How to refinance student loans for 30 years

When you take out student loans, you typically have 10 years to repay them. But if that’s not enough time, refinancing is one way to get more.

Refinancing your student loans can potentially lower your monthly payments, and extend your loan term up to 30 years. There are two ways to refinance your loan term over three decades, but it’s important to understand the ramifications of making such a major change to your loan repayment plan.

How to get a 30-year student loan refinance

Unfortunately, there’s no way to refinance your student loans directly into a 30-year term. Federal student loans typically come with the standard 10-year loan term. Private lender terms vary between five and 20 years.

But, there are ways to extend your loan term that long with a little extra work.

Option 1: Direct Consolidation Loans

If you have multiple federal student loans, consolidating them into a single Direct Consolidation Loan could allow you to extend your repayment term, while retaining federal loan benefits such as access to loan forgiveness and other repayment plan options. Note that you can’t consolidate private student loans this way.

• How it works: If eligible, you can combine multiple existing federal student loans into one loan with terms between 10 and 30 years. You can apply for a Direct Consolidation Loan online on the Federal Student Aid website. There’s also an option to download, print, and mail a paper application form.
• How much it costs: The good news is there’s no extra cost to consolidate your federal student loans. However, when you consolidate loans, the interest capitalizes, meaning the outstanding interest on the loans you’re consolidating is added to the principal balance of your new loan. You’ll essentially end up paying interest on your interest, since the interest is accruing on a higher principal amount.
• Eligibility requirements: Most federal student loans are eligible for consolidation but must currently be in repayment or in the grace period to be eligible. Defaulted loans may be eligible for consolidation if you make acceptable repayment arrangements or agree to repay your consolidation loan through an income-driven repayment (IDR) plan. You’re eligible to consolidate your federal loans after you graduate, leave school, or fall below half-time enrollment.

There are pros and cons to Direct Consolidation Loans. Here are a few to keep in mind:

Pros

• One monthly payment
• One loan servicer
• Can extend your loan term up to 30 years
• Access to additional repayment plans and Public Service Loan Forgiveness (PSLF) if you consolidate loans that aren’t Direct Loans

Cons

• May lead to paying more in interest charges than with a standard loan term
• Unpaid interest on original loan becomes part of your new loan’s principal balance, so you may be paying interest on a higher amount
• Qualifying payment count for PSLF starts over when you consolidate
• Can lead to loss of some benefits like rate discounts and loan cancellation

Option 2: Consecutive refinances

Refinancing your student loans is a way to lower your monthly payments or potentially cut thousands of dollars off your student loan bill. As mentioned earlier, the longest loan term for refinancing offered by private lenders is usually 20 years. But there’s no limit on the number of times you can refinance your loans.

• How it works: Let’s say a lender approves you for a refinanced loan with a 20-year term. You could make payments for 10 years and refinance it again to another 20-year term, giving you a 30-year loan term. You don’t have to wait 10 years to refinance, but that gives you an idea of how you can extend your loan payments beyond typical loan limits.
• How much it costs: If your credit history and credit score improve over time, you can refinance again and potentially receive lower interest rates each time you refinance. As your interest rate goes down, you could end up paying less in interest over the life of your loan.
• Eligibility requirements: There’s no difference between qualifying for multiple refinances and qualifying for your first refinance. However, qualifying one time doesn’t guarantee that you’ll be eligible each time. Private lenders consider factors like your credit score and history, income, and other financial information to determine eligibility. Credit score requirements vary depending on the lender, but typically require good to excellent credit to qualify.

Here are a few benefits and drawbacks to consecutive refinances:

Pros

• Extend your loan terms by several years
• Can lower monthly payments
• Continuously lower interest rates

Cons

• May end up paying more in interest charges overall
• Extra work and closing costs applying for a new loan each time
• No guarantee you’ll be approved for your desired loan term length

You can easily compare student loan refinance rates through Credible.

Federal student loan refinance: What to know

Refinancing federal student loans with a private student loan can save you money, especially if your credit’s good enough to secure a lower rate than offered with federal loans. It also allows you to extend your loan term beyond federal limits.

With the passing of the CARES Act in March 2020, people with federal student loans have had their interest rate set to zero. You won’t find a private student loan with 0% interest, so it probably doesn’t make sense to refinance federal student loans right now.

• How it works: When you refinance federal loans, a private lender pays off your old loans, and you end up with a new loan with a new rate (either fixed or variable) and new loan terms. Most lenders offer fixed-rate and variable-rate loans.
• How much it costs: Unlike other types of refinancing, there are generally no origination fees or prepayment penalties associated with student loan refinancing.
• Eligibility requirements: Credit requirements vary between different private lenders, but typically you’ll need a credit score between 670 and 700 to qualify for refinancing on your own. Lenders look at other factors, like your income, total debt, and credit history to determine eligibility. If your credit isn’t good enough, you may need the help of a cosigner with excellent credit to qualify. Keep in mind that a cosigner is on the hook financially if you can’t repay your loan. Some lenders offer cosigner release after you meet specific repayment criteria. There are other lender requirements you may need to meet to qualify for refinancing. Usually you need to be a U.S. citizen or permanent resident. Refinancing is also usually restricted to borrowers who attended a Title IV accredited college or university.

