How to Refinance Your Student Loans


Going through life is harder when you have too much debt on your plate. This is the case for many of the more than 43 million U.S. adults with student loans. Refinancing can provide a path forward for many of these individuals. Here’s how to refinance your student loans.  

What Is Refinancing? 

There are few terms related to debt that are more common than refinancing. Despite this, people can still sometimes get confused about what it really means to refinance a loan. So, what is refinancing

When you refinance student loans, you’re getting a new loan—not because you’re taking out more debt, but because that new loan will pay off and replace your old one. While this might sound a little complicated at first, it’s really a simple process. Think of it this way: Say your friend lends you 10 dollars and tells you to either bring them 20 dollars the next day or you pay them back the 10 dollars the same day. That afternoon, another friend says they’ll give you 10 dollars if you bring them 15 the next day. Since this second deal is clearly superior, you can take this new loan and immediately bring the first friend their 10 dollars back.    

Refinancing can be done with the same lender or through a new one. The thing to know specifically about refinancing student loans, however, is that this can only be done through a private lender, not the federal government. This can lead to some tricky choices for those who have federal loans that carry highly advantageous protections like income-driven repayment plans and loan forbearance. Still, there are some compelling reasons for you to refinance student loans.  

Why Refinance Student Loans? 

One of the most prevalent reason people do a student loan refinance is to lower their interest rate. The interest rate of a loan is the top factor for determining how much you’re going to pay beyond the originally borrowed amount.  

Think back to the previous example. The first friend’s deal equated to an interest rate twice as high as the second friend’s offer. By refinancing with the second friend, you saved a lot of money. This principle can be highly exacerbated due to the fact that student loan interest accrues based on current principal balance. When your rates are high, it’s going to cost you more over the long term—especially if your loan has a long duration and low monthly payment.  

How to Refinance Your Student Loans 

If you think that refinancing is the right move for you, it’s time to figure out how to refinance your student loans. As already mentioned, you can only refinance through a private lender. This doesn’t mean, however, there aren’t other companies out there that can help you out along the way.  

For example, Juno is one organization that’s making the process of refinancing easier and more beneficial to borrowers. Juno isn’t a lender, but instead takes bids from a huge pool of lending firms, of which it only selects the absolute best offers to show to its members. This can be an extremely valuable tool for those who want to get the best refinance deal for someone in their position without having to search for it on their own.  

It’s also good to know that since refinancing student loans only happens through a private lender, they’re going to have more stringent lending requirements than the federal government. Those who want to refinance student loans will have to prove a certain credit score—often about 650—as well as show they meet income requirements. Those who aren’t able to meet these hurdles can also apply for a student loan refinance with a cosigner.  

If you think refinancing your student loans will be beneficial to you I the long run, it’s likely a good move. While some might not want to refinance their federal loans, those with Direct PLUS loans—and especially those with private student loans already—should strongly consider refinancing as an option.  

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