Refinancing federal student loans can either help you pay down your loans sooner (by shortening your term) or lower your monthly payment (by extending your term). However, when you refinance federal student loans with a private lender, you may lose federal benefits and protections.
Refinancing is not a simple decision to make. Read on to learn more about federal student loan refinancing and whether it’s right for you.
Table of Contents
Key Points
• With refinancing, you can pay off your federal student loans sooner or lower your monthly loan payments.
• Refinancing involves rolling your private and federal loans into a new private loan with a different term and interest rate.
• The benefits of refinancing include potential savings on interest, lower monthly payments, and streamlined repayments.
• Refinancing your student loans with a private lender involves careful consideration, as you lose the benefits and protections that come with government-held student loans.
• Factors such as your credit score, your income, and market conditions can influence the terms of your student loan refinancing.
What Is Federal Student Loan Refinancing?
If you graduated with student loans, you may have a combination of private and federal student loans. Federal student loans are funded by the federal government. Direct Subsidized Loans and Direct PLUS Loans are both examples of these.
Interest rates on federal student loans are fixed and set by the government annually. The rate for the 2025-26 school year is 6.39% for undergraduate students. Private student loan rates are set by individual lenders. If you’re unhappy with your current interest rates, you may be able to refinance your student loans with a private lender and a new — ideally lower — interest rate.
Recommended: Types of Federal Student Loans
Can I Refinance My Federal Student Loans?
It is possible to refinance your federal student loans with a private lender, but you lose the benefits and protections that come with a federal loan, such as income-based repayment plans and public service-based loan forgiveness. On the plus side, refinancing may allow you to pay less interest over the life of the loan or pay off your debt sooner.
💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-hidden-fees loans, you could save thousands.
How Do Refinancing and Consolidation Differ?
Student loan consolidation and student loan refinancing are not the same thing, but it’s easy to confuse the two. In both cases, you’re signing different terms on a new loan to replace your old student loan(s).
Consolidation bundles multiple federal student loans together, allowing borrowers to repay with one monthly bill. However, it does not typically get you a lower interest rate. When you consolidate federal student loans through the Direct Consolidation Loan program, the resulting interest rate is the weighted average of the original loans’ rates, rounded up to the nearest one-eighth of a percent. This means you don’t usually save any money. If your monthly payment goes down, it’s usually because the loan term has been extended, and you’ll spend more on total interest in the long run.
Refinancing, on the other hand, rolls your existing federal and private loans into a new private loan with a different loan term and interest rate. When you refinance federal and/or private student loans, you get a new interest rate. This rate can be lower if you have a strong credit history, saving you money. You may also choose to lower your monthly payments or shorten your payment term (but not both).
Recommended: Student Loan Consolidation vs Refinancing
What Are the Potential Benefits of Refinancing Federal Student Loans?
Potential Savings in Interest
The main benefit is potential savings. If you refinance federal loans at a lower interest rate, you could save thousands over the life of the new loan. Plus, you may be able to switch out your fixed-rate loan for a variable-rate loan if that makes more financial sense for you (more on variable rates below).
Lower Monthly Payments
You can also lower your monthly payments, which typically involves lengthening your loan term and paying more in overall interest. (Shortening your term usually results in higher monthly payments but more savings in total interest.)
Streamlining Repayments
Refinancing multiple loans into a single loan can help simplify the repayment process. Instead of multiple loan payments with potentially different servicers, refinancing allows you to combine them into a single monthly payment with one lender.
What Are the Potential Disadvantages of Refinancing Federal Loans?
When you refinance federal loans with a private lender, you lose the benefits and protections that come with government-held student loans. Those benefits fall into three main categories:
Deferment/Forbearance
Most federal loans will allow current borrowers to put payments on hold through deferment or forbearance when they are experiencing financial hardship. Student loan deferment allows you to pause your subsidized loan payments without accruing interest, while unsubsidized loans continue to accrue interest.
With student loan forbearance, you can reduce or pause your payments, but interest usually accrues during the forbearance period. Some private lenders do offer forbearance — check your lender’s policies before refinancing.
Special Repayment Plans
Current federal loans offer extended, graduated, and income-driven repayment plans (such as Pay As You Earn, or PAYE), which allow you to make payments based on your discretionary income. However, it’s important to note that these plans typically have a higher total interest over the life of the loan. Private lenders do not offer these programs.
Student Loan Forgiveness
Teachers, firefighters, social workers, and other professionals who work for select government and nonprofit organizations may apply for Public Service Loan Forgiveness (PSLF). Changes made by the former Biden Administration have made qualifying easier — even for borrowers who were previously rejected. Learn more in our guide to PSLF.
The Teacher Loan Forgiveness program is available to full-time teachers who complete five consecutive years of teaching in a low-income school. Find out more in our Teacher Loan Forgiveness explainer.
