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How Does Your Debt-to-Income Ratio Impact Student Loan Refinancing?

Last updated 06/18/2019 by

Jessica Walrack
Do you want to refinance your student loans? If so, you’ll need to get your debt-to-income (DTI) ratio in check. Your DTI is one of the most important factors that lenders look at when you apply to refinance your student loans.
But what is a debt-to-income ratio, and why is it so important? Read on to get the full breakdown. Plus, find out if you can qualify for student loan refinancing with your current DTI.

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What is debt-to-income ratio?

Your debt-to-income ratio, also known as DTI, is a percentage that shows how much of your monthly income you spend on your debts every month. To calculate yours, add up your monthly debt payments, divide that figure by your gross monthly income, and then multiply it by 100.
For example, let’s say your monthly bills include:
  • Housing: $600
  • Utilities: $150
  • Car payment: $200
  • Credit cards: $100
  • Total monthly debt: $1,050.
If your monthly gross income is $3,000, your DTI would be 35% ($1,050/$3,000). This would leave 65% of your income open for other expenses.
Lenders look at DTI to gain an understanding of your ability to repay a loan. Higher DTIs correlate with higher default rates on loans.

Front-end DTI vs. back-end DTI

You can break down DTI into two types: front-end and back-end.
Front-end DTI only includes your monthly housing expenses, such as mortgage or rent payments, mortgage insurance, etc. Your front-end DTI should not exceed 28%.
Back-end DTI considers all types of debt that you repay on a monthly basis, including credit cards, auto loans, etc. You should keep your back-end DTI at 36% or lower. If it rises to 40% or higher, it’s a sign of financial stress.

Are student loans included in your DTI?

Student loan payments are included in your back-end DTI. That’s because student loan debt is repaid on a monthly basis, impacting your available cash flow.
If you apply to refinance a student loan, lenders often include the new loan’s monthly payments when calculating your DTI.

What DTI do you need to refinance student loans?

The required DTI to refinance student loans varies from one lender to the next, though it typically sits between 35% and 50%. Some lenders publish their DTI requirements, while others make decisions on a case-by-case basis.
DTI is just one of several factors considered by lenders who refinance student loans. They also consider your credit score, credit history, savings, and employment status. Certain lenders may allow a higher DTI if you make up for it in other areas.

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How to lower your DTI

If your DTI is too high for you to qualify for refinancing, you can take action to lower it. How? There are two ways. You can work to lower your monthly debt payments, or you can try to increase your income.
If you decide to focus on lowering your monthly debt, try the following strategies:
  • Make a bulk payment to lower your monthly payment amount.
  • Pay off a loan early by targeting debts with high monthly payments but low total amounts.
  • Refinance debts to reduce their monthly payment amounts.
Alternatively (or additionally), you can try to boost your income:
  • Take on more responsibilities at work and ask for a raise.
  • Look for professional opportunities that may pay you more.
  • Look for a side gig to supplement your income.
It may take some time to move the needle, but you have a better chance to lower your DTI if you understand how it works.

Find the best student loan refinance rates

Want to learn what student loan refinance rates you qualify for with your current credit score and DTI? SuperMoney makes it easy with our student loan refinance engine.
Just answer a few questions and we’ll communicate with multiple lenders to retrieve your pre-qualification offers. Within minutes, you can compare rates and terms side-by-side to find the best deal for you.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids. Learn more

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Jessica Walrack

Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar,, Commonbond, Bankrate, NextAdvisor, Guardian, and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.

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