Refinancing student loans for working professionals in the USA – benefits, eligibility, important documents

Did you know?

In 2022-23, public-sector banks alone disbursed education loans of INR 17,668 crores in India. In the USA, the number was $1.773 trillion in 2024.

Sadly, many students start looking for education loans just a few weeks before they need to enroll in a foreign university. The problem with this is that it often leads to loans with unfavorable terms—like high interest rates or steep monthly payments. 

This can end up putting a big strain on their finances and make repayments a real struggle later on.

The corrective opportunity comes when students have completed their higher education program and secured a job. This is when they can refinance their education loan. 

Refinancing a student loan young graduates who have become working professionals switch to a lender offering better terms, like lower interest rates or longer repayment periods. It is a simple process that can take a huge weight off your shoulders and make managing your loan a lot easier.

But how exactly does refinancing student loans in the USA work? Let’s break it down and see how it can help you handle your finances better.

What is student loan refinancing and how does it work?

Refinancing an education loan involves transferring or switching your loan from one lender to another. 

Essentially, you take a new loan with better terms from a different lender to pay off your existing loan. This is usually done when your current loan terms are unfavorable and make repayment challenging. 

The new lender typically offers better loan terms, such as lower interest rates, reduced monthly payments, or more flexible repayment options.

If done correctly, refinancing can help you save significantly on interest. For instance, some lenders in India charge interest rates as high as 12–14% on education loans. A student locked into this loan product has to pay a hefty interest amount over time. However, by refinancing in the USA, the student could secure rates as low as 4.9–5%. This can lead to substantial savings.

While refinancing student loans has many advantages, it also comes with potential drawbacks. For example, you might have to pay prepayment or foreclosure fees to your previous lender to repay the full loan amount before the agreed duration.

However, the benefits of refinancing student loans often outweigh the drawbacks. By switching to a more favorable loan, you can make repayment more manageable and ease the financial stress of education-related debt. Learn more about the benefits of refinancing below.

Also Read: Top Education Loan Providers in India [Best Banks & NBFCs]

Benefits of refinancing education loans for working professionals

Refinancing your education loan from India to the USA has many advantages. Let’s discuss:

Lower Rates of Interest or Better Repayment Terms

The biggest benefit of refinancing your student loan is that you will lower your interest rates or get better repayment options.

If you’re currently on a repayment plan with a private lender in India, chances are you’re paying an interest of 12-14% or higher on your loan, depending on when you got your loan sanctioned. 

However, if you refinance your loan in the USA with, let’s say–SoFi, you can lower your interest rates to 4.49% – 9%. Similarly, with MPOWER, you can bring your rate of interest to as low as 9.99%. With a good credit score between 580 and 669 or higher, you can further negotiate to get a better deal. 

Additionally, refinancing allows you to change your loan terms. This can help you by:

• lowering your monthly payments or
• increasing the duration of your repayment.

Lower Management Fees

Once you become a working professional in the USA, you will like to repay your loan with the Indian bank, from the money you earn in USD. 

This can be cumbersome. 

With every payment you make, you have to deal with:

• International banking fees
• Fluctuating currency exchange rates
• Transfer fees

This, on top of your already high interest rates, adds to your financial burden. 

However, if you refinance with a US-based lender, you can simplify your repayment process. No more dealing with fluctuating currency exchange rates or hefty fees for transferring money to India. With a lender in the USA, you can also access additional benefits, which we are going to discuss below. 

Assistance in Loan Repayment

Some organizations in the USA offer student loan benefits to their employees. These companies contribute up to $5,250 per annum to help employees repay their student loan debts. 

However, student loans with international lenders – in your case, an Indian lender – might not qualify for such assistance. So, when you refinance your education loan with a US-based lender, you become eligible for these benefits.

As a result of these employer-sponsored assistance programs, you can pay your debt faster and save money in the long run. 

Releasing the Co-Signer or Collateral

When you took your education loan in India as a student, it likely required a co-borrower or co-applicant to support your application. Now that you’re employed or about to start working in the USA with a steady income, you may want to release your co-borrower from that responsibility. Refinancing your loan with a US-based lender allows you to do just that.

If you’re not yet employed, it’s a different scenario, as most refinancing options still require proof of a steady income in the USA. Beyond releasing your co-borrower, refinancing can also free up any assets you pledged as collateral for your original loan. This further reduces your financial obligations.

Building Credit History in the USA

If you are planning to stay in the USA for a long time, refinancing with a lender in that country is a good move. With every on-time payment of the loan, you will build a credit history in the USA. 

