Refinancing has many benefits, like saving on interest and paying off your student loan debt quicker. However, it’s important to weigh the pros and cons of refinancing student loans before proceeding.
Although you can technically refinance federal student loans, it’s generally best to avoid doing so — you’ll lose access to federal programs like income-driven repayment plans and student loan forgiveness programs.
That said, refinancing your federal loans could be worth it if you’re eligible for a significantly lower interest rate and don’t qualify for any federal benefits.
Ultimately, though, you’ll want to ensure that a student loan refinance actually saves you money. By crunching the numbers with our calculator, you can review your potential savings before applying.
Looking to calculate your total student loan interest? How about a calculator to see if it’s worth paying off your student loans in full or applying for the Public Service Loan Forgiveness (PSLF) program? Here are some useful calculators to have a look at.
Deciding when to refinance your student loans comes down to whether you qualify for a lower interest rate. Typically, you need to graduate school before you can apply for a student loan refinance — although there are a few lenders that offer refinancing to those who didn’t earn a degree.
It is generally best to avoid refinancing your federal student loans if you want access to government protections like income-driven repayment and loan forgiveness. However, borrowers who don’t qualify for such programs might save money by refinancing their federal debt if they can secure a lower interest rate.
You can refinance your student loans as often as you want. There are typically no fees associated with a student loan refinance, so there’s no harm in switching lenders whenever you see a lower interest rate.
Just be sure to use our refinance calculator in advance to compare rates for refinancing student loans to ensure you get the best deal.
The amount you can expect to save depends on your current loan balance, plus your new rate and term.
Let’s say you have $30,000 in private student loans with a 7% rate on a 10-year term; your monthly payment would be $348. Now, if you refinance to a 5% rate, and if your monthly payment remains around the same, you would save $4,483 in total interest charges while shaving one year off your repayment term.
While requirements vary by lender, here are some standard criteria lenders look at when assessing your level of creditworthiness:
Your school. In general, most lenders require that you graduate from an eligible institution to qualify for student loan refinancing — still, some lenders will work with those who didn’t complete their degree.