If you were an international student in law school, you have likely had some financial experiences that were different from US citizens in law school. You have had to deal with visas for school and potentially jobs, you might have had issues with renting off-campus, and you faced limitations in getting international student loans, such as not being eligible for federal student loans. So perhaps unsurprisingly, refinancing your loans is complicated as well. The good news is that just because refinancing is complicated, does not mean it is impossible. This article walks you through how to refinance student loans.
International students have limited refinancing options
The primary issue with refinancing student loans for non-citizens is that many financial institutions in the US do not loan to students who are not US citizens, so they will not refinance non-US citizens’ loans as well. You likely dealt with these limitations when you took out loans. You had to get private student loans because federal student loans are not available to non-citizens. Even private student loans are limited, since not all institutions will give out loans to non-citizens.
Financial institutions are reluctant for a few reasons. First, someone who is not a citizen of the US is more likely to leave, either by choice or because they lose their visa. If this happens, it is difficult for lenders to bring forbearance on loan payments. Additionally, often international students do not have a robust U.S. credit history because it can be difficult to build up credit without a social security number. So when a lender sees someone with a lack of credit history, they do not know if they are someone safe to lend to.
What conditions are at play in international student loan refinancing?
There are a few things you can do to find a lender who is willing to refinance your loans. First, you can get a cosigner for your refinancing. A lot of international students have already used a cosigner for their initial loan. If that was the case for you, then it is worth checking whether your initial cosigner will cosign your refinancing as well. It is generally in your cosigners’ interest, since refinancing will generally save you money or at least lower your monthly payments; this will decrease your chance of defaulting and landing them in trouble. If you did not find a cosigner for your initial loans, it might be worth speaking with your school or other international students to see if they have ideas on finding a cosigner.
If you do not want to use a cosigner, then there are private lenders who are more inclined to lend to non-citizens. Some of the most likely refinancing lenders are the online ones because they often specialize in quicker and more seamless processes, so they do not have a bunch of qualifiers that people have to go through. Additionally, there are some refinancing lenders who focus on lending to non-US citizens.
One hurdle you might encounter is that even if you find a lender who will refinance for non-citizens, there is no guarantee that you will qualify. First, you might not qualify because you do not have the right visa. There are around 10 different visa holders, but a lender might only allow a few types of visas to qualify. If you are a permanent resident, you will typically have a much better chance of being able to refinance.
Even if the lender accepts your visa, there are a few factors that will impact whether they allow you to refinance. First, if your visa is close to expiring, that may disqualify you. You should check the particular length requirement for each lender. If you do not meet the length requirement, you still may be able to qualify if you can prove that you have put in for your visa to be extended or that you are seeking to become a permanent resident.
Your creditworthiness also helps the lender decide whether they want to lend to you. Lenders will run a credit check. Many will refuse to lend to you if you have a “poor” or “fair” credit score. So you want to have a minimum of a credit score that falls under “good”, but preferably “very good” or “excellent”. If you have not hit those levels yet, you cannot change them automatically. But if you are still a few years from when you plan to refinance, you can try to find a credit card that will let non-US citizens, particularly those new to the US, enroll. Using a credit card and paying off the bills right away help you build good credit. Also if you are looking to live off-campus and cannot qualify for an apartment, see if you can find a roommate who has the background to allow you to qualify together for the apartment. If you are on the lease and pay rent, that builds credit as well.
The basics of refinancing
What you should consider
Clearly there is a lot more to navigate and think about if you are refinancing as a non-US citizen. But there are some factors anyone refinancing should consider. First, the national financial environment can impact whether it is the best time to refinance. If the federal reserve has cut interest rates since you started law school, there is a good chance that you will get a repayment plan from refinancing that is more favorable.
Second, your own financial situation is a factor in terms of what loan options you will pursue. If you are having issues making monthly loan payments on your current loan, then you might want to see if you can refinance your international student loans for a lower monthly payment. If interest rates are low enough, sometimes you can get a lower monthly payment on the same repayment plan. For example, if your monthly payment was $2,000 a month for a loan term of 10 years, your new loan may have you pay $1,500 a month for a repayment term of 10 years. Alternatively, you may be able to pay your normal monthly payment but for a shorter repayment term. So a $2,000 a month repayment plan for 10 years, can become a loan term where you pay $2,000 a month for seven years and six months.
