What Does Refinancing a Student Loan Mean for International Students?

by Rebecca Safier | In All blogs, Loan Refinancing, Guides and Tools | 23 August 2023 | Updated on: September 3rd, 2024

You may have heard that refinancing your college loan as an international student might be a good idea, but you may not know what refinancing a student loan means and whether it’s right for you. Don’t worry. We’ll walk you through the fundamentals, including the benefits and downsides as well as eligibility criteria, so you can decide for yourself if refinancing is the way to go.

What is student loan refinancing?

In a nutshell, student loan refinancing means replacing your existing student loan with a new loan from a bank, online lender or other private lender. That lender will pay off your current student loan and issue a new one in its place. 

Depending on your credit, income and other factors, the new loan might have a better interest rate than what you have currently. Reducing your interest rate even a small amount can significantly reduce the amount of interest you pay over the life of your loan. 

Let’s say, for example, that you took a US$25,000 student loan at a 15% interest rate on a 10-year repayment term. If you can reduce that rate to 12%, you could decrease your monthly payments by US$45 and reduce the amount of interest you pay by US$5,359 over the 10-year period.  

What are the benefits of refinancing student loans? 

There are a number of reasons why you’d want to refinance your student loan. Refinancing: 

  • Reduces your interest rate. Lowering your interest rate can reduce the amount of interest you pay by hundreds or even thousands of dollars over the course of your loan term.
  • Lowers your monthly payment. A reduced interest rate can also make your monthly student loan payments more affordable.
  • Adjusts your repayment terms. Through refinancing, you can choose new repayment terms, which will impact your monthly payments and long-term interest costs. A shorter term can help you pay off your debt faster and reduce the total amount of your interest. Meanwhile, a longer term will make your student loan payments more affordable from month to month. Most lenders also let you prepay your student loans ahead of schedule without penalty.
  • Allows you to switch to a fixed interest rate. If you currently have a variable interest rate on your student loans, you may be able to switch to a fixed rate through refinancing. A variable rate can increase over time and make your loans more expensive. With a fixed rate, you’ll have a predictable monthly payment and won’t have to worry about your debt payments increasing over time.
  • Makes your loans eligible for employer assistance. Some employers offer student loan repayment assistance, but they may only help pay back loans that were issued in the U.S. If you refinance an international student loan with a U.S. lender, your new loan will likely be eligible for any student loan benefits your employer offers.  

Are there any downsides to refinancing student loans? 

Before applying to refinance your student loan, it’s worth considering any downsides to this process. Here are some potential cons of student loan refinancing: 

  • May be difficult to qualify. Many refinancing lenders require that you have good credit and a steady source of income to qualify for student loan refinancing. If you don’t have good credit, you may need to apply with a creditworthy cosigner.
  • More stringent requirements for international students. The eligibility criteria for international students can be especially tough to meet, since some lenders require that they apply with a cosigner who is a U.S. citizen or permanent resident. That said, some lenders, like MPOWER Financing, offer no-cosigner loans to international students
  • Potential loss of student loan benefits. When you refinance your loans, you say goodbye to your existing loan. If your current lender offers any benefits that you want to maintain, it may not be a good idea to trade that loan in for a new one from a different lender (who may or may not offer the same benefits). 

Student loan refinancing eligibility: how to qualify 

Every lender sets its own student loan refinancing eligibility requirements, but here are some common criteria you’ll need to meet: 

  • Good credit. Most refinancing providers want to see a credit score of 670 or higher to qualify for student loan refinancing. Having good credit reassures the lender that you are likely to pay your refinanced student loan back on time.
  • Source of income. Lenders also want to see that you have a steady income or offer of employment as reassurance that you’ll be able to afford loan payments. If you don’t have good credit or a stable income, you may still be able to qualify by applying with a cosigner who will be equally responsible for the loan.
  • Associate’s degree or higher. Some lenders want to see that you graduated with the degree for which you have borrowed the funds, though others will refinance student loans even if you didn’t graduate.
  • U.S. citizenship or permanent residency. Many U.S. lenders also review your citizenship or residence status, though some will refinance student loans for international students with a cosigner. 

Can you refinance a school loan without a cosigner?

It can be difficult to meet the requirements for student loan refinancing if you don’t have good credit or a steady source of income. Many U.S. lenders also require international students to apply with a cosigner who is a U.S. citizen or permanent resident. 

However, not everyone has a cosigner who’s willing to share student loan debt. Once you’ve completed your undergraduate or graduate degree, you may feel ready to refinance student loans and manage your finances on your own. 

MPOWER Financing understands that not all international students have a U.S. credit history or a cosigner. That’s why MPOWER offers student loan refinancing to international students with no cosigner or collateral required. 

For more on the benefits of refinancing, check out our guide on the top five reasons to refinance international student loans

Author: View all post by Rebecca Safier

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