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Overview of Refinancing MBA Student Loans

Overview of Refinancing MBA Student Loans
Melissa Brock
Melissa BrockUpdated August 15, 2022
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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.
When people refinance a Master of Business Administration (MBA) degree, they try to lock in a lower interest rate or shorten their loan term in order to save money. Or they may try to lengthen their loan term in order to shrink their monthly payments. Read on to find out whether refinancing MBA student loans makes sense for you. We'll walk through the steps in the process of refinancing student loans for an MBA and also go over the requirements.

What Is Student Loan Refinancing?

When you refinance MBA loans (or any other type of loan, for that matter), a private lender pays off your old lender and gives you a new interest rate and terms. Some private lenders refinance more than one type of student loan debt, including both federal and private student loans. Many borrowers refinance multiple loans together with the intention of getting a lower interest rate and saving money over the life of the loan. When refinancing, private lenders review your credit score, history, and financial information to determine your new interest rate and terms.Refinancing federal student loans does disqualify you from taking advantage of federal repayment programs, including Public Service Loan Forgiveness, which forgives the remaining balance on your Direct Loans, and income-driven repayment plans, which allows you to pay your loans back based on your income and family size. You'll also lose out on federal protections like forbearance and deferment. 

Can You Refinance MBA Student Loans?

When you graduate with an MBA degree, you may have federal and private student loans. As long as you meet the requirements and eligibility criteria, you can refinance both the federal and private loans you used to borrow for your MBA degree. Note that you may not be able to refinance while still in school, though that depends on the lender.

Pros of MBA Loan Refinancing 

Why might you want to refinance your MBA? Let's take a look at the benefits.

Interest Savings

Refinancing to a lower interest rate means you could save money over the life of your loan. For example, you may save by switching from a variable rate loan (one that varies) to a fixed-rate loan (one that stays the same).

Lowered Monthly Payments

Your monthly payments can go down when you refinance. However, this usually means that you switch to a longer loan term, so you will make payments on your loan over a longer period of time. You can also lower your monthly payments by shortening your loan term, which means you'll have a higher monthly payment but pay less in interest over the life of the loan.

Simplifies Repayment

When you refinance, you can consolidate multiple loan payments into one loan payment, which means you no longer have to try to keep track of multiple payments every month. Instead, you end up with one payment.

Helps Your Overall Finances 

MBA student loan refinancing can bring even bigger benefits. Since you only have one payment to worry about, you're less likely to miss it each month. This can translate to a healthier credit score, which has even more far-reaching implications — you may be able to qualify to purchase a house with a higher credit score, for example.

Cons of MBA Loan Refinancing 

It's a good idea to consider the other side of the coin—the downsides to refinancing your MBA.

You'll Have to Qualify

It's not a given that you'll qualify for MBA loan refinancing. You'll need to have a good credit score, which is a three-digit number that shows how well you pay back debt. You'll also need to show evidence of a low debt-to-income (DTI) ratio, which shows how much of your monthly paycheck goes toward bills. You may need to have a credit score of 650 or higher and a DTI ratio under 50%, but remember that each lender has different qualifications. You can calculate your DTI by dividing your total monthly payments by your monthly earnings. Ask your lender about the qualifications required to refinance. 

You May Give Up on Federal Loan Benefits 

You may give up on certain federal student loan benefits if you exchange your federal loans for a private loan, including deferment or forbearance. Student loan deferment lets you pause subsidized loan payments without accruing interest, though unsubsidized loans still accrue interest. Forbearance allows you to reduce or pause payments, but note that interest usually accrues during the forbearance period. Some private lenders sometimes do offer forbearanceYou may also give up on special repayment plans through federal student loans, including extended, graduated, and income-driven repayment plans. Private lenders will not offer these specific types of repayment plans.Exchanging federal student loans for a new private loan means that you might also give up on forgiveness options, which means you will no longer have to repay your loans in partial or full amounts.

When to Refinance MBA Student Loans

When you got your MBA, you may have had an assortment of student loans, such as Federal Direct Unsubsidized Loans and Direct PLUS Loans. You might have also tapped into private student loans as well.You may want to refinance if you know you'll get a lower interest rate and save money on your loans over time. Another good reason to refinance is to simplify your payments. If you want to whittle an array of loans down to just one payment, refinancing can help you do that.

Refinancing Business School Loans 

Let's take a look at the process to refinance business school loans in four simple steps: making sure refinancing is for you, checking the qualifications, comparing lenders, and applying to refinance your student loans. 

1. Make Sure Refinancing Is For You 

Ultimately, refinancing must provide a benefit to you, the borrower. If a refinance won't offer a lower interest rate or a longer term for your loan, you may want to explore other options.

2. Check the Qualifications 

Do you meet the qualifications to refinance? It's a good idea to shop around among various lenders to make sure you have the credit score, income, DTI, refinancing amount, and degree to qualify. 
  • Credit score: Your credit score influences your ability to get a refinance. You may not get approved for a refinance if your credit score is too low. If you have a lower credit score, you may end up with a higher interest rate.
  • Income: Lenders will want to check your income to make sure that you will be able to make your new payments.
  • Debt to Income (DTI): Your DTI indicates how much risk you present to lenders. You can figure your DTI by adding up your monthly bills and dividing by your gross monthly income (your income before taxes), which is in the form of a percentage. 
  • Refinancing amount: The amount you're able to refinance will vary from lender to lender. You may also have to hit a minimum refinance threshold in order to refinance. 
  • Degree: Lenders will likely want to know about your completed degree(s). Some lenders require you to have a degree in your hand in order to refinance. Check with various lenders about their degree requirements.

3. Compare Lenders 

Lenders can provide a wide variety of opportunities for an MBA student loan refinance, from various interest rates to loan terms. It might not be the best option to go with the first lender you check with — you may find others that offer better rates and terms. Consider comparing a handful of lenders at once to see the average interest rates.  

4. Apply to Refinance Your Student Loans 

Lenders will need your name, address, and information about your university, degree, student loan debt, income, housing costs, and credit score estimate to get rate quotes. The lender will complete a soft credit check, which shouldn't affect your credit score more than a few points.If you meet a lender’s eligibility requirements, they’ll generally provide you with multiple offers, including fixed and variable rates and various loan terms. You'll also submit final documentation to the lender, such as proof of citizenship, a valid ID number, pay stubs, tax returns, or other types of verification. Note that if you apply with a co-signer, they will also have to submit this information as well. 

Student Loan Refinancing With Lantern 

Ready to refinance your student loans? Lantern wants to help you make the most of your refinance by helping you choose the partner to make it happen. Simply enter your loan amount, ZIP code, and an estimate of your credit rating. Lantern will help you sort and filter by payment, rate type, APR, and loan term. Paying your student loans doesn't need to be complicated. Lantern can help you compare and refinance your MBA student loans. 
Photo credit: iStock/sankai
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.LCSL0522012

Frequently Asked Questions

How do you refinance your MBA loans?
Can I refinance my MBA loans?
What are the requirements for refinancing MBA student loans?

About the Author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Her work has appeared on Yahoo Finance, Entrepreneur, Investopedia, The Balance, FinanceBuzz, The Journal of College Admission, MarketBeat, College Finance, Rocket Mortgage, LeverageRx, Benzinga, Morty, Ally, and more.
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