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Lenders determine debt-to-income ratio, or DTI, by dividing your total monthly debt payments and other financial obligations by your gross monthly income. Generally, you'll need a DTI below 50% to be able to refinance student loans. The lower your DTI, the better your chances of qualifying and getting a low interest rate.
Are student loans counted in your debt-to-income ratio?
Lenders typically count your existing student loan payment in your debt-to-income ratio. They'll also include your housing payment — even if you rent — as well as other debt payments and obligations such as child support.
Use the calculator below to estimate your debt-to-income ratio. Depending on your DTI, consider applying for student loan refinancing pre-qualification to see if you’ll meet a lender's other eligibility criteria. Prequalifying won’t hurt your credit and will give you an estimated personalized interest rate.
Can you refinance with a high debt-to-income ratio?
If your debt-to-income ratio is high, you may be able to refinance student loans by increasing your income, paying down debt or both. If those options aren't possible, adding a co-signer may also help you meet the lender's requirements.
A high debt-to-income ratio means a lot of your income goes toward bills. The Federal Reserve considers a DTI of 40% or more a sign of financial stress. A low debt-to-income ratio — 20% or less — means you have wiggle room in your budget.
Refinancing student loans can actually decrease your debt-to-income ratio by lowering your monthly student loan payment. This may be helpful, for example, if you want to get a mortgage to buy a home.
If you can't qualify with a student loan refinance lender because of your DTI, consider other options like enrolling in an income-driven repayment plan. That may offer you a more affordable monthly bill.
Debt-to-income ratio requirements
You'll need to meet a lender's DTI requirements to refinance student loans. DTI criteria often isn't shared publicly, but the following lenders provide this information:
Student loan refinance lenders assess your DTI to understand how much extra cash you have each month, but it's not their only consideration. Factors like your credit history and scores, employment status and savings are also important in qualifying you for student loan refinancing,