How Soon Can I Refinance My Student Loans?

One of the biggest debates over the current state of student loans is the ability of borrowers to refinance their loans at lower interest rates with a new (or possibly current) lender. Right now, there are few options for borrowers who want to consolidate their loans into one monthly payment and try to save on interest. There are also a lot of things to consider when deciding if one of the few student loan refinancing options is right for you.

For starters, if you refinance federal student loans using a private lender, you lose access to things like federal student loan forgiveness programs, income-based repayment and default rehabilitation. Also, you may want to make sure your credit is in good standing before you apply for new financing. Each lender has different underwriting criteria, but your credit score will be part of the loan approval process and likely affect whether you can, in fact, secure a lower interest rate on your new loan. (You can get two free credit scores every 30 days on Credit.com to see where you stand.)

When Can You Refinance?

Once you’ve decided whether refinancing is a good option for you, it’s likely to your advantage to refinance as soon as possible, because the longer the wait, the more interest you’ll accrue at your higher, original rate. You may even be able to refinance your student loans before you’re required to repay them. Many loans have a grace period, during which your loan may or may not accrue interest (it depends on the loan program), but you don’t yet have to make payments on them. For the most common kind of loan (Federal Stafford Loans), that grace period ends six months after graduation, which is right about now for the class of 2015. If you refinance before your grace period is up, the new lender might honor your grace period and allow your loan to accrue interest at the new, lower rate — that’s something to research when you’re considering refinancing.

Two of the biggest names in student loan refinancing, SoFi and CommonBond, honor grace periods. SoFi allows qualified borrowers to refinance as soon as they’ve graduated and have a job, while CommonBond’s loan qualifications vary based on your degree. For example, if you’ve earned a bachelor’s degree, you’re required to be two years out of school before refinancing, but if you’re a law school grad, you need to have graduated and passed the bar exam, according to Phil DeGisi, vice president of marketing at CommonBond.

While student loan refinancing has become more common, you first need to figure out if you qualify by meeting the minimum loan amount (It’s $3,500 at CommonBond and $10,000 at SoFi.), the income requirements to support your loan payments and any other criteria required by the lender. You also need to determine if the loan is your smartest option. Giving up federal student loan protections can be risky, but it could be worth the savings (Some lenders, like CommonBond and SoFi, may have programs in place to help borrowers who lose their jobs), especially if you have a lot of debt.