Can I refinance part of my student loan?

Every one in eight Americans has student loans. One popular relief option, especially if you have private student loans, is refinancing. If you’re looking to lower your monthly payments, save money on interest, release a co-signer, or all three, refinancing can certainly help you achieve this.

But what if you don't want to refinance the full amount? Fortunately, there are some options.

Can I refinance a portion of my student loans?

You don’t have to refinance your entire loan balance and you may not want to. By doing a partial student loan refinance, you can target any high-interest or high-balance loans you might have. Here’s how it works.

Typically, when you refinance your student loans, you get a new lender who pays off your balance with the old lender. Moving forward, you will make payments to the new lender hopefully at a lower interest rate.

With a partial student loan refinance, you can choose to only refinance some of your student loans. If you have five different loans for example but only want to refinance three of them, a partial student loan refinance would help you do this. If you have a single student loan, you could ask the new lender to pay off a portion of the balance during the refinancing process.

SHOULD I REFINANCE MY STUDENT LOANS?

How to partially refinance student loans

Keep in mind that partially refinancing your student loans may still involve origination fees (cost of underwriting and processing) which will add to the cost of your loan. However, if you go through Credible, you can rest assured that your new lender will not charge prepayment penalties, loan application fees or origination fees.

WHAT ARE STUDENT LOAN REFINANCING RATES? 

When to consider a partial student loan refinance?

You may want to consider a partial student loan refinance for a number of reasons. According to Argenis Bouza, who works at the Chief Investment Office at Bank of America, the primary reason why someone will only refinance a portion of their total debt could be due to approval limits, their credit score or a lack of other qualifications.

“In some cases, students who have a lot of outstanding debt quoted at high interest rates and a bad FICO score will not qualify for a full refinance,” Bouza said. “So in this case, they can refinance a portion of their debt at lower interest rates and still find some relief.”

Another reason why you may want to consider a partial student loan refinance is when you have a mix of federal and private student loans. If you have federal student loans, in most cases, it’s best not to give up benefits like deferment, forbearance and loan forgiveness options. Plus, interest rates for federal student loans are often fixed and lower than private loans.

Whereas, your private loans can come with fewer protections and a higher interest rate which makes refinancing seem like a viable option.

WHO BENEFITS FROM STUDENT LOAN FORGIVENESS?

Why you may want to refinance your student loans

For some borrowers, refinancing student loans can be an excellent idea. You can save money by lowering your interest rate or even lower your monthly payments while shortening or extending your repayment term. Another benefit is potentially releasing a cosigner especially if your credit score has significantly improved.

On the flip side, refinancing federal student loans can make you lose access to helpful government relief options like deferment and forbearance. Private lenders offer less of these protections so consider refinancing your private loans first if you feel burdened by the payment.

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