Want to refinance your student loans? Here's what credit score you might need to get a good rate

ByJames Dennin

If you're having trouble with your student loans, refinancing might not be the silver bullet you want it to be.

It's certainly true that a lot of people who refinance can save a ton of money — refinancing companies often advertise $17,000 to $20,000 in savings.

But there's a caveat to those big numbers, says Nate Matherson, founder of student loan refinancing marketplace LendEDU, which just published a study looking at the finances of more than 23,000 applicants.

"When they calculate those savings, they exclude people with the long-term plans," Matherson said. "So if you’re only looking at the five year terms, you’re saving a lot more money."


There's a lot of cherry-picking in the data that makes the savings look a little sweeter than they might actually be. Those enviable people able to pay off their loans in 5 years? The truth is they've made paying down their debt a top top priority — and their monthly payments are usually really high. 

Matherson also added that these refinancers are often using riskier variable interest rates as opposed to fixed interest rates — which, while higher to start with, have the benefit of not changing over time.

In the current environment of rising interest rates, the longer you plan on taking to pay back your loans, the bigger the risk a variable rate is. 

Mel Evans/AP

Also: If you're paying off your student debt in five years, you're also probably making a fair bit of money.

Matherson said that the typical incomes of successful refinancers start between $60,000 and $70,000. And LendEDU's study revealed these refinancers tend to have high credit scores, too: 748 on average. 

An important gut check: The average 19-year-old makes half that income, and the average credit score in the U.S. is around 670

Now, before you get too jealous, take some solace in the fact that these borrowers likely have a lot more debt than you do: $53,892 on average. Matherson said many of his borrowers are dealing with as much as $200,000 in student loans.  


That's a lot more than the typical graduate debt load, around $37,000

In any case, Matherson says, you should not necessarily be deterred from trying to refinance — even if you don't fit the profile described in the study — as long as you keep your expectations in check. 

Only 43% of applicants get denied for student loan refinancing, LendEDU's survey found, and while the average credit score was pretty high, they were able to identify scores as low as 560 among those who get approved. 

Plus, even if your stats aren't ideal, there are a few things you can do to improve your odds, Matherson said. Of successfully refinanced loans, 32% included co-signers on the application.

Those are typically parents and grandparents who agree to put their names on the line as well.

Not only were applicants with co-signers able to qualify for refinancing with lower credit scores and incomes, they also saved some extra money, around 0.15% in interest each month.

Of course, there are major risks for the co-signer — if you start missing payments, mom and dad will feel the pain on their credit reports too.

The overall payoff of refinancing varies from person to person, but if you're an average borrower with the average amount of debt, Matherson said you'd probably be able to save about $5,000 over the course of 10 years. 

$500 a year is no fortune, but over the years it really adds up. And refinancing in a way that helps you pay off the loan faster?

That's worth a lot: like the satisfaction of demolishing debt so you can move on with your life — and finally start on that a college fund for your own kids.

Sign up for The Payoff — your weekly crash course on how to live your best financial life. Additionally, for all your burning money questions, check out Mic’s creditsavings, careerinvesting and health care hubs for more information — that pays off.