Your debt-to-income ratio, or DTI, is one of the many factors lenders assess when you apply to refinance student loans. They may also look at your credit history and scores, employment status and savings.
A debt-to-income ratio is calculated by dividing total monthly debt payments and other financial obligations by gross monthly income. This gives lenders an indication of how much extra cash you have on hand each month.
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.
Debt-to-income ratio needed to refinance student loans
Some student loan refinance lenders don’t disclose their debt-to-income requirements. But generally, lenders look for borrowers with DTIs below 50%. The lower, the better.
Debt-to-income calculations include your housing payment — even if you rent — student loan payment, other debt payments, and child support or other obligations.
Use the calculator below to estimate your debt-to-income ratio. To see if you’re likely to qualify, apply for student loan refinancing pre-qualification. The process won’t hurt your credit and will give you an estimated personalized interest rate.
Typically, debt-to-income calculations include your housing payment — even if you rent — student loan payment, other debt payments and child support or other obligations.
If your debt-to-income ratio is too high to qualify for student loan refinancing, you can reduce it by increasing your income, paying down debt or both. Adding a co-signer to the loan may also allow you to meet the lender’s requirements.
Refinancing student loans can actually decrease your debt-to-income ratio by lowering your monthly student loan payment. This may be helpful for getting a mortgage, if you want to buy a home.
Student loan refinance lender DTI requirements
|Splash Financial||35%-50% depending on the borrower's income, degree type and loan amount.|
|Education Loan Finance||55%|
|PenFed||35%-50% depending on the borrower's income, degree type and loan amount.|