How to Refinance Student Loans

Student loan refinancing replaces one or more existing loans with a new private loan, ideally with better terms. Your new lender pays off your old loans, so you now only have one monthly payment.

People refinance to lower their interest rate or monthly payment, change their repayment term, combine multiple lines, switch from a variable to a fixed-rate loan, or pay off debt faster.

But refinancing federal loans means giving up access to income-driven repayment, financial hardship, and loan-forgiveness programs.^[1]

Here’s how student loan refinancing works, how to qualify, when it makes sense, and alternatives to consider.

What Is Student Loan Refinancing and How Does It Work?

Student loan refinancing lets you roll one or more loans into a single private loan with updated rates and repayment terms. A lender pays off your old loans and issues a new one based on your credit, income, and financial profile.

Refinancing isn’t the same as a federal Direct Consolidation Loan. Consolidation combines federal loans into one, but keeps them in the federal system. Refinancing moves them to a private lender and changes the loan terms.^[2]

Consideration Factor	Student Loan Refinancing	Direct Consolidation Loan
What types of loans does it apply to?	Private and federal student loans	Federal student loans only
Income-driven repayment	Not available	Available
Interest rate	Fixed or variable interest rate	Fixed (weighted average of loans)
Credit check required?	Yes	No
Loan forgiveness eligibility	Federal forgiveness not available	Yes (for qualified borrowers)
Combine federal and private loans	Yes	No

You can refinance private, federal, or both into one loan, but refinancing federal student loans usually means losing federal benefits.

What refinancing does:

• Creates a new loan with new terms

• May lower your rate or monthly payment

• Combines multiple loans into one

What it doesn’t do:

• Erase your student loan debt

• Guarantee approval or a lower rate

• Keep federal protections or forgiveness programs

How to Refinance Student Loans, Step by Step

Here’s the step-by-step process on how to refinance student loans, from start to finish. Use this guide to compare options and find the best rates.

Step 1: Confirm your loans are eligible

Most private and federal student loans qualify for refinancing. But you should check with your lender to confirm eligibility. Ask about protections you may qualify for from the federal government and what benefits you’ll give up if you refinance privately.

Step 2: Establish your refinancing goals

Decide what you want from refinancing before you apply. Refinancing could help:

• Lower your monthly loan payment

• You get a fixed interest rate

• Simplify multiple loans into one

• Reduce the total interest you pay over the life of the loan.

Your goal affects your choices, like picking a longer term for lower payments or a shorter term to save on interest.

Step 3: Review your current loans

Make a list of each loan you currently have, including the balance, interest rate, loan type, servicer, remaining term, and monthly payment amount. Review the list to understand your loans.

Identify which loans you want to refinance and which you might want to keep. Federal fixed-rate loans with borrower protections, such as deferment, forbearance, and income-driven repayment plans, may be worth keeping.

Step 4: Check your credit, income, and DTI

Lenders look at your credit score, income, and debt-to-income ratio (DTI) to determine if you qualify and set your refinance rate.

Check your credit report for free through the major credit bureaus, and gather your most recent pay stubs or income statements. Estimate your DTI by dividing your monthly debt by your gross income. Correct errors in your credit history or pay down debt to improve your score before applying.

Step 5: Compare lenders and prequalify

Prequalify with multiple lenders to see estimated rates using a soft credit check, which won’t affect your score. Compare term lengths, fixed vs. variable rate loans, cosigner release options, and customer reviews and service reputation. Check for extras such as auto pay discounts and origination fees to calculate the loan’s total cost.

A comparison tool can help you quickly spot the best student loan refinance offers.

Step 6: Choose your term and structure

The loan term you choose directly affects your monthly payment and total interest cost.

• Shorter term: Higher monthly payment, lower total interest

• Longer term: Lower monthly payment, higher total interest

Pick a loan repayment term you can comfortably afford each month while still being able to cover other commitments, like your mortgage, and meet other financial goals, like building an emergency fund.

Step 7: Apply for your student loan refinance

Once you choose a lender, complete the full loan application. This includes a hard credit check and submitting documents for underwriting, like:

• Proof of income (pay stubs or tax returns)

• Current student loan statements

• Government ID and Social Security number

• Cosigner information (if using)

Approval times vary, but most lenders take a few days to a few weeks.

Step 8: Finalize the loan and confirm payoff

After approval, your new lender will pay off your existing loans directly.