You may be eligible for forgiveness under an income-driven repayment (IDR) plan after 20 or 25 years of payments. Most of the current plans are scheduled to close in the coming years, leaving only Income-Based Repayment for current borrowers or the new Repayment Assistance Plan, which launches in July 2026. Learn about your options in our guide to IDR plans.
Private student loan holders are not eligible for these programs.
| Potential Advantages of Refinancing Federal Student Loans | Potential Disadvantages of Refinancing Federal Student Loans |
|---|---|
| Lower Interest Rate: Refinancing provides an opportunity to qualify for a lower interest rate, which may result in cost savings over the long term. There is also the option to select a variable rate for individual financial circumstances. | Loss of Deferment and Forbearance Options: These programs allow borrowers to temporarily pause their payments during periods of financial difficulty. |
| Adjustable Loan Term: This allows borrowers to make lower monthly payments, usually by extending the loan term, which could make loan payments easier to budget for but may increase the total amount of the loan in the long run. | Loss of Federal Repayment Plans: Loan holders become ineligible for special repayment plans, such as income-driven repayment. |
| Getting a Single Monthly Payment: Combining existing loans into a new refinanced loan can help streamline monthly bills. | Loss of Loan Forgiveness: Borrowers become excluded from federal forgiveness programs, including Public Service Loan Forgiveness. |
How Many Times Can You Refinance Your Student Loans?
There is no limit to the number of times you can refinance your student loans. Each time you refinance, you essentially take out a new loan to pay off the old one, ideally with better terms. However, it’s important to ensure that refinancing is beneficial for your financial situation. Here are some key considerations:
Improved Financial Situation
You might qualify for better loan terms if your credit history or financial circumstances have changed for the better.
• Credit Score: If your credit score has improved, you may qualify for a lower interest rate.
• Income: A higher or more stable income can make you eligible for better loan terms.
• Debt-to-Income Ratio: A lower debt-to-income ratio can also help you secure more favorable terms.
Market Conditions
• Interest Rates: If market interest rates have decreased since your last refinancing, you might be able to get a better rate.
• Promotional Offers: Keep an eye out for new promotional rates or special offers from lenders.
Loan Terms
• Shorter Terms: Refinancing to a shorter loan term can reduce the overall interest you pay.
• Extended Terms: If you seek lower monthly payments, extending the loan term can provide relief, though it may increase the total interest you pay over the life of the loan.
• Consolidation: Refinancing multiple loans into a single loan can simplify your payments and possibly offer you better terms.
The Takeaway
If you’re looking to pay off your federal student loans sooner or lower your monthly payments, refinancing could be a feasible option. Potential benefits include getting a lower interest rate, adjusting the loan term, and streamlining repayments into a single loan.
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.
FAQs on Refinancing Your Federal Student Loans
Who typically chooses federal student loan refinancing?
Many borrowers who refinance have graduate student loans, since federal unsubsidized and Grad PLUS loans have historically offered students less competitive rates than federal student loans. To qualify for a lower interest rate, it’s helpful to show high income and a history of managing credit responsibly, among other factors. The one thing many refinance borrowers have in common is a desire to save money.
Do I need a high credit score to refinance federal loans?
Generally speaking, the better your history of dealing with debt (which is reflected in your credit score), the lower your new interest rate may be, regardless of your chosen lender. However, though many lenders look at credit scores as part of their analysis, it’s not the single defining factor. Underwriting criteria vary from lender to lender, so shopping around is advisable.
For example, SoFi evaluates a number of factors, including employment and/or income, credit score, and financial history. Check here for current eligibility requirements.
Are there any fees involved in refinancing federal loans?
Fees vary and depend on the lender. That said, SoFi has no application or origination fees.
đź’ˇ Quick Tip: Enjoy special member benefits and no hidden fees when you refinance student loans with SoFi.
Should I choose a fixed- or variable-rate loan?
Generally speaking, a variable-rate loan can save you money if you’re reasonably certain you can pay off the loan somewhat quickly. The more time it takes to pay down that debt, the more opportunity there is for the index rate to rise — taking your loan’s rate with it.
Most federal student loans are fixed-rate, meaning the interest rate stays the same over the life of the loan. When you apply to refinance, you may be given the option to choose a variable-rate loan.
Fixed-rate refinancing loans typically have:
• A rate that remains the same throughout the life of the loan
• A higher rate than variable-rate refinancing loans (initially, at least)
• Payments that stay the same over the life of the loan
Variable-rate refinancing loans typically have:
• A rate that’s tied to an “index” rate, such as the prime rate
• A lower initial rate than fixed-rate refinancing loans
• Payments and total interest costs that vary based on interest rate changes
• A cap, or a maximum interest rate
What happens if I lose my job or can’t afford loan payments?
Some private lenders offer forbearance — the ability to put loans on hold — in case of financial hardship. Policies vary by lender, so it’s best to learn what they are before you refinance. For policies on disability forbearance, check with the lender directly, as this is often considered on a case-by-case basis.
SoFi Student Loan Refinance SoFi Loan Products
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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