Student loans typically have a standard repayment term of 10 years. Although a 30-year student loan refinance would be one way to shrink your monthly payments and lower your interest rate, stretching out a loan over a long time is likely to increase the overall interest you’ll pay.
Still, the added interest costs might be worth it for a little extra wiggle room in your budget. Before you decide, here’s everything you need to know about 30-year student loan refinancing:
Student loan refinancing creates a new loan. The funds from the refinance pay off the old loan (or loans), and then you make payments according to the terms of the refinance.
With a student loan refinance, you can change the term length and, potentially, qualify for a better interest rate. Borrowers who refinance student loans to a lower interest rate can save money on interest and might be able to lower their payments, too.
There are two ways to stretch your student loan repayment term to 30 years: a Direct Consolidation Loan or consecutive refinancing.
When you consolidate your student loans with a Direct Consolidation Loan from the federal government, you combine all of your federal education debt into one single loan. This new loan gives you one monthly payment, with an interest rate that is the average of your existing student loan rates, rounded up to the nearest one-eighth of 1%. When you consolidate, you can choose a new loan term from 10 years to up to 30 years.
However, although most federal student loans are eligible, Direct Consolidation is not applicable for private student loans.
Most student loan refinance companies offer a maximum loan term of 20 years. However, you can get a 30-year student loan refinance by refinancing at the 10-year mark of your repayment. The 10 years of the first loan and the 20 years of the refinance together make 30 years of repayment.
Refinancing has advantages and disadvantages, so it’s important to be sure you understand how this decision could affect your long-term finances.
Related: Learn more about refinancing your student loans on Credible.com
To refinance private student loans, you’ll take out a new loan, with a new interest rate and term. This new loan will pay off your old loans.
You’ll have the choice between a variable interest rate, which will fluctuate according to market forces, and a fixed rate, which stays the same. Terms are typically 5, 10, 15, or 20 years long. For example, you might choose to refinance $15,000 in loans into a 10-year, fixed-rate loan at 6% interest.
To qualify for a student loan refinance, you generally need a good credit score. FICO scores between 670 and 739 are considered “good.” If you have fair or poor credit, you might need to find a cosigner to get the loan or secure better rates.
You’ll also need to show you have employment, steady income (there may be a minimum yearly salary requirement), and an acceptable debt-to-income (DTI) ratio. If your debt is more than 50% of your income, you’ll have a hard time finding a lender to refinance your student loans. Some lenders will also require you to have received your degree.
Pros: Lower monthly payments, multiple loan options, single monthly payments
Cons: May require good credit, low DTI, and/or a cosigner
Yes, you can refinance federal student loans with a private lender. But you’ll lose federal benefits, such as access to deferment, forbearance, and forgiveness options, so it’s important to consider your options.
You have plenty of options when refinancing your federal student loans with a private lender. You’ll be able to choose between fixed and variable rates, and loan terms between five and 20 years. You might be able to refinance as little as $5,000 or $10,000 in loans, or as much as $200,000 or more. In December 2022, lenders charged interest rates that ranged from about 3% to 11%, depending on your financial situation.
Pros: May lower monthly payments, variety of loan options
Cons: Lose access to federal benefits, might not save money
Refinancing your existing loans to a 30-year term has advantages and disadvantages.
If you can lower your monthly payments through a refinance, you might make more room in your budget for the essentials, or to save up for a house. You’ll also be able to combine multiple loan servicers and monthly payments into just one.
If your credit score has improved since you first took out the loans, that will make it easier to qualify for a lower rate. A lower interest rate might reduce your loan costs, even with a longer loan period.
But whenever you increase the length of a loan term, you expand the time that you’ll be charged interest. While you might secure a lower rate, it’ll have to be much lower to make up for the additional time you’ll be paying on the debt.
| For example: If you refinance your standard repayment of $60,000 with a 6.8% interest rate and a $690 monthly payment at a new loan term of 30 years, you could potentially lower your interest rate to 4.25% with a new monthly payment of $295. While this might save you $395 monthly, in the long run, your interest cost will increase to about $23,401, making the total cost of the new loan $106,259 and you would pay off the debt by 2053. So overall, you’ll save money in the short term, but the interest on your loan will increase, meaning you won’t save money over time. |
You’ll also be locked into this debt for 30 years, unless you can pay it down early. Such a long time frame can block your other financial goals. That’s because a 30-year refinance will increase your DTI ratio until you pay it off, making it tougher to get a mortgage or other loans.
To refinance a student loan, you’ll need to meet the lender’s eligibility requirements when you apply. That usually means good credit (670 or higher), a steady job, stable income, and a low DTI ratio.
The exact requirements will vary depending on the lender, and not all of them disclose their minimum credit score, DTI, or salary requirements. Check with the lenders you’re interested in to make sure your situation qualifies. If you’re unable to qualify due to poor credit, you may be able to apply with a cosigner.
A 30-year student loan refinance is not for everyone, and it’s not your only option. If you still want to make changes to your current student loan situation, you have a few choices.
If you have federal student loans, you can consolidate them for free through the Federal Student Aid website. Consolidating student loans this way can give you one monthly payment and a maximum 30-year term.
If you meet the eligibility requirements, you might be able to defer your student loan payments until your finances improve. With student loan forbearance, you can temporarily stop your payments, or make smaller payments for a time. But you’re still responsible for any interest that accrues (except for Direct Subsidized Loans, which are interest-free during certain repayment pauses tk tkt tk). Be aware that capitalized interest is tacked onto your loan balance.
Income-driven repayment (IDR) plans tie your monthly payment to your income and your family size. Typically, plans will be 10% to 20% of your discretionary income, with repayment periods of 20 to 25 years. They’re only for federal student loans, and not all loans will qualify.
IDR plans include:
Though not an IDR plan by type, an extended repayment plan or an extended graduated repayment plan give you the option to repay over a 25-year period.
If you are having trouble making your payments, contact your lender or servicer right away. They can provide you with repayment options. A private student loan refinance might be the solution you need to lower your monthly payment, simplify your finances, and work toward getting out of debt.
Refinancing at a 10- or 15–year term, for example, can still shrink your monthly payments without locking you into the full 30 years.
Related: Learn more about refinancing your student loans on Credible.com