There’s no one right answer that’s right for everybody. It depends on the type of loan you have and your credit score.

You’ll benefit by refinancing your student loans sooner under these 3 circumstances:

#1 Your Credit Has Improved

Your interest rate is based on your credit score and income. A good score and steady income make you a low-risk borrower who’s more likely to pay back the loan on time. As a result, lenders will offer you a lower interest rate. The stronger your credit profile the lower the interest rate you’ll pay. This could add up to significant savings in interest over the life of the loan.

You don’t need to wait to build a perfect credit profile before refinancing. It makes sense to refinance as soon as you qualify for a lower interest rate. There are no costs associated with refinancing and you can refinance multiple times. When your credit score and income improve some more in a year or so, you can refinance again to boost your savings.

#2 Refinance Sooner If Interest Rates Have Dropped

Interest rates on loans are tied to market rates. Interest rates are lower when markets are down. You can cash in on this trend by refinancing when interest rates have dropped. Compare the current market rates and the rate you’re paying on your student loans. If the current rates are lower, it makes sense to refinance your student loans now and save on accrued interest.

This is particularly useful if you have variable-rate loans. With variable-rate loans, the interest rate fluctuates with market conditions. You’ll pay a higher rate when markets are strong and a lower rate when markets are weak. This continuous fluctuation can be stressful. It messes with your budget as monthly payments increase when interest rates are high. Refinancing sooner while switching to a fixed-rate loan will allow you to lock in a lower rate for the life of the loan.

#3 You’re At Risk Of Missing A Payment

If you’re struggling to make the loan payments, it’s better to refinance immediately. Missing payments for whatever reason can have serious long-term consequences. The late payment fees and interest on the outstanding will increase the cost of the loan. Late payments also damage your credit score making it even more difficult to get future lines of credit. This can get you stuck in a debt cycle for a longer time. The best way to prevent this scenario is by refinancing to lower your monthly payments and make them more affordable.

When you lower the monthly payments, you’ll pay more in interest over the longer loan term. That’s still better than missing a payment, however. When your finances improve, you can always refinance again to increase the monthly payments.

When To Refinance Student Loans Later Rather Than Sooner

It’s advisable not to rush into refinancing federal student loans. When you refinance, you’ll lose access to all protections associated with the original loan. If your finances are still shaky, it’s best to wait a bit before refinancing federal student loans. Those income-based repayment plans and deferment or forbearance options may come in useful.

Another reason you may want to refinance federal student loans later is if you’re pursuing federal loan forgiveness.