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All You Need to Know About Graduate School Student Loan Refinancing

All You Need to Know About Graduate School Student Loan Refinancing
Rebecca Safier
Rebecca SafierUpdated August 4, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Americans owe a whopping $1.7 trillion in student loan debt, with a large part of that amount belonging to graduate students. According to the Education Data Initiative, the average graduate student loan debt is 142% higher than the average among all student borrowers. Paying off a large student loan balance can be challenging, especially if you’re dealing with high interest rates. Refinancing can help you lower your interest rates and simplify debt repayment. Let’s take a closer look at graduate school loan refinancing so you can decide if it might be the right move for you. 

What Is Graduate Student Loan Refinancing?

So, what is student loan refinancing? Well, student loan refinancing involves exchanging one or more of your existing student loans for a new loan from a private lender. Depending on your credit and income, you could qualify for a better rate than you have currently. Lowering your interest rate has the potential to save you money over the life of your loans. Along with getting a better rate, you can also choose new repayment terms, often between 5 and 20 years. If you refinance multiple loans at once, you can combine them into a new loan with a single monthly payment. Plus, refinancing graduate school loans could allow you to switch to a new lender, which might be a welcome change if you’ve had a bad experience with yours. Before applying to refinance, however, it’s worth noting that refinancing federal loans means losing access to federal programs, including income-driven repayment plans and forgiveness programs.

How Grad School Loan Refinancing Works

If you want to refinance your graduate school loans, you can kick off the process by checking graduate student loan refinance rates with a few lenders. Many lenders let you prequalify for student loan refinancing online with no impact on your credit. If you see an offer you like, you can submit a full application and permit a hard credit inquiry, which will show up on your credit report. Most lenders look for a positive credit history and strong credit score before approving your application. Before you apply, therefore, it’s a good idea to look at your credit and identify any areas where you can improve. If you can’t meet a lender’s criteria on your own, you could consider applying to refinance with a cosigner. Once your application has been approved, your new lender will pay off your existing student loans and set you up with your new one. You may need to make payments right away, though some lenders will let you defer payments if you’re still in school or make low monthly payments if you’re in a training program. Make sure to read over the terms of your new loan agreement so you understand when bills are due and don’t miss a payment. 

Is It a Good Idea to Refinance Graduate School Loans?

There are a number of reasons why refinancing graduate school loans could be beneficial. For one, lowering your interest rate could result in major savings over the life of your loan. Let’s say you owe $50,000 at an 8.0% rate. On a 10-year repayment term, you’d pay $22,797 in interest on your loan. But if you could lower that rate to 4.0% through refinancing, you’d pay $10,747 over 10 years. Plus, your monthly payment would decrease by $100. Along with reducing your interest charges, refinancing can help simplify repayment by consolidating multiple loans into one. Plus, you can select new repayment terms, perhaps opting for a shorter term to get out of debt faster or a longer term to reduce your monthly payments. If these benefits of student loan refinancing appeal to you, refinancing graduate school loans could be a good idea. Before you jump in, though, it’s important to understand some of the downsides that can come with refinancing graduate school loans. 

Are There Any Reasons Not to Refinance Graduate School Loans?

It may not be a good idea to refinance federal student loans if you want to retain access to federal repayment plans or forgiveness programs. When you refinance, you lose access to plans such as income-driven repayment and extended repayment.Since your new, refinanced loan is private, it also wouldn’t be eligible for federal forgiveness or discharge programs. And as mentioned earlier, your loan would no longer qualify for the emergency forbearance that has paused payments for the past couple of years. Some private lenders offer benefits such as economic hardship protection and temporary forbearance, but you won’t have access to the same range of protections that the federal government provides to student loan borrowers.
Pros of Refinancing Graduate School LoansCons of Refinancing Graduate School Loans
Lower your interest rateForfeit access to federal repayment plans, such as income-driven repayment*
Simplify repayment by consolidating multiple loans into oneLose eligibility for federal forgiveness programs, such as PSLF*
Adjust monthly payment by choosing new repayment termsBecome ineligible for the current emergency forbearance for federal student loans*
Switch to a new lender that may offer more benefits than your current onePotentially need a cosigner to qualify, which could put your cosigner’s credit at risk
*Note that these cons refer to refinancing federal student loans with a private lender. If you refinance private student loans, you won’t have to worry about these cons, as your loans are already private and thus ineligible for federal programs. Recommended: Is a Master's in Social Work Worth It?

Alternatives to Refinancing Graduate School Loans

Refinancing isn’t your only option for managing your graduate student loan debt. Here are some alternatives to consider before you apply: 

Consolidate Your Loans

If you’re juggling multiple federal student loans, consider consolidating them with a Direct Consolidation Loan. Through consolidation, you can combine multiple loans into one and choose new repayment terms up to 30 years. Like refinancing, consolidation can simplify repayment. However, unlike refinancing, it won’t lead to a lower interest rate. Instead, your new interest rate will be the weighted average of your previous rates rounded up to the nearest one-eighth of a percent. While both private and federal student loans are eligible for refinancing, only federal student loans are eligible for Direct loan consolidation. 

Apply for Income-Driven Repayment 

If you’re struggling to keep up with high monthly payments on your federal student loans, consider applying for an income-driven repayment plan. The four income-driven plans are, 
  • Income-Based Repayment
  • Pay As You Earn 
  • Revised Pay As You Earn 
  • Income-Contingent Repayment 
All of these plans adjust your monthly bills to 10% to 20% of your discretionary income and extend your loan terms to 20 or 25 years. Under President Biden's new SAVE program, the amount could be adjusted to as little as 5% of monthly income. Besides these plans, you may also consider the extended repayment plan or graduated repayment plan. 

Pursue Student Loan Forgiveness or Repayment Assistance 

Depending on your line of work, you might qualify for partial or full student loan forgiveness. The Public Service Loan Forgiveness program, for example, forgives federal student loans for those working in public service. Teacher Loan Forgiveness offers up to $17,500 in loan forgiveness to teachers in low-income schools. Some states also offer student loan repayment assistance to professionals in certain fields, such as dentists and lawyers. Plus, you might be able to find a program from your graduate school or a private organization. Finally, some employers offer student loan assistance to their employees. If you’re on the job hunt, consider prioritizing companies that offer this benefit. 

Check Out Lantern's Graduate School Loan Refinancing Options 

If you’re interested in refinancing your graduate school loans, make sure to shop around with multiple lenders. By comparing your options, you can find the best loan offer for you. Before you refinance federal student loans, however, make sure you understand that doing so means losing eligibility for federal repayment plans and forgiveness programs.  If you’ve weighed the pros and cons and decided refinancing is right for you, Lantern Credit can help you find and compare student loan refinance options.

Frequently Asked Questions

Can I refinance my graduate school loan?
When should I refinance my graduate school loan?
Should I consider graduate school loan refinancing?
Photo credit: iStock/hxdbzxy

About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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