Cash-Out Refinance for Student Loan Debt

July 13, 2023

With most student loans resuming normal payment schedules soon, this could be an opportune time to use your home’s equity to eliminate student debt. 

If you’re a homeowner with student debt, you could potentially benefit from the equity in your home by using a cash-out refinance to pay off your student loans. 

What is a Cash-Out Refinance?

A cash-out refinance means you take out a new mortgage greater than the remaining balance on your current loan; this allows you to use your home equity to pay other expenses (in this case, your student debt).  

How to Use a Cash-Out Refinance for Student Debt

We offer a student loan cash-out refinance program that many homeowners have found to be beneficial. A few things to keep in mind, if you’re interested in pursuing this option, are: 

  • At least one student loan must be paid in full (you can’t pay just part of a loan); you must have enough equity in your home to cover the full loan amount
  • The cash-out refinance funds must be paid directly to your student loan servicer at closing 
  • At least one borrower (homeowner) must be named on the student loan being paid off (for instance, you couldn’t pay off your child’s loan if their name isn’t on the mortgage)  
  • You must meet all other standard cash-out refinance requirements to qualify 

Benefits of a Student Debt Cash-Out Refinance

Another great feature: some of the traditional fees associated with a cash-out refinance are reduced with this program. This can help you save money, as compared to a traditional refinance. 

Other advantages of a cash-out refinance for student debt may include: 

  • Reducing your student loan interest rate (if you can refinance to a lower rate mortgage loan, you might save money on your student loan repayment) 
  • Streamlining your loans into one payment (instead of a mortgage payment and a student loan payment) can simplify the repayment process 
  • Paying your loan off at closing means you don’t have to worry about contacting student loan servicers to schedule future payments  

As with any loan program, there are pros and cons – so it’s best to talk to a qualified loan professional about your unique situation. In some cases, a cash-out refinance for student debt makes financial sense. We can help you determine if a cash-out refinance for educational debt would be an ideal solution for you.