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Should You Refinance Federal Student Loans?
Consider refinancing federal student loans only if you don't need federal benefits and can qualify for lower rates.
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Student loan refinancing can help you save money if you qualify for lower interest rates. But even if you’re offered the lowest rates, should you refinance your federal student loans?
Refinancing federal loans with a private lender waives your access to government programs that can give you more flexible repayment options and even forgiveness.
If you have private student loans, refinancing remains a good option if you can lower your interest rate, but think twice about refinancing federal loans.
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When you refinance, a private lender pays off your existing student loans and issues you a new private loan with new terms, including a lower rate. This can save you money, and — if you refinance multiple loans — you’ll have just one monthly payment to budget for.
You can only refinance student loans with a private lender — and once you refinance government loans, you can’t refinance them back to federal student loans.
Can you refinance federal student loans?
It’s possible to refinance federal student loans; however, you risk losing government benefits, including:
Access to potential loan forgiveness. If you teach or work in public service or for a nonprofit, you would lose access to the federal Public Service Loan Forgiveness and Teacher Loan Forgiveness programs, which forgive your loans tax-free after a certain number of years.
Flexible repayment plan. These include income-driven repayment plans, which can make your monthly payments more manageable. These plans base payments on your income and family size and forgive your remaining debt after 20 or 25 years of repayment. Some private lenders offer plans that decrease your payments temporarily, but few offer income-driven plans.
Interest-free payment postponements. If you lose your job or run into financial issues, you may be able to temporarily pause repayment via deferment and forbearance. During deferment, interest does not accrue on subsidized federal student loans. Interest usually accrues on unsubsidized loans, as well as on all loans during forbearance. Some refinance lenders offer postponement options, but you are usually responsible for the interest.
Loan discharge options. Remaining federal loan debt may be eliminated in instances such as school fraud or if you, or the borrower benefiting from the loan, die or become totally and permanently disabled. Discharge options vary by refinance lender.
When to refinance federal student loans
The main reason to refinance government loans is to save money. If you don't need the federal loan benefits, refinancing student loans could offer long-term savings on high-interest federal loans.
For example, say you owed $30,000 with a 7% interest rate and 10 years on your repayment term. Refinancing at a 5% interest rate — roughly the best you could expect — would save you around $3,600.
There are additional advantages to refinancing, including:
Make a single loan payment each month. If you also have private student loans, you can refinance them together with federal loans.
Switch student loan servicers. You'll get a new servicer through your refinancing lender, which you may want if you've been unhappy with your federal loan servicer.
In some instances, it may make sense to refinance only some of your federal loans. For example, you could refinance your higher-interest PLUS loans from graduate school, but not your undergraduate direct loans. This would keep part of your federal protections in place, should the unexpected happen in the future.
The federal government has the ability to offer borrower protections, which means it’s helpful to think about more than the interest rate when deciding whether to refinance. Consider the following:
Will your job be at risk in the coming months?
Would you struggle to afford all your financial obligations if your employment changes?
Do you qualify for other federal loan forgiveness programs?
If the answer is "yes" to any of these questions, think twice about refinancing.
To keep federal benefits, you can consolidate federal student loans instead of refinancing. Consolidation takes several federal student loans and combines them into one new loan. While federal consolidation won’t lower your interest rate, you can gain federal protections and benefits when consolidating non-direct loans into a direct loan.
To qualify for refinancing, you’ll typically need good credit (a FICO score in at least the high 600s) and a debt-to-income ratio less than 50%. If you wait to refinance, work to exceed those benchmarks to get the lowest rate possible when you do apply.
If you've decided now is the best time to refinance your federal loans, here’s how to get started:
Get estimates. Review offers from multiple lenders to find the best deal. Most private lenders will pre-qualify you via a soft credit check so you can see your new interest rate.
Choose a lender. Once you select a lender that best fits your needs, you’ll complete an application. Plan to have verifying documents such as proof of employment, residency and graduation.
Wait for loan payoff. Your refinance lender will pay off the debt to your current lender. Moving forward, you’ll make payments to your new lender.
NerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.54% APR to 9.23% APR (excludes 0.25% Auto Pay discount). Variable rates range from 6.13% APR to 9.98% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
650
5.88-
9.73%
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.54% APR to 9.23% APR (excludes 0.25% Auto Pay discount). Variable rates range from 6.13% APR to 9.98% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
NerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
NerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
4.89-
9.04%
See LendKey's full terms and conditions at https://www.lendkey.com/disclaimers
680
5.54-
9.12%
See LendKey's full terms and conditions at https://www.lendkey.com/disclaimers
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
NerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
4.88-
8.44%
Subject to credit approval. Terms and conditions apply. https://www.elfi.com/terms/
680
4.86-
8.24%
Subject to credit approval. Terms and conditions apply. https://www.elfi.com/terms/
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
NerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Splash Financial, Inc. (NMLS # 1630038) reserves the right to modify or discontinue products and benefits at any time without notice. The information you provide is an inquiry to determine whether Splash’s lending partners can make you a loan offer, but does not guarantee you will receive any loan offers. Terms and conditions apply. Products may not be available in all states. These rates are subject to change at any time. If you do not use the specific link included on this website, offers on the Splash website may include other offers from lending partners that may have a higher rate. Fixed Rate options range from 5.94% APR - 8.95% APR (without autopay). Variable rate options range from 7.60% APR (with autopay) to 7.85% APR (without autopay). Variable APRs and amounts subject to increase or decrease. Lowest rates are reserved for the highest qualified borrowers and may require an autopay discount of 0.25%. Some of the rates are based on the one-month London Interbank Offered Rate (“LIBOR”) index and some are derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). Fixed loans feature repayment terms of 5 to 20 years. For example, the monthly payment for a sample $10,000 with an APR of 7.50% for a 10-year term would be $118.70. Variable loans feature repayment terms of 5 to 20 years. For example, the monthly payment for a sample $10,000 with an APR of 7.85% for a 5-year term would be $202.05.
650
7.60-
7.85%
Splash Financial, Inc. (NMLS # 1630038) reserves the right to modify or discontinue products and benefits at any time without notice. The information you provide is an inquiry to determine whether Splash’s lending partners can make you a loan offer, but does not guarantee you will receive any loan offers. Terms and conditions apply. Products may not be available in all states. These rates are subject to change at any time. If you do not use the specific link included on this website, offers on the Splash website may include other offers from lending partners that may have a higher rate. Fixed Rate options range from 5.94% APR - 8.95% APR (without autopay). Variable rate options range from 7.60% APR (with autopay) to 7.85% APR (without autopay). Variable APRs and amounts subject to increase or decrease. Lowest rates are reserved for the highest qualified borrowers and may require an autopay discount of 0.25%. Some of the rates are based on the one-month London Interbank Offered Rate (“LIBOR”) index and some are derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). Fixed loans feature repayment terms of 5 to 20 years. For example, the monthly payment for a sample $10,000 with an APR of 7.50% for a 10-year term would be $118.70. Variable loans feature repayment terms of 5 to 20 years. For example, the monthly payment for a sample $10,000 with an APR of 7.85% for a 5-year term would be $202.05.
