Want to refinance graduate student loans? This is how to do it

Graduate school can open up many doors professionally. A graduate degree may be a prerequisite to work in your field or may give you a leg up when it comes to getting hired. But it also comes at a cost, as graduate programs are expensive.

Still, loans are an issue for most people who pursue a degree beyond college. In fact, while graduate students collectively take out around 40% of all student loans they represent just 14% of students enrolled in universities. In the 2017-2018 school year alone, grad students borrowed around $37.6 billion.

How to refinance graduate student loans

Typically, you should refinance only private student loans. Refinancing federal loans doesn't make sense for most borrowers.

Refinancing federal loans requires you to give up many borrower benefits, including loan forgiveness options and flexibility in repayment plans. President Biden may also help borrowers with federal student loans. And payments and interest are currently suspended through September due to COVID-19.

If you have private loans, however, refinancing could potentially save you money and be a smart move. To refinance graduate student loans, take these seven steps.

1. Check your credit score and report

Good credit is essential to qualifying for a refinance loan at favorable rates. Check your credit history to see if there are derogatory remarks affecting your score. And always make payments on time.

If your credit score is too low to refinance student loans at a competitive rate, work on improving it before applying -- or ask a cosigner to help you refinance to make paying back student loans faster and easier.

2. Work on improving your debt-to-income ratio

Lenders consider your total debt relative to your income when deciding if they'll help make student loan payback easier by approving you for a refinance loan.

If your debt-to-income ratio is too high, maximize your chances of loan approval by paying off as much debt as possible. This doesn't necessarily have to be student loan debt -- repaying any loans will improve your DTI ratio.

3. Decide on your goals for refinancing

You can refinance for different reasons. Your goal may be saving money over time. That would mean you'd want to choose a loan with a shorter payoff timeline. These tend to come with lower interest rates. You could save both because the costs of borrowing are lower and because you're not paying interest for as long.

4. Research lenders offering student loan refinance loans

Many lenders offer student loan refinance loans. However, not all lenders cater to grad school students, who often owe more money. If you have a high loan balance, find a lender that will give you a large enough refinance loan.

5. Shop and compare rate quotes from several lenders

6. Complete your student loan refinance application and wait for approval

Once you've found a lender offering an affordable interest rate, a payoff timeline that makes sense, and monthly payments in your budget, apply for your loan. You'll be notified quickly if you're approved and can then complete the process of getting a new loan to repay existing debt.

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