This will improve your chances of accessing financial services like loans and credit cards. A good credit score will also improve your chances of refinancing again, should you wish to do so. It can also help you get better deals on refinancing with lower interest rates. 

Also Read: Collateral Vs Non-Collateral Education Loans For Abroad Studies

Refinancing education loans for Indian professionals in the USA

If you are an Indian working professional in the USA and want to refinance your education loan, please note you might need to consider many other factors. 

For instance, your visa status, your credit score in the USA, and your income level when you are applying for refinancing. 

We’ve already mentioned SoFi and Mpower Financing as some of the popular options for refinancing, but there are more. Because there are a lot of factors involved, you can definitely get the best refinancing option with the right advice, and that is what we do for you without charging any consultancy fees. 

If you’re stuck with a high-interest loan, reach out to GradRight today for personalized, no-commitment refinancing advice—100% free.

📞 +91 92402 09000
📧 grad@gradright.com

You will get expert advice from our refinancing expert who has helped thousands of students reduce their rate of interest from more than 10% to less than 7% with the right refinancing option.

Also Read: How Can Indian Student Get A U.S. Education Loan?

What is the right time for refinancing student loans?

Is there a right time to refinance your student loan?

Yes, there is. Let’s find out:

If You Started a Job:

Most lenders, if not all, require the borrower to have a steady income. So, when you are employed or about to be, it is the right time to think of refinancing your student loan. 

But that is not the only reason. When you have a steady income, you can leverage that to negotiate better terms. In fact, in many cases, lenders themselves tend to offer you better repayment conditions. 

If the Interest Rates are Dropping:

Interest rates fluctuate based on the financial market’s performance. If the rates drop significantly, you can refinance your loan and reduce your monthly payments. 

If Your Credit Score Has Improved: 

An improved credit score can help you with a great refinancing deal. This is particularly helpful if you are refinancing your loan for a second or third time. 

Requirements for refinancing education loans 

Each lender has its own set of eligibility requirements for refinancing student loans. Unfortunately, as an Indian student, you may have very limited options with US-based lenders that allow refinancing. Most lenders require you to either be a US citizen, a resident alien, or a permanent resident. 

So, let’s learn about the eligibility requirements for the lenders you, as an Indian citizen, can explore:

Requirements for Refinancing Education Loans with MPOWER

You are eligible to apply for refinancing with MPOWER if:

• You have an outstanding education loan with an Indian lender. 
• You have completed your education, for which you took the loan. 
• You currently live in the USA or are working there. 
• You must have at least three months of full-time work experience in the USA after your education.
• You have a valid H1-B or F-1 Visa with OPT.

Requirements for Refinancing Education Loans with SoFi

You are eligible to apply for refinancing with SoFi if:

• You can legally enter into a binding contract.
• You are not refinancing the loan you took for your ongoing education. For example, if you took a loan for your undergraduate studies (that you have completed) and graduate studies (that you’re currently pursuing), you can only refinance the former loan. 
• You are employed or have a steady income from other sources. OR you have an employment offer, which you can start within the next three months. 
• Your student loan did not originate outside the USA. 

Another important criterion for refinancing your loan is a good credit score. Since refinancing means getting a new loan, lenders re-evaluate your income and credit history. Lenders often do not specify a minimum credit score requirement. But, it is good to have a CIBIL score of 650 or above to reduce your chances of getting rejected.  

Note: According to what you just read, you can only refinance your education loan with SoFi if you already have a loan with a US-based lender. This is not helpful if you’re currently holding a loan with an Indian lender. MPOWER, on the other hand, allows you to refinance your Indian loan. 

But the problem with that is interest rates offered by MPOWER may be lower than your current lender, but they could still be higher than SoFi. 

In that case, you can do what many students do – multiple refinancing. First, you can refinance your loan with MPOWER, which would then make you eligible to refinance with SoFi.

Important documents for refinancing education loans 

Depending on the lender, the documentation requirement for loan refinancing varies. Here’s a list of documents suggested by MPOWER:

Immigration Status:

• You must prove that you are currently living in the USA with a valid visa. 
• You must have a valid H1-B Visa or F-1 Visa on OPT.

Identification:

• You must have a valid government-issued ID or passport proving your Indian citizenship.

