//Ask a Hero: Should I Refinance to a Higher Interest Rate But Shorter Loan Term?

Ask a Hero: Should I Refinance to a Higher Interest Rate But Shorter Loan Term?

Refinancing rates from 2.47% APR. Checking your rates won’t affect your credit score.

Dear Student Loan Hero,

I am looking to refinance my student loans and repay them faster, but I’m not sure about the terms. Should I refinance to a higher interest rate but lower the number of years so I pay it off sooner?

Dear Student Loan Borrower,

If you’re seeking a black-and-white answer, here it is: You’ll never benefit by increasing the overall interest rate of your student loans. The higher your rate, the more interest you’ll pay.

Also, you could achieve your praiseworthy goal of shortening your repayment without refinancing. Instead, make larger payments on your current (lower-rate, longer-term) loan. This way, you’d save money on accruing interest and retain the ability to pay off the debt early.

Use a prepayment calculator to set your preferred timeline. Just be sure your lender doesn’t charge fees (also known as prepayment penalties) for repaying the debt before it’s due, and that the money is applied to your principal rather than going toward interest.

Of course, you might have better reasons to refinance at a higher rate, even if selecting a shorter repayment term isn’t among them.

It could make sense to refinance, for example, to consolidate your debt so that you make one monthly payment to a single lender. That might bring you a peace of mind that outweighs the math.

Similarly, refinancing could help you escape an unruly loan servicer. You might be worried that your servicer won’t apply your extra (large) payments the way you’d like, for example.

You could accept the trade-off of a higher rate from top refinancing companies if it nets you an important perk, whether that’s consolidation, better service or something else. Sometimes, the rationale goes, restoring your sanity is worth a few extra bucks every month.

How much interest you’re willing to shell out in this exchange is an individual question — and only you can answer it.

Check out these additional resources as you make your decision:

Wishing you a happy repayment,

Andrew P.

Student Loan Hero

Read more in the Ask a Hero series.

Interested in refinancing student loans?

Here are the top 6 lenders of 2019!


Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.