Student loan refinancing is when a private lender pays off your existing loans and gives you a new loan at today’s interest rates. Refinancing student loans can be helpful to borrowers in multiple ways.
First, you might be able to reduce your interest rate or repayment term, which reduces your overall cost. If lowering your monthly payment is your main goal, you might be able to extend your repayment term during refinancing, too.
But one of the downsides of student loan refinancing is that many banks require borrowers to be U.S. citizens to qualify. And that can make it more difficult to refinance student loans for non-U.S. citizens.
But international student loan refinancing isn’t impossible. In fact, you’d be surprised at the number of lenders that might be willing to work with you. In this guide, we’ll lay out the best options for refinancing for international students and how to get started.
Why student loan refinancing for international students is challenging
As mentioned above, many U.S. banks and lenders will only lend to U.S. citizens, leaving many international students and non-U.S. citizens out. Although this eligibility requirement may seem restrictive, there are two practical reasons that banks don’t conventionally lend to international student borrowers.
International students pose a higher risk of permanently leaving the U.S.
U.S. financial institutions are often leery of lending money to international student loan borrowers who have non-permanent visas. Examples of temporary visas that international student loan borrowers may hold include:
Borrowers with any of these visa types are considered a higher risk by lenders because there’s no guarantee that they’ll establish permanent residence in the United States. Should the borrower voluntarily choose (or be forced) to leave the U.S., enforcing payment is very difficult to impossible.
International students are more likely to have limited U.S. credit histories
Without Social Security numbers, it can be more difficult for non-U.S. citizens to get approved for credit cards or other lines of credit. For this reason, international students may have a thin credit file for lenders to evaluate.
Limited credit histories make it more difficult for anyone, regardless of citizenship or residency status, to get approved for refinancing at the best rates. Credit histories and scores still play a major role in the underwriting decisions for most lenders today.
It should be noted, however, that not all international students struggle in this area. There are a few credit card programs today that are specifically targeted at U.S. newcomers. And if you’ve already begun to make payments on your student loans, that positive credit history will appear on your credit report as well.
How to refinance student loans for non-U.S. citizens
Many international students who come to the U.S. for higher education on a visa are pursuing specialized professions as medical physicians or engineers, that require them to take out a lot of student debt. And many of these borrowers may plan to continue working in the United States after graduation.
Yet in addition to most foreign students being ineligible for federal student loan programs, many also struggle to meet U.S. refinancing requirements.
Getting financing can be a frustrating experience for international borrowers, especially when they’re entering high-paying fields that would normally qualify them for competitive rates. Yet despite these obstacles, there are ways to qualify for international student loan refinancing with U.S. lenders.
Here are two strong options:
1. Add a creditworthy U.S. cosigner to your application
Finding a creditworthy U.S. citizen to cosign your refinance loan may be the easiest way to qualify for a new loan at the best rates. Most international students don’t qualify for federal student loans. So if you’re a non-U.S. citizen with student loans that originated in the United States, they’re most likely from a private lender. And while a few lenders today will lend to international students without a cosigner, that’s still the exception rather than the norm.
Many international student borrowers may already have a U.S. cosigner on their loans. If that’s the case for you, you may want to ask your existing cosigner if they are willing to cosign a new refinancing loan with you.
There’s a strong possibility that your cosigner would be happy to cosign your refinance loan. After all, they’re already on the hook if you’re unable to repay your student loans. They might as well try to help you get a lower interest rate to relieve your financial burden and increase the likelihood that you’ll be able to keep your loans current.
2. Look for lenders with flexible borrower eligibility requirements
Each of these lenders will have their own set of eligibility requirements. But Commonbond, for example, says that the following visa types are eligible for a student loan refinance:
It’s less common to find lenders that accept borrowers who still have a student visa status, such as F-1 or OPT. However, Prodigy and Stilt are two lenders that have no restrictions on either of these visa types.
How to qualify for international student loan refinancing without a cosigner
To get approved for international student loan refinancing without a cosigner, make sure that your temporary visas aren’t set to expire soon. SoFi, for example, says that it will require you to have at least two years left until your status expirer, or you’ll need to show that you’ve filed for an extension or permanent residency.
Next, check your credit score. If your score is “poor” or “fair,” you may not be able to lower your interest rate by refinancing. But your chances of earning a better rate are higher if you have “good” to “excellent” credit.
Finally, many lenders want to see proof of strong income as they’ll want to know that you have the financial means to make your monthly payments. As a general rule, owe less federal debt than 1.5 times your annual income.
Is international student loan refinancing worth it?
Just because you can refinance your international student loans, doesn’t necessarily mean that you should. If your credit score doesn’t qualify you for better rates or terms and you can’t find a creditworthy cosigner, you may be better off sticking with your existing loans.
But since most international students don’t have federal student loans, they also don’t have to worry about losing out on federal benefits like income-driven repayment (IDR) or student loan forgiveness when refinancing. That makes the risk-versus-reward proposition of student loan refinancing much simpler.
If you’re able to qualify for a better loan by refinancing your international student loans with a lender like CommonBond, you probably should. To learn more about the pros and cons of refinancing, check out our full student loan refinancing guide.