Existing Loan Documents:

• You need to submit a payoff statement for your previous loan. The statement must be valid for at least 15 business days to allow the processing time.
• Provide banking details, including your bank or country-specific routing numbers, beneficiary account number, etc. 
• Provide your most recent statements for the previous loan to show:
  • Your full name
  • Interest rate
  • Outstanding balance
  • Loan terms
  • Bank information

School Documents:

• Submit the admission letter issued by your university.
• You must also provide your final transcript or diploma that shows your graduation date. 

Employment Documents:

• Submit a copy of your employment or job offer letter. 
• Submit your pay stubs or salary receipts for the last three months. 
• You may be required to go through an additional employment and salary verification process. 

Address Proof:

You can provide any of the following documents as address proof:

• Electricity/ water/ gas/ insurance bills
• Bank statements
• Loan documents
• Signed lease agreements
• Income tax returns
• Property tax bills

Also Read: Study Abroad Loan Documents | Documents for Education Loan

Process of refinancing for working professionals in the USA 

The process of refinancing for working professionals in the USA can be comparatively easier than getting your first loan. Here are the steps you need to follow:

Approach the Current Lender:

• You need to start the process by checking if your current lender offers refinancing on student loans. Most lenders in India do. 
• Next, you need a loan foreclosure form. This confirms your decision to pay off the existing loan. 
• Make sure to look into the foreclosure fees and other fees. It is good to consult with experts to avoid paying extra charges that can be avoided. 

Explore Your Options: 

• Look for lenders offering better loan terms and apply for refinancing. 
• Make sure you meet the eligibility criteria stipulated by the lender. 

Submit Documents:

• The lender you are applying with will give you a list of documents you need to submit. 
• It would be better to check this list in advance. This way, you would have already prepared your documents even before you started the application.
• This step in the refinancing process is crucial because failing to produce the right documents can lead to immediate rejection. 

Get Approval:

• After submitting the application and documents, the lender will assess your profile. 
• Once approved, the lender will issue a cheque to your previous lender to pay off the outstanding loan amount. 

Loan Closure:

• Your loan will be closed once your previous lender receives a cheque from the new lender. 
• With this, the refinancing process will be complete. 

Key refinancing models for working professionals in the USA

There are many refinancing models you can opt for. Here are three of them:

Fixed-Rate Refinancing Model

In this model, you refinance the loan at a fixed rate of interest. This means your monthly payments throughout the tenure will be predictable. 

It is a great option for those looking for stability and want to avoid dealing with payment fluctuations. You would know your monthly repayment amounts so you can budget accordingly. 

Variable-Rate Refinancing Model

Unlike the previous model, your rate of interest changes based on market conditions. When your interest rate depends on the condition of financial marketers, there is potential for lower interest rates. But this can also make your monthly payments unpredictable. This can make it difficult for you to budget your monthly expenses in a fixed way. 

Hybrid Refinancing Model

As the name suggests, this model is a combination of the first two models. But how does that work?

Banks may start your loan with a fixed rate and then shift it to variable rates a few years down the line. It can be helpful for students who are not certain about their long-term financial stability. However, the terms of this model can be complicated to understand and could cause potential risks. 

It is advisable to consult with experts and read the fine print of your loan terms. 

3 common myths about refinancing education loans in the USA 

During your initial research on refinancing for working professionals in the USA, you would come across many statements that might scare you. But the good news is, most of them are probably just myths. 

Here are 3 common myths about refinancing student loans in the USA:

Refinancing Student Loans Affects Your Credit Score

It doesn’t. Or even if it does, you can recover from it in just 2 to 3 months with on-time payments. Lenders like Citizens Bank claim that refinancing will not affect your credit score. 

You Need a Co-Signer to Refinance Your Loan

You only need a co-signer to refinance your loan if you are unemployed. As an Indian student eligible to refinance after three or more months of full-time employment, the requirement for a co-signer (typically only needed if unemployed) does not apply to you. 

You Can’t Refinance Your Student Loan if It Originated in India

While this may be true for some lenders, like SoFi, it doesn’t apply to all. Lenders like MPOWER allow you to refinance your Indian loan, provided you meet other eligibility requirements. 

Is refinancing worth it? 

This entirely depends on your requirements. However, many students claim that refinancing helped lower their financial burden. The image below is from an article written by Brett Holzhauer, who refinanced his loan six times. 

With each refinancing, he was able to negotiate better deals and lowered the interest rate. 

Source 

Refinancing your education loan to a US-based lender can help you in many ways. However, it’s important that you fully understand the terms and conditions involved in the process. 

For that, you can consult experts from GradRight and make an informed move. 

Refinancing your education loan – FAQ’s