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What Is Refinancing Student Loans, Really?
Refinancing is a way to decrease the amount of interest you pay on your student loans.
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How is this page expert verified?
NerdWallet's content is fact-checked for accuracy, timeliness and relevance. It undergoes a thorough review process involving writers and editors to ensure the information is as clear and complete as possible.
Cecilia Clark is an editor on the loans team. She specializes in student loans and manages product reviews and roundups. Previously, she worked as a freelance writer and developed communications strategies for cybersecurity firms. Cecilia has also worked in post-secondary education, elevator operations management and sales and military nuclear command control, maintenance management and public affairs.
Kirsten VerHaar is an editor for personal finance, with an English literature degree from the University of Colorado Boulder. In her previous roles, she was a lead editor with eBay, where she managed a team of writers who produced coverage for the site's global content team. She has also written for Yahoo. Since joining NerdWallet in 2015, she has covered topics as wide-ranging as vacuums (yes, really), budgeting and Black Friday.
In a nutshell, student loan refinancing is when a private lender pays off your existing loans and gives you a new loan with new terms. It usually costs nothing to refinance student loans, and you can save a lot over time by lowering your interest rate.
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Let’s say you have $40,000 in private student loans with an 8% interest rate. That means you’re paying $485.31 every month for the next decade.
After applying with a private lender that offers student loan refinancing, you're approved for a lower interest rate — say 5%. That would reduce the monthly payments on your $40,000 loan to $424.26.
This would ultimately save you a total of $7,326 in interest.
Estimate your potential savings with our student loan refinance calculator
Note: This calculator assumes that after you refinance, you’ll make minimum monthly payments.
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.
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.
Not everyone can refinance student loans — and many borrowers shouldn't. Refinance companies use certain criteria to evaluate your eligibility. Generally, you need good credit (in the high 600s or above) and a stable income. If you’re lacking either, you’ll need a co-signer who qualifies.
And think of the length of your loan term when considering refinance. If you’re already halfway into paying off a 10-year loan and refinancing would only add more time to your loan term, it may not benefit you in the long run even if your monthly payment is lower.
It can make sense to refinance as soon as you're eligible. That will maximize your potential savings. If you’ve started working and have built up your credit, see what kind of rate you can qualify for.
If you previously refinanced your loans, you can refinance again to lock down an even lower rate.
Here are a few more things to keep in mind before you apply:
There are a few caveats if you refinance federal (versus private) loans. Payments on federally held student loans are paused interest-free through Aug. 31, 2022, as part of relief efforts due to the coronavirus. You will give up this benefit by refinancing your federal loans.
Compare offers from multiple lenders. Get interest rates from different companies to identify the lowest one. Generally speaking, the better your credit score, the better the rate will be.
There’s no catch. Refinancing isn't a scam. We’ve even compiled the best student loan refinance companies across multiple categories, along with the pros and cons.
