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Refinancing student loans means exchanging your current loans for a new loan, potentially with a lower interest rate and more favorable terms. Lowering the interest rate might mean substantial savings, depending on your loan amount and repayment timeline.
But along with the potential benefits of refinancing student loans, there are also drawbacks to consider. For example, refinancing federal loans makes them ineligible for federal programs and protections.
Read on to learn about the pros and cons of refinancing student loans to help decide if this move is right for you.
Key Points
• Refinancing student loans involves replacing existing loans with a new private loan, potentially securing a lower interest rate and more favorable repayment terms.
• Borrowers can refinance private student loans, federal loans, or both types of loans together.
• Refinancing federal student loans permanently forfeits access to benefits like income-driven repayment plans, Public Service Loan Forgiveness, deferment, and forbearance.
• With refinancing, borrowers may choose new repayment terms, with shorter terms potentially allowing savings on interest and longer terms lowering monthly payments but increasing total interest costs.
• Refinancing lenders typically require borrowers to have strong credit scores, stable income, and a manageable debt-to-income ratio.
What Does It Mean to Refinance Student Loans?
When you refinance student loans, a private lender pays off your existing student loans and gives you a new loan. That loan may have a new interest rate, monthly payment amount, and repayment schedule.
The main goal of student loan refinancing is to secure a better interest rate or more favorable terms. By lowering the rate, a borrower could potentially save hundreds or even thousands of dollars over the life of the loan. Applicants typically need strong credit to qualify for a competitive rate.
Refinancing also allows borrowers to choose new repayment terms, often between five and 20 years. A shorter term will help them get out of debt faster and save on interest. With a longer term, they’ll get lower monthly payments, but extending the life of the loan may increase total interest costs.
It’s possible to refinance private student loans and federal student loans, or both types together, but there’s an important caveat: Refinancing federal loans means losing eligibility for federal repayment plans, forgiveness programs, and other protections.
Benefits of Refinancing Student Loans
There can be several financial benefits of refinancing student loans with a private lender.
Lower Interest Rate and Total Interest Savings
Depending on your credit and overall financial profile, you may qualify for a lower interest rate than your current rate. Reducing the interest rate could potentially save a lot of money over the life of your loans.
Let’s say, for example, that you owe $30,000 in private student loans at an interest rate of 10.00%. On a 10-year term, you’d pay approximately $17,574 in interest charges. But if you were able to lower your rate to 5.00% through refinancing, your interest costs would drop to about $8,184.
Reduced Monthly Payments
You might also lower your monthly payments through refinancing. Reducing your interest rate can reduce your payments, even if you choose the same repayment term. On the 10-year, $30,000 loan, for example, cutting your rate from 10.00% to 5.00% would make your monthly payments go from about $396 to $318.
If you pick a longer repayment term, like 15 or 20 years, you’ll have even more affordable monthly payments. This may be helpful if your budget is tight. Keep in mind, though, that a longer repayment term may increase your total interest costs over the life of the loan.
Flexible Repayment Terms
Private lenders often let borrowers choose repayment terms from five to 20 years. You could choose a short term to pay off your debt faster, or a longer term to lower your monthly payments.
Recommended: Guide to Refinancing Student Loans
Risks and Drawbacks of Refinancing Student Loans
Refinancing student loans isn’t without its potential disadvantages, however. Borrowers may want to weigh options like refinancing vs. paying off student loans early to see what might be a better choice for their specific situation.
As you’re thinking about whether you should refinance your student loans, here are some possible drawbacks to consider.
Loss of Federal Loan Protections
Refinancing federal student loans means replacing them with a new private student loan. That means you’ll forfeit access to federal programs and benefits, such as:
• Income-driven repayment: An income-driven repayment (IDR) plan adjusts your monthly payments based on your income and family size and may eventually end in loan forgiveness. (It’s worth noting that there have been some recent student loan changes limiting the number of federal repayment plans available to new borrowers as of July 1, 2026.)
• Public Service Loan Forgiveness (PSLF): This program forgives eligible federal loans after 120 qualifying payments by qualifying borrowers who work in public service.
