Student loan debt and auto refinancing: How to lower your car payment without throwing off repayment

Key takeaways

• You can refinance a car loan even if you have student loans — student debt isn’t an automatic disqualifier.
• Student loans mainly affect refinancing through debt-to-income ratio (DTI) and credit history, which influence approval odds and APR.
• Refinancing works best when it lowers your rate or payment without stretching the term so much that you pay significantly more interest overall.
• Staying current on student loan payments helps protect your credit and can improve the refinance offers you qualify for.
• Compare multiple offers using APR + term + total cost (not just the monthly payment) to make sure the refi truly helps your budget.

Student loans and car payments are two of the biggest budget line items for many recent college graduates, and they can influence each other more than you’d expect. Student loan debt can affect auto refinancing because it impacts the two factors lenders care about most: how much debt you already have (DTI) and how reliably you repay it (credit history). The good news: refinancing your car loan may still be a smart move if it lowers your APR or monthly payment and helps you stay on track with your overall debt plan, especially in today’s higher-rate auto market.

Why student loans matter when you refinance a car loan

Auto refinance lenders typically want to know one thing: Can you comfortably handle the new monthly payment? Student loans can affect the answer in two key ways.

Student loans can raise your debt-to-income ratio (DTI)

Your DTI is all your monthly debt payments divided by your gross monthly income. It’s one of the main ways lenders measure how much room you have in your budget.

DTI example (simple math):

• Monthly income (before taxes): $5,000
• Monthly debts:
  • Student loan payment: $350
  • Current car payment: $525
  • Credit cards minimums: $150
  • Total monthly debts: $1,025
• DTI = $1,025 ÷ $5,000 = 20.5%

Refinancing your car could lower the car portion of that equation, but if your student loan payment is high (or recently increased), your DTI may still be a hurdle.

Student loan repayment history can affect your interest rate (or approval)

Auto refinance pricing is heavily influenced by credit. If a student loan becomes delinquent, that can show up on your credit file and make it harder to qualify for a good refinance offer.

In 2025, the New York Fed noted that student loan balances transitioning from current to delinquent rose sharply as delinquent loans began showing up on credit reports again after the pandemic-era reporting pause.

Bottom line: If your student loans are current and your credit is solid, student debt doesn’t automatically block refinancing. But if you’re behind, refinancing may be more expensive, or not available.

When auto refinancing makes sense for borrowers with student loans

Refinancing is most likely to help when it does one (or more) of these things:

• Lowers your interest rate (APR).
• Reduces your monthly payment enough to improve cash flow.
• Shortens your loan term so you pay less interest overall.
• Replaces a loan you took when your credit was weaker with a loan priced for today’s credit score.

And in a high-rate environment, even a modest rate drop can matter. Experian reported average auto loan rates around 6.80% for new cars and 11.54% for used.

A quick gut-check: If refinancing saves you money and keeps your repayment plan stable, it’s worth running the numbers.

When refinancing can backfire

Auto refinancing can look great on a monthly-payment basis — and still cost you more in the long run.

Watch out for these common traps:

• Extending the term too far. A lower payment can mean more months of interest.
• Rolling negative equity into a new loan. If you owe more than the car is worth, refinancing can lock you into higher total costs.
• Trading total cost for payment relief without a plan for what you’ll do with the extra cash each month.

If you’re refinancing mainly to lower the payment, set a rule for the savings (more on that below).

How to refinance your car loan if you have student loans

Here’s a practical step-by-step approach that keeps the process simple, and helps you avoid offers that look good but cost more.

1) Pull your current loan details

You’re looking for:

• Current APR
• Monthly payment
• Remaining term
• Payoff amount (and whether there’s a prepayment penalty)

2) Calculate your DTI (don’t guess)

DTI is monthly debt payments ÷ gross monthly income.

Include:

• Student loan payment (minimum due, not “what you hope to pay”)
• Current car payment
• Credit cards
• Personal loans
• Mortgage/rent (some lenders treat it differently, but it still affects your budget)

3) Check your credit reports for student-loan status

You’re looking for:

• Late payments
• Default/collections indicators
• Incorrect balances or duplicate accounts

If you see a problem, fix it before you apply.

4) Decide what you want: lower payment, lower rate, or faster payoff

Pick one primary goal so you can compare offers correctly:

• Lower monthly payment (cash-flow relief)
• Lower total interest (cost savings)
• Pay off sooner (debt reduction)

5) Compare multiple offers

Focus on:

• APR
• Term length
• Monthly payment
• Any fees
• Total interest cost (the “true price”)

6) Choose the offer that helps both your car budget and your student-loan plan

This is the part people skip.

If refinancing saves you $100/month, decide in advance:

• Put $50 toward student loans (or emergency savings) and
• Keep $50 for breathing room (groceries, gas, insurance increases)

That way, the refinance doesn’t just “disappear into lifestyle creep.”

Bottom line

If you have student loans and want to refinance a car loan, focus on what lenders care about most:

• Keep student loans current (protect your credit).
• Know your DTI before you apply.
• Compare offers by total cost, not just monthly payment.

If refinancing gives you more budget back, make it count: use at least part of the savings to strengthen your overall financial foundation.

FAQ: Student loans + auto refinancing

Can you refinance a car loan if you have student loans?

Yes. Student loans don’t automatically disqualify you. But they can affect the two big underwriting factors: DTI and credit history.

Does student loan delinquency affect auto refinancing?

It can. Delinquencies can appear on credit reports and may make refinancing more expensive — or lead to denial. The New York Fed highlighted that student-loan delinquency transitions rose after delinquent loans began showing up on credit reports again.

Should I refinance to lower my car payment while paying student loans?

It can make sense if the refinance reduces your rate or payment without meaningfully increasing total interest, and if you have a plan for what to do with the savings (for example: split between student loans/savings and budget relief).

What matters more: DTI or credit score?

Both matter, but they affect different things:

• DTI influences whether you can afford the payment.
• Credit influences your approval odds and pricing.