How to Refinance Student Loans (And When You Shouldn’t)
In this guide
- What is student loan refinancing?
- How much can refinancing save?
- What you give up when you refinance federal loans
- Who should consider refinancing?
- Who should NOT refinance?
- Fixed vs. variable rates
- How to compare refinancing offers
- Do you need a co-signer?
- Step-by-step: refinancing your student loans
- Alternatives to refinancing
- Example: refinancing private loans only
- Frequently asked questions
- Should you refinance?
Refinancing student loans can cut your interest rate, lower your monthly payment or help you pay off debt years sooner. For the right borrower, the savings can run into thousands of dollars. For the wrong borrower, especially someone giving up federal loan protections they later need, it can be an expensive mistake that can’t be undone.
This guide explains how student loan refinancing works, how much it can save, who should and shouldn’t refinance and how to compare offers.
What is student loan refinancing?
Refinancing means taking out a new private loan to pay off one or more existing student loans, federal, private or both. The new loan comes with a new interest rate, term and monthly payment, based largely on your credit and income.
Refinancing is different from federal consolidation. A Direct Consolidation Loan combines federal loans into one federal loan with a weighted-average rate; it doesn’t lower your rate, but it keeps federal benefits. Refinancing with a private lender can lower your rate but turns federal loans into private debt.
How much can refinancing save?
Here’s an example of refinancing $40,000 over 10 years:
| Before refinancing | After refinancing | |
|---|---|---|
| Interest rate | 7.5% | 5.5% |
| Monthly payment | About $475 | About $434 |
| Total interest over 10 years | About $16,980 | About $12,090 |
| Savings | About $4,890 |
Illustrative rates only. Your offered rate depends on your credit, income and market conditions.
You can also use a lower rate to pay off the loan faster. Choosing a shorter term usually brings an even lower rate but a higher monthly payment.
What you give up when you refinance federal loans
This is the most important part of the decision. Once federal loans are refinanced into a private loan, you permanently lose access to federal benefits, including:
- Income-driven repayment, including the Repayment Assistance Plan (RAP) introduced in 2026, which ties payments to your income
- Public Service Loan Forgiveness (PSLF) for government and qualifying nonprofit workers
- Federal deferment and forbearance options during unemployment or hardship
- Discharge in cases of death or total and permanent disability (some private lenders offer similar terms, but it varies)
- Any future federal relief programs
Federal repayment rules changed significantly under the 2025 budget law, with major provisions starting July 1, 2026. Before refinancing federal loans, review your options at StudentAid.gov using the Loan Simulator. Our guide on paying off student loans faster summarizes the main changes.
Who should consider refinancing?
Refinancing usually makes the most sense if you:
- Have private student loans at a high rate. You’re not giving up federal protections.
- Have a strong credit score, often in the high 600s or above, with the best rates typically going to borrowers with excellent credit.
- Have stable income and a manageable debt-to-income ratio.
- Have a solid emergency fund, since private loans offer fewer hardship options. See how to build an emergency fund.
- Have federal loans at high rates, a high and secure income, and are confident you won’t need income-driven repayment or forgiveness.
Who should NOT refinance?
Think twice, or avoid refinancing federal loans, if you:
- Work in public service and could qualify for PSLF
- Have an unstable or variable income, or work in an industry with frequent layoffs
- Rely on, or might need, income-driven repayment
- Have a low credit score, which may mean you won’t get a lower rate
- Are close to paying off your loans, where savings would be small
Fixed vs. variable rates
| Fixed rate | Variable rate | |
|---|---|---|
| How it works | Rate stays the same for the life of the loan | Rate can rise or fall with market interest rates |
| Starting rate | Usually higher | Usually lower |
| Best for | Longer terms and predictable budgets | Short payoff timelines when you can absorb increases |
If you’re paying the loan off over many years, a fixed rate protects you from rising rates. Variable rates can save money if you plan to pay off the loan quickly and rates don’t rise much.
How to compare refinancing offers
- Check your credit score and review your credit reports. See what makes a good credit score.
- Prequalify with several lenders. Most offer prequalification with a soft credit check, which doesn’t affect your score.
