International Student Loan Refinancing: Your Questions Answered
For international students, repaying their student loans is an inevitable step in their educational journey. One repayment option that might lessen the financial burden is refinancing.
Refinancing a student loan may provide students access to competitive interest rates, terms or even a better service experience. As an international student, student loan refinancing options are more limited, but they’re not entirely out of reach.
How refinancing student loans works
When refinancing a student loan, the refinancing lender pays your original lender the full unpaid balance on the loan, and a new refinance student loan is created for the total amount that was paid on your behalf, plus any applicable fees.
The new loan has completely new features, like a fixed or variable interest rate, and repayment period. You’ll then make monthly payments to the refinance lender to pay down the refinance loan.
Can international students apply for student loan refinancing?
U.S. citizenship is typically a minimum requirement for many U.S. banks and financial institutions that refinance student loans. U.S. institutions that have no experience in servicing and collecting upon international loans will generally limit their eligibility requirements to U.S. permanent residents and citizens.
There are some lenders, such as MPOWER Financing, that finance international education loans.
Refinancing lenders often consider other eligibility factors when they examine a refinance student loan application, including:
- U.S. residency for some period of time (i.e., two years).
- U.S. credit history.
- Employment history.
- Stable income.
- Debt-to-income ratio.
As an international student, satisfying all of these points might be challenging, though not impossible.
What to do if you’re not eligible for refinancing student loans
If you don’t meet general eligibility requirements for refinancing education loans today, you still have a few options.
Build your U.S. credit profile
International students who borrowed a private student loan from a U.S. lender likely already have the beginnings of a credit history in the U.S. However, if this isn’t your situation, you can slowly build a U.S. credit profile to be eligible later for international student loan refinancing.
Ask a trusted family member if they’re willing to add you as an authorized user on their credit card. Some card issuers report repayment and activity data for all users on a credit card account to the major credit bureaus. As an authorized user on the card, positive repayment activity and responsible usage on the card account can help boost your credit.
Find a creditworthy cosigner
A cosigner is an individual who agrees to take legal financial responsibility for the loan if you fail to make timely payments. If you don’t qualify on your own, some lenders allow a cosigner with strong credit as a co-borrower on a refinancing loan.
The minimum requirements necessary to be considered for cosigning a loan include a minimum credit score of 670. However, credit score requirements for cosigners vary among lenders. Additionally, a cosigner must meet the lender’s other requirements, such as income and debt-to-income ratio.
Since cosigning a loan is a major responsibility and favor, cosigners typically are a spouse, parent, grandparent, close relative or trusted and long-term friend.
Explore lenders offering flexibility
Meeting the eligibility requirements for a student loan refinance has its fair share of barriers. Fortunately some lenders, like MPOWER Financing, offer student loan refinancing specifically for international students.
Flexible requirements could include not requiring a cosigner or collateral to secure the loan, among other advantages.
What to look for when refinancing a student loan
Private refinance lenders have different underwriting requirements and repayment rules. Below are a few features to examine before refinancing student loans as an international student.
- Eligibility criteria. As mentioned above, the base eligibility requirements for refinancing ranges among lenders. For example, before submitting an application, make sure you confirm that you meet the lender’s requirements for U.S. credit (if noted), income and employment history.
- Cosigner requirements. If you’re refinancing education loans with a cosigner, be clear about the lender’s requirement for cosigners and confirm your chosen cosigner meets this criteria. This includes credit history, income and the lender’s rules about cosigner release, if available.
- Rates and fees. Lenders set their own lending requirements, interest rates and fee structure. As a refinancing applicant, you’re responsible for comparing interest rate offers and fees – like origination or application fees – across multiple lenders. Doing your due diligence to shop around for the most competitive rate helps you save money in the long-run on interest charges. The annual percentage rate (APR), for instance, creates an apples-to-apples comparison of a loan’s interest and fees by annualizing the cost of that loan.
- Repayment terms. The longer your repayment term, the lower your monthly payment amount will be. However, a longer term also means you’ll pay more interest over the life of the loan. Ensure that your potential student refinancing lender offers a repayment term that matches your repayment goals.
Finding the right refinancing education loan
If you qualify, international student loan refinancing can offer many perks – from securing a potentially lower interest rate to simplifying your repayment experience. However, as an international student, you might face challenges qualifying for student loan refinancing.
If you believe refinancing your education loans is the right move for you, there are a handful of ways to move forward starting with the options above. When you’re ready to apply, shop around to find a lender that can help you best reach your student loan repayment goals.
