How Soon Can You Refinance a High-Interest Private Student Loan?

The cost of college often exceeds the maximum a student can borrow in federal loans. This leaves students with no alternative except private loans, which come at a high price. These loans are similar to personal loans, and do not have to follow the same requirements as federal loans. Interest rates are much higher, and students often choose to refinance these loans after graduation.

Private Loans

Students often seek out private student loans as a supplement to their federal loans. Private loans require a credit check, and interest rates are based on your score. Often a cosigner is used to qualify for this loan. Most private loans do not lock in a rate, but instead use a flexible rate that varies month to month, making it difficult for the student to afford the payments.


You cannot refinance a student loan until you are no longer using that loan. If you are still in school and drawing from the loan for tuition, you cannot refinance. Once you have completed school or finished using your private loan because of other forms of financing you have obtained, you can refinance. If you have federal loans and private loans, it is wise to refinance them separately. Often the federal loans will refinance at a lower rate independently than if grouped with the private loan.

Preparing to Refinance

Refinancing private loans requires credit approval. Before applying, you need to check your credit report and make any changes necessary. Most students will have a better score at the time of refinancing than when they originally took out the loan. They have 4 or more years of additional credit history and probably six months of employment history. This should equal a better rate, but you may need to fix a few problem areas on your credit report first. Pay down some credit card balances. If you have late payments, set up automatic withdrawals and pay on time several months before applying to refinance. By creating a better credit profile before applying for your refinance, you are going to receive a better rate and save money in the long run.

 Finding the Best Deal

You should contact the lender that currently holds your loans and ask for a better rate. See what they offer you; then check with a few other lenders. Your bank or credit union may have a program. Your student financial aid office could give you a few lender options. Don't overlook online consolidation companies. They can offer great deals because of low overhead since there is no brick and mortar location. Checking the Better Business Bureau before giving out any personal information is always a good move to protect yourself from fraudulent sites. Find the best rate and terms. Be sure to understand the length of the loan, the rate, whether it is adjustable and how much interest you will pay over the life of the loan.