Additionally, if you get a job at a Biglaw firm where you are making a six-figure salary, lenders may be willing to give you a better repayment plan than when you entered law school. If you want to aggressively pay off your international student loans ahead of schedule, refinancing can help you save on interest. Although most lenders will not charge you a penalty for early repayment, the higher the rate, the higher the interest you are getting charged until your loan is paid off. So if you are planning on paying your loans ahead of schedule, you might as well take the lower interest rate.
You just want to be sure to not get too aggressive of a repayment plan, where you have no breathing room. If you refinance your ten-year loan term to a five-year one, it may seem doable at the time, but unforeseen factors in your life could increase your cost of living down the line. If you have no savings, it could suddenly become difficult to make those monthly payments.
If you are enrolled in a public interest repayment plan at your school, you should ensure that refinancing will not impact that at all. Some public interest programs demand that you do not change the length of time for repayment because they do not want to contribute more to a higher interest rate or monthly payment.
The steps to refinancing
Generally the application process of refinancing is the same regardless of whether someone is a citizen. First, you will research potential refinancing providers. You can reach out to the lender for your initial loan and see if they offer refinancing. You can also reach out to their competitors and see if they will offer you a better deal. You should search online for other lenders. Rather than just clicking on one that pops up in your search results, it is best to go through a reputable financial site that has a list of solid lenders that they recommend.
Once you have a list of lenders, you should first look at their sites for any information that might preclude your eligibility out of the gate. There might be a FAQ section or a disclaimer page with this information. If you are a non-US citizen, the site might say that they only lend to citizens. If you reach out to financial institutions, you can ask them about any concerns you have about qualifying.
From here, you will likely fill out an online application. They will usually ask you the following:
- Your overall debt, this will include any other student loan debt, such as undergrad, and any other non-law school debt that you incurred, such as from personal loans.
- The loan balance on your law school loans. If you have multiple loans, you will list them separately, but typically the process will result in the consolidation of all of your loans.
- What you pay in monthly rent or mortgage.
- Where you live.
- Where you went to college and law school.
- Your current lender and loan servicer.
- Any assets you have, such as property or money in your bank account.
- Whether you are a US citizen.
Usually after submitting all of this, you will get an estimate on the refinancing available to you. If you do not qualify at all, or need a cosigner to qualify, they will typically tell you that at this point.
You will then have to submit the following documentation:
- Something that proves your residence, such as a bill mailed to you.
- A deposit statement or another document that demonstrates your income and that you are employed.
- If you are claiming any supplementary income, you need to show how much you make. You will typically need to have a two year track record of that income.
- Documents that show how much you owe for your student loans.
- Proof of your assets.
After all of this is submitted, they will usually give you the final offer through a formal agreement. Usually it will be the same as the initial offer, but it can be different if your submitted documents show some sort of discrepancy. For example, maybe you accidentally entered a lower total loan amount than you actually owe.
Something to keep in mind is you will likely be offered a fixed interest rate that stays the same for the life of the loan. A variable interest rate (also known as a variable APR) will fluctuate with the market during the loan term. A variable APR will often result in a lower interest rate, but it is riskier because it can fluctuate greatly, especially over 10 years.
Thinking about signing up for autopay on the monthly payments. Doing so will typically result in a rate discount. It will prevent you from forgetting to make the payments, which would lead to forbearance issues. The only real detriment to autopay is that if you are shifting money around your accounts, the autopay can cause you to overdraft, but this is generally avoidable through planning on your end.
You will then sign the agreement, usually digitally. Before signing, you should consider whether the ultimate deal makes sense for your financial situation. Many people get excited about student refinancing because it can be very beneficial to borrowers. However, sometimes factors outside of your control will preclude you from meeting the eligibility requirements for a good deal, this can particularly be true for non-US citizens. Often you might not get as good of a deal because of your immigration status, and while that is unfortunate, if you exhaust all of your options to get a better deal, then you should opt to move on.
If you do refinance, you should see when the disbursement will occur in terms of your old loan being paid off. Until your new lender pays off the loan, you should continue to make payments.
What else should you know?
Given that refinancing is handling potentially hundreds of thousands dollars, you should review a more comprehensive guide about student loan refinancing. If you are refinancing your loans multiple times, you should consider the potential downsides of it. Finally, given that refinancing is typically done to help make your loans more manageable, you should look into additional ways to pay off your loans efficiently.
Todd Carney is a graduate of Harvard Law School. He holds a Bachelor’s degree in Political Science and Public Communications. He has also worked in digital media in New York City and Washington D.C. The views in his pieces are his alone and do not reflect the views of his employer.