What does refinancing a student loan mean for international students?
Did you invest in an international education with the goal of greater financial security, only to find yourself struggling to keep up with monthly payments on your student loan? Do you wish you could release your parents from their obligation as your cosigner? Are you eager to start building credit in the U.S.?
If you answered yes to any of these questions, you may want to consider refinancing your student loans. But what does refinancing your student loans mean, and how can you know whether it’s the right decision for you?
In this blog, we’ll walk you through everything you need to know about refinancing your student loans as an international student. We’ll discuss the benefits, potential downsides and eligibility criteria – and how refinancing with MPOWER can help you gain independence and lay the groundwork for future financial stability in the U.S.
What is student loan refinancing?
In a nutshell, student loan refinancing means replacing your existing student loan with a new loan. Your new lender pays off your old loan and gives you a new one in its place, with different loan terms that better suit your unique financial needs. Loan terms include factors like interest rate, repayment period and repayment plan.
For instance, your new loan may offer a lower interest rate, which can lower your monthly payments and greatly reduce the overall amount you spend on interest over the life of your loan. Or, you may choose a new loan with a shorter repayment period so you can repay your debt faster.
Every lender will offer something different, but the ultimate goal when refinancing is to replace an old loan with a new loan that helps you feel more financially independent, flexible and secure.
What are the benefits of refinancing student loans?
There are several ways to benefit from refinancing your student loans – especially if your original loan was borrowed from a lender in your home country. Refinancing with a U.S. lender can make loan repayments simpler and more affordable while building your financial foundation in the U.S.
Here are some reasons to consider refinancing your international student loans:
- Reduces your interest rate. Lowering your interest rate even a small amount can mean major cost savings over time. Let’s say, for example, that you took out a US$25,000 student loan at a 15% interest rate on a 10-year repayment term. If you lowered that interest rate to 12%, you could reduce the amount of interest you pay by US$5,359 over the 10-year period.
Not all refinancing lenders offer low interest rates, but when you refinance your international student loans with MPOWER, you can access competitive, fixed interest rates as low as 9.99% (11.52% APR).
- Lowers your monthly payment. A reduced interest rate doesn’t just reduce the overall cost of your loan – it can also lower your monthly student loan payments, improving cash flow and making it easier to manage steep U.S. living expenses.
- Allows you to release your cosigner and collateral. Did your parents cosign your loan? Are there family assets tied up in your loan as collateral? Do you wish you could release your cosigner and collateral to protect your family’s finances and gain independence?
- Helps you avoid currency transfer hassles. When you refinance with a U.S. lender, you no longer have to deal with the frustration of converting USD to your home currency every month for equated monthly installment (EMI) payments.
- 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, inflation-proof monthly payment and won’t have to worry about your debt payments increasing over time.
- Makes your loans eligible for employer assistance. In the U.S., some employers will help you pay off your student loans. In fact, some employers can contribute up to US$5,250 to your student loan payments every year without being taxed. However, in order to qualify for employer assistance, your loan has to be issued from a U.S. lender. By refinancing with a U.S. lender like MPOWER, you can become eligible for employer assistance, leading to major savings and helping you get out of debt faster.
Not all U.S. employers offer student loan assistance. Be sure to check with your employer first.
- Builds your credit history in the U.S. If you’re currently repaying a loan from your home country, your monthly payments aren’t helping you build credit in the U.S. When you refinance with a U.S. lender, your timely monthly loan repayments help you build a U.S. credit history and improve your U.S. credit score. A good credit score can help you access home or business loans, rent an apartment and access job opportunities.
- Good credit is crucial if you want to settle, grow your career and obtain financial security in the U.S.
When you refinance your loan, you may have the option to release your cosigner and collateral. Not every lender will allow you to qualify independently, but lenders like MPOWER allow you to release your cosigner and collateral and assume responsibility for your international student loans on your own.
Student loan refinancing eligibility: How to qualify
Once you’ve decided that refinancing is the right option for you, you need to make sure you qualify for refinancing. 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 good credit score, which reassures the lender that you’re 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. This reassures lenders that you’ll be able to afford loan payments.
- Associate’s degree or higher. Some lenders want to see that you graduated with the degree for which you have borrowed the funds. However, 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. For instance, when you refinance with MPOWER, you must have a valid H1-B, F-1 visa while on OPT or be a DACA recipient, U.S. citizen, refugee or asylum seeker.
Can you release your cosigner when you refinance your international student loans?
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 yet. If you don’t meet these requirements on your own, many U.S. lenders will require you to refinance with a cosigner. Often, they will require a cosigner who is a U.S. citizen or permanent resident.
This can be frustrating. You may not know anybody in the U.S. who would be willing to share your student loan debt. More importantly, you may be eager to release the family members who are acting as cosigners on your current student loans, or the family assets that are tied up as collateral.
MPOWER understands that you’ve worked hard to get here, and we know you feel ready to manage your finances on your own. That’s why you’re able to release your cosigner and collateral when you refinance your international student loans with MPOWER.
Refinancing your international student loans with MPOWER
If your current international student loan is holding you back, it’s time to refinance which can help you reduce the overall cost of your loan and gain financial flexibility. Plus, refinancing with a U.S. lender like MPOWER Financing allows you to build credit in the U.S., so you can feel confident settling into your life and career in the U.S.
MPOWER Financing is the only lender currently offering to refinance Indian education loans to students or graduates living in the U.S., which allows you to release your cosigner and collateral when you refinance, giving your family the financial security they deserve and achieving the independence you desire.
See if you qualify for MPOWER’s refinancing options, and see what MPOWER can do for you.