Pros

• Lower your interest rate
• Lower your monthly payments
• No extra fees or costs

Cons

• Will lose access to income-driven repayment plans
• Will lose access to loan forgiveness options
• May need a cosigner

Refinancing private student loans

Refinancing private student loans is another way to extend your loan term. This is a good option if your credit’s good enough to qualify for a lower interest rate, you want to switch your rate structure, or you want to switch lenders.

• How it works: Refinancing private student loans works the same way as refinancing other student loans. But unlike refinancing federal student loans, you won’t lose access to federal protections. Refinancing private loans allows you to choose between a fixed-rate or variable-rate loan.
• How much it costs: Refinancing private loans doesn’t cost anything other than the cost of the loan. There are no prepayment penalties, loan application fees, or origination fees charged by most private lenders.
• Eligibility requirements: Like any type of student loan refinancing, you’ll need to meet a lender’s specific credit and other financial and personal requirements to qualify. If you don’t qualify on your own, you may qualify with the help of a cosigner.

Pros

• May qualify for a lower rate with good credit
• A chance to change or extend your loan term

Cons

• May need a cosigner to qualify if your credit doesn’t meet lender requirements
• New lender may not be any better than your current one

Is refinancing into a longer term a good idea?

As with any financial decision, refinancing has advantages and disadvantages, so it’s important that you understand how refinancing to a longer repayment term could affect your long-term finances.

Pros of a 30-year refinance

• Lower monthly payments because the loan balance is spread out over more months
• Potentially lower interest rate if your credit’s good enough
• Can switch from a variable interest rate to a fixed rate, and vice versa

Cons of a 30-year refinance

• Could end up paying more interest in the long run, even with a lower interest rate, because you’re paying it for longer
• Lingering debt when you have other financial goals you want to achieve

How refinancing may affect credit scores

When you apply for student loan refinancing, lenders perform a hard credit pull. They do this to assess your creditworthiness or your risk level for lending. Hard credit pulls can temporarily lower your credit score.

Most private lenders allow you to check interest rates or prequalify for refinancing before applying for a loan. Checking your rates doesn’t affect your credit because it employs soft credit pulls.

When shopping around for the best refinancing rates, your best bet is to do this during a short period (two weeks to 45 days) instead of stretching it out over several months. Your credit is less impacted this way, because multiple inquiries will be treated as one this way.

In addition, when you refinance, you’ are closing out an account — this can cause your credit score to take a hit because you may be closing an account with a long history, and your credit history is part of what makes up your credit score.

Alternatives to a 30-year student loan refinance

Extending your student loan debt for three decades is a significant financial commitment. That kind of long-term debt will have a lasting impact on your credit and finances. Before you commit to a 30-year student loan refinance, here are some alternatives to consider:

Refinance for a shorter term

• Lenders typically reserve their best interest rates for people who choose shorter loan terms. Your monthly payments may increase by choosing a shorter term, but you’ll pay off your debt faster, freeing up funds each month you can apply toward other financial goals. And, because you’re paying interest for less time, you’ll likely save money on interest charges.
• You’ll need to meet the lender’s credit, income and other requirements to qualify for student loan refinancing. And if you can’t qualify on your own, you may need a creditworthy cosigner.

Student loan consolidation

• Federal student loan consolidation terms range from 10 to 30 years on Direct Consolidation Loans. When you consolidate your federal loans, you have the option to choose your loan servicer and repayment plan. Applying for a Direct Consolidation Loan is free and most federal loans are eligible for loan consolidation as long as they’re in repayment or in a grace period. In most cases, you need to graduate, leave school, or fall below half-time enrollment to qualify for student loan consolidation through the federal government.

Income-driven repayment plans

The federal government offers four income-driven repayment repayment plans for federal student loans:

• Revised Pay As You Earn Repayment Plan (REPAYE)
• Pay As You Earn Repayment Plan (PAYE)
• Income-Based Repayment Plan (IBR)
• Income-Contingent Repayment Plan (ICR)

The government bases income-driven repayment plan payments primarily on adjusted gross income, family size, and your federal student loan balance. Provided you qualify, and depending on your income, you could end up with a monthly payment as low as $0.

Deferment or forbearance

Deferment and forbearance are ways to temporarily pause your student loan payments if you have a hardship.

You’ll need to submit a request and get approval before your payments are paused. Several types of deferment and forbearance are available, depending on your specific circumstances. But there are rules for who can get deferment or forbearance, and often interest continues to accrue on the loan balance while payments are paused.

Refinancing is one way to deal with student loan debt. While a 30-year student loan refinance can help lower your monthly payments and give you more time to repay your student loans, it’s likely the longer term will also result in higher lifetime interest costs for your loan.