• Federal deferment and forbearance: These programs may let you temporarily postpone payments if you experience financial hardship, go back to school, or have another qualifying reason.
Private student loans generally don’t have as many protections as federal loans, and they’re not eligible for federal forgiveness programs. Some private lenders may let you postpone payments if you run into financial hardship or go back to school, but policies vary by lender.
It’s important to understand that student loan refinancing is irreversible — you can’t undo your decision and move your loans back into the federal student loan system. Before you refinance federal student loans, think carefully about whether you might need the federal protections you’d be forfeiting.
Credit and Income Requirements
Borrowers need to meet a lender’s financial requirements to qualify for refinancing. Lenders generally prefer candidates with strong credit, a stable income, and a manageable debt-to-income ratio.
If you have poor credit, you might have a tough time qualifying for refinancing. Even if you get approved, you may not get a lower interest rate.
Some lenders let borrowers refinance with a creditworthy cosigner, which might be an option for those with less-than-stellar credit.
Keep in mind, though, that a cosigner is responsible for paying back the loan if you are unable to. Also, their credit is impacted by how you repay the loan — if your monthly payments are late, that might negatively impact the cosigner’s credit as well as your own.
Recommended: Pros and Cons of Consolidating Student Loans
When You Should Refinance Student Loans
While everyone’s situation is different, here are a few scenarios where it may benefit you to refinance your student loans:
• Interest rates are low: If market interest rates are low, you might qualify for a better rate than you have currently.
• Your credit has improved: A stronger credit profile might help you get more favorable rates and terms than when you originally borrowed your loans.
• You have a stable income: Having a steady income may help you get approved for refinancing.
• You want to pay off your loans faster: You might consider refinancing to a shorter loan term to get out of debt faster and save on interest.
• You’re looking for lower monthly payments: You can opt to pick a longer repayment term for more affordable monthly payments. However, extending your term can increase your total interest costs over the life of the loan.
• You don’t need federal programs or benefits: If you have private student loans, you aren’t eligible for federal benefits, so refinancing may make sense for you. But if you have federal loans, refinancing them means you permanently lose access to federal repayment plans, forgiveness programs, and other protections. If you think you might need these benefits in the future, refinancing likely isn’t right for you.
The Takeaway
Refinancing student loans may be a way to lower your interest rate if you qualify and adjust your repayment timeline. But whether refinancing is the right move depends on your financial situation and the type of student loans you have.
If you have high-rate private student loans, refinancing may be worth exploring for potential savings, especially if your credit has strengthened or rates have dropped since you first borrowed. If your loans are federal, however, refinancing means giving up federal protections.
Carefully weighing the pros and cons of refinancing can help you make an informed decision about the best way to manage your student loans.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Does refinancing student loans save money?
Refinancing student loans may save you money if you qualify for a lower interest rate. However, your savings also depend on your new repayment term. If you pick a longer repayment term, you may end up paying more in interest over the life of your loans, even with a lower interest rate.
Does refinancing student loans hurt your credit score?
Refinancing student loans may cause a slight and temporary dip in your credit score when the lender runs a hard inquiry to check your credit when you apply. The impact is typically five points or fewer. Paying your loans consistently and on-time each month typically has a positive impact on your credit.
Can you refinance both federal and private student loans?
Yes, you can refinance both federal and private student loans. Refinancing multiple loans into one new loan can simplify repayment. However, refinancing federal loans into a private loan means you lose eligibility for federal repayment plans, forgiveness programs, and other benefits.
How many times can you refinance student loans?
There’s no limit to how many times you can refinance student loans if you can meet the lender’s requirements for credit, income, and other criteria. For example, borrowers might consider refinancing more than once if interest rates drop or their credit strengthens.
What credit score do you need to refinance student loans?
Each lender sets their own minimum credit score to refinance student loans; there’s no one standard requirement. However, many lenders look for a credit score around 650 or above. A score of 670 or higher, for instance, may make it easier to get approved and qualify for lower interest rates.
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