benchmark is every two years or so, with a minimum of one year. Much of this has to do with your credit. You want to keep tabs on your credit and make sure it’s the same or improved by the time you refinance again.

Steps to Take Before Refinancing

Check your debt-to-income ratio (DTI): Each lender has its own income requirements. An important number to know is your debt-to-income ratio which should be less than 50%. To calculate your DTI, add your total monthly payments and divide it by your monthly income.
Review your credit score: Look at rates and cash back bonuses.
Gather your personal and loan info: Have your pay stubs, tax returns, address, and Social Security number handy when applying for another refinancing loan.
Get quotes from several lenders: Our survey found that a third of respondents applied with one refinancing lender. SoFi®, Laurel Road, and Earnest make up roughly 50% of the refinancing market.
Compare prequalified rates from multiple lenders: This allows you to see potential interest rates and terms without any impact on your credit score.

Considerations Regarding Federal Loans

Refinancing federal loans may be a good idea if interest rates have fallen, as it could save you money on interest in the long run. However, it's important to consider the benefits you'll be giving up:

Income-driven repayment plans: Income-driven repayment plans are highly adaptable and flexible repayment options for federal loans that allow you to make your monthly payments a function of your salary. So, if you are not earning a lot of money, you won’t have to make high payments until you see an increase in salary.
Public Service Loan Forgiveness: If you are considering a career in a qualifying field (these include teaching, nursing, firefighting, military service, NGO work, and more) you may be able to get your federal loans forgiven after 10 years of payments.
Forbearance during national emergencies: During the Covid 19 Pandemic, borrowers did not have to make a single loan payment (and their loans did not acquire a cent of interest). The federal government took this action in response to the economic stress caused by the pandemic.

Impact on Credit Score

In the long run, refinancing student loans can actually help your credit score by putting you in a spot to make manageable payments and pay down your debt faster. However, they do have an initial effect of dinging your credit score. This should not limit borrowers from refinancing, but may prove prohibitive to those who are considering refinancing multiple times in a very short period.

Fees

As noted above, most lenders do not charge borrowers to refinance their loans. However, this is not a hard-and-fast rule, and borrowers should always read the terms and conditions carefully before agreeing to anything. Look for the language “origination fees” in the contract to find any fee that would come with opening the account.

Staying Informed

To keep your finger on the pulse of refinancing opportunities, it’s a good idea to browse student loan marketplaces. These allow you to compare different lenders side-by-side and see what each of them may be able to offer you. Also, remember that if you don’t already have a cosigner, finding one can be one of the most promising ways to improve the interest rates of your loan.

Examples of Refinancing Scenarios

Scenario 1: A graduate who refinanced immediately after college at a high interest rate due to a thin credit file can refinance again after a couple of years with a stable job and improved credit score to secure a lower rate.
Scenario 2: A parent who refinanced a Parent PLUS loan may not find a better deal if market rates and their credit score remain unchanged.
Scenario 3: A borrower with a high balance may refinance multiple times over several years to take advantage of dropping interest rates.
Scenario 4: A borrower with a small remaining loan balance may not find refinancing worthwhile due to minimum loan amount requirements and minimal savings.

Tips for Ongoing Monitoring

Set calendar reminders: Mark your calendar to check interest rates every 6 to 12 months.
Monitor your credit: Use free credit monitoring tools to track your score.
Know your break-even: Before applying, know your current interest rate and remaining term.
Use the prequalification tool: Never submit a full application blindly. Prequalify with multiple lenders to compare estimates.
Organize your documents: Keep digital copies of your pay stubs and loan statements handy.

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