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Can You Refinance a Student Loan to a Term Longer Than 20 Years?

It is possible to refinance a student loan to a term that's longer than 20 years.

While the vast majority of refinance lenders offer a maximum term of 20 years, you can find lenders that provide 25-year terms. But you may only be able to choose a variable interest rate, for instance, which can change over time; or you may need to meet a minimum loan balance requirement.

Most important, refinancing to such a long term could limit your interest savings, which is a primary reason borrowers consider refinancing. Here's what to know before refinancing student loans to a longer than 20-year term.

How Student Loan Financing Works

When you refinance a student loan, much like a mortgage, a lender will qualify you for a new interest rate based on your creditworthiness.

Ideally, you'll receive a new rate that's lower than the original student loan interest rate you received, thanks to your stronger current financial standing (or the use of a cosigner if you have one). Student loan refinancing generally requires good or excellent credit, meaning a score of 670 or higher, and lenders will also look at your income and the amount of debt you have relative to it.

Private student loans, whose interest rates are often higher than federal loans' rates, are especially good candidates for refinancing. Federal student loans also come with unique benefits, like longer payment-postponement periods and forgiveness programs, that you'll lose when you refinance them. Make sure you're willing to give up these protections when you refinance a federal loan.

If you're approved, the refinance lender will pay off your existing loan, or multiple loans if you choose to refinance several, and issue you a new loan at the rate you're eligible for. You'll make payments to your new lender according to the terms of the loan agreement.

Choosing a Loan Term

U-fi, a student loan refinance lender, offers a 25-year loan term, but it's one of the only lenders to do so. You must have a $25,000 minimum loan balance and choose a variable interest rate in order to get it.

A 25-year loan term isn't ideal. To save the most money on interest, choose the shortest loan term you can manage when refinancing. That may mean the monthly payment on your student loans doesn't drop. Instead, you'll pay the same, or even more, per month. But by the time you've paid off your refinanced loans, you'll have paid less interest than if you hadn't refinanced.

Here's how it works. If you have $25,000 and seven years left on your student loans at a 6% average interest rate, you'll pay $365 per month and $5,678 in interest overall. Refinance that amount to a five-year term at 4% interest and you'll pay $460 per month, but $2,625 in interest. You'll save more than $3,000 over time by refinancing, though your monthly payment won't decrease. A 25-year term would bring your monthly payment down to $132, but you'd pay a massive $14,588 in interest.

Five years is generally the shortest loan term you'll find. Several lenders—SoFi, Citizens Bank, CommonBond and Education Loan Finance, for instance—make loans that last five, seven, 10, 15 or 20 years. Others, like PenFed by Purefy, offer five-, eight-, 12- and 15-year terms. Earnest provides custom term lengths that can last between five and 20 years.

Other Ways to Get Longer Student Loans

Refinancing may not be right for you if you're looking for a longer term because you want, or need, a lower monthly payment. Your income may not meet refinancing lenders' requirements. You may be better off not refinancing federal loans in particular so you can take advantage of their benefits for struggling borrowers.

These benefits include income-driven repayment plans, which lower monthly payments to a percentage of your income. Some income-driven plans extend your loan term to 25 years—and they all offer forgiveness on the remaining balance.

You may also wish to consolidate your federal student loans, which provides a single monthly payment, like refinancing, and a loan term of up to 30 years depending on your balance. But you'll pay more in interest if you take longer to repay a federal consolidation loan, and you won't receive forgiveness when your loan term is up. Consolidation is most helpful if you need to use it to qualify certain loan types for:

  • An income-driven repayment plan
  • The Public Service Loan Forgiveness program, which offers tax-free federal loan forgiveness after 120 monthly payments to certain public service workers

Take care when considering refinancing student loans to a longer than 20-year term. You may not see the interest savings that make refinancing worthwhile. Seeking a longer term might mean it's time to consider alternatives that make your loans more affordable instead.

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