- Compare the APR, not just the interest rate. The APR includes fees.
- Look for fees. Many lenders charge no origination fees or prepayment penalties.
- Compare borrower protections, such as forbearance options, unemployment protection and death and disability discharge.
- Consider the term. Shorter terms cost less in total interest; longer terms lower your monthly payment.
- Read reviews of customer service. You’ll work with this lender for years.
Multiple hard credit checks for the same type of loan within a short period are usually treated as one inquiry in credit scoring.
Do you need a co-signer?
If your credit or income isn’t strong enough, a co-signer with good credit can help you qualify or get a lower rate. The co-signer is legally responsible for the loan if you don’t pay. Some lenders offer co-signer release after a period of on-time payments.
Step-by-step: refinancing your student loans
- Decide which loans to include: private only, or federal too.
- Gather your loan details: balances, rates and servicers.
- Prequalify with three to five lenders.
- Choose the best offer, considering APR, term and protections.
- Submit a full application with income documents.
- Keep making payments on your current loans until the new lender confirms the old loans are paid off.
- Set up autopay on the new loan. Many lenders offer a small rate discount for autopay.
Alternatives to refinancing
- Autopay discounts on your current loans
- Extra payments applied to your highest-rate loan
- Employer student loan repayment benefits, which can provide up to $5,250 a year tax-free
- A debt payoff plan such as the avalanche method
- Refinancing only your private loans, while keeping federal loans federal
Example: refinancing private loans only
Morgan, 30, has four student loans:
| Loan | Type | Balance | Rate |
|---|---|---|---|
| Loan 1 | Federal Direct Unsubsidized | $12,000 | 5.0% |
| Loan 2 | Federal Direct Unsubsidized | $9,000 | 4.5% |
| Loan 3 | Private | $15,000 | 9.5% |
| Loan 4 | Private | $10,000 | 8.75% |
Morgan works for a private company with no plans to move into public service, earns a stable $92,000 and has a credit score of 760 and a six-month emergency fund.
Morgan’s decision:
- Keep the federal loans federal. Their rates are already moderate, and they keep access to income-driven repayment, deferment and forbearance if something changes.
- Refinance the two private loans together. With prequalification from four lenders, Morgan finds a fixed rate of 6.25% for seven years with no origination fee.
| Before (private loans) | After refinancing | |
|---|---|---|
| Combined balance | $25,000 | $25,000 |
| Weighted average rate | About 9.2% | 6.25% |
| Federal benefits lost | None (already private) | None |
By refinancing only the private loans, Morgan lowers the highest rates without giving up any federal protections. Morgan then directs any extra monthly payments to the refinanced loan, which still carries the highest rate.
Rates are hypothetical examples. Your offers depend on credit, income and market conditions.
Red flags when comparing lenders
- Pressure to decide immediately
- Fees that appear only late in the application
- Vague answers about forbearance or hardship options
- Requests for upfront payment before the loan is approved
Frequently asked questions
Does refinancing student loans hurt your credit?
A hard inquiry and a new account can cause a small, temporary dip. Over time, on-time payments on the new loan support your score.
Can I refinance student loans more than once?
Yes. If rates drop or your credit improves, you can refinance again. Check for fees and compare carefully.
Can I refinance federal loans back into federal loans?
No. Once federal loans are refinanced with a private lender, they can’t be converted back into federal loans.
Is there a minimum amount to refinance?
Many lenders require a minimum balance, often around $5,000 to $10,000. Requirements vary by lender.
Can I still deduct student loan interest after refinancing?
Generally yes, as long as the new loan is a qualified student loan used solely to refinance qualified education debt, and you meet the income limits.
Should you refinance?
Refinancing can lower your rate and save thousands, especially for borrowers with high-rate private loans, strong credit and stable income. But refinancing federal loans means permanently giving up income-driven repayment, forgiveness programs and federal hardship options. Compare offers through soft-credit prequalification, focus on APR and protections, and refinance federal loans only if you’re sure you won’t need federal benefits.
This week: List your loans and mark which are federal and which are private. Prequalify for refinancing on your private loans with three lenders, and check your federal options on StudentAid.gov before deciding about the rest.