Review the refinanced loan terms carefully. Keep making on-time payments on your old loans until you get confirmation they’re paid off. Set up automatic payments on your new loan to avoid missing payments.

Should You Refinance Your Student Loans?

Refinancing makes sense if you qualify for a lower interest rate, want to reduce monthly payments, or simplify multiple loans. It might not if you rely on federal benefits like income-based repayment or loan forgiveness, since refinancing to private student loans removes these protections.

• 

  Refinancing might be a good idea if:

  • You have strong credit and income

  • You want a lower rate or monthly payment

  • You don’t need federal protections

• 

  Think twice if:

  • You plan to pursue loan forgiveness

  • You have unstable income

  • You might need income-driven repayment

Pros and Cons of Refinancing Student Loans

Refinancing can help you save money and simplify student loan repayment, especially if you qualify for a lower or fixed rate. But it also comes with trade-offs, particularly if you refinance federal loans and lose built-in protections.

How Refinancing Affects Your Monthly Payment and Total Cost

Refinancing education loans can lower your monthly payment, your total interest, or both. But extending your repayment term can shrink your monthly student loan payments while increasing the total interest you pay over time.

New Interest Rate	Loan Term	Typical Impact on Monthly Payment	Typical Lifetime Interest Cost Change
Lower	Same	Lower	Lower
Lower	Longer	Lower	Higher
Lower	Shorter	Higher	Lower

Here’s an example, based on a typical loan calculation. Let’s say you refinance a $40,000 loan from 7% to 5% with a 10-year term. You could save more than $4,000 in total interest over the life of the loan. 

Now, let’s use the same loan amount and interest rate, but extend the term to 20 years. Even though your monthly payment will likely drop, you could pay more than $12,000 in additional interest over time because the loan lasts longer.

Do You Qualify to Refinance Your Student Loans?

It depends. Lenders consider your overall financial picture to determine whether you qualify and what rate you receive. You generally need good credit, steady income, and manageable debt levels to have the best chances of approval and lower rates.

Here’s what most lenders require:

• Credit score ranges: Many lenders prefer borrowers with good credit, often 650 or higher, with the best rates reserved for borrowers with credit scores of 700 or higher.

• Minimum income: Many lenders look for steady income, and some may require you to have an income of around $24,000–$35,000 annually, depending on your credit profile and loan amount.

• Maximum acceptable DTI ratio: Usually below 50%, but lower ratios — such as 36% or less — can help you qualify for better rates. 

• Loan status: Your loans should be in good standing, with no recent defaults or missed payments.

• Citizenship: Typically must be a U.S. citizen or permanent resident.

• Education requirements: Some lenders require an associate’s or bachelor’s degree from a Title IV school.

• Age and location: Must meet minimum age and state eligibility rules.

• Minimum loan amount: Usually $5,000 or $10,000 minimum to refinance.

A co-signer can help if you don’t meet the criteria to qualify on your own or receive a higher rate offer. A co-signer is someone with strong credit who agrees to share responsibility for the loan if you can’t pay. They can improve your approval odds and help you qualify for a lower rate.

Should You Refinance Federal Student Loans?

Refinancing federal student loans isn’t a good idea for most borrowers. It can make sense in certain situations, but you need to be sure the benefits outweigh what you’re giving up.

When is the best time to refinance your student loans?

The best time to refinance is when you’re most likely to qualify for a lower interest rate. That usually happens after your credit score improves, your income goes up, or you’ve paid down other debt. Refinancing when interest rates are low can also reduce your overall borrowing costs.

Alternatives to Refinancing Your Student Loans

Refinancing isn’t for everyone, especially if you have federal loans or uneven income. Here are some alternatives you might qualify for:

• Federal Direct Consolidation: Combines multiple federal loans into one with a fixed rate and a single payment.

• Income-driven repayment plans: Adjust your monthly payment based on your income and family size.

• Federal loan forgiveness: Programs that forgive remaining loan balances after a set period or qualifying employment.

• Deferment or forbearance: Temporarily pauses payments during financial hardship.

• Graduated repayment plans: Start with lower payments that increase over time.

• Extended repayment: Lets you pay your loan over a longer term to lower monthly payments.

• Temporary hardship options: Provide short-term relief during hardship, like job loss

It’s OK if refinancing isn’t the best fit. The goal is to choose a strategy that best fits your income, employment stability, and long-term financial goals.

How to Refinance Student Loans FAQs