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Does Refinancing Student Loans Save Money?
Refinancing can save you money — how much you save depends on your credit, income and financial health.
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Teddy is a former student loans writer with NerdWallet, where she covered topics around managing money before, during and after college. Her work has been featured by The Associated Press, USA Today, the Chicago Tribune and Reuters.
Des Toups was a lead assigning editor who supported the student loans and auto loans teams. He had decades of experience in personal finance journalism, exploring everything from car insurance to bankruptcy to couponing to side hustles.
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Refinancing student loans can save money by lowering how much you pay in interest and the time it takes to pay off the loan.
Student loan refinancing is trading in multiple loans for one, new loan — ideally with a lower interest rate. You can save the most money with a lower rate and shorter loan term. But the exact savings will depend on your income, credit score and debt-to-income ratio.
NerdWallet ratingNerdWallet'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.
NerdWallet ratingNerdWallet'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.
Fixed APR
3.95-10.49%
Actual rate will vary based on your financial profile. Fixed annual percentage rates (APR) range from 4.60% APR to 10.74% APR (4.35% - 10.49% with .25% auto pay discount). Variable annual percentage rates (APR) range from 6.13% APR to 10.74% APR (5.88% - 10.49% with .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 a month, but there is no limit on the amount that the rate could increase at one time. 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 require selection of our shortest term offered (5 years) and enrollment in our .25% auto pay discount from a checking or savings account. Enrolling in autopay is not required as a condition for approval.
Variable APR
5.88-10.49%
Actual rate will vary based on your financial profile. Fixed annual percentage rates (APR) range from 4.60% APR to 10.74% APR (4.35% - 10.49% with .25% auto pay discount). Variable annual percentage rates (APR) range from 6.13% APR to 10.74% APR (5.88% - 10.49% with .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 a month, but there is no limit on the amount that the rate could increase at one time. 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 require selection of our shortest term offered (5 years) and enrollment in our .25% auto pay discount from a checking or savings account. Enrolling in autopay is not required as a condition for approval.
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.
To estimate your savings and decide whether you should refinance, you’ll want customized rates based on your financial profile. Lender's rates vary, so you'll want to shop and compare.
Here’s how to compare offers from multiple lenders:
1. Get rate estimates. As you research some of the top student loan refinance lenders, see which ones allow you to pre-qualify. To pre-qualify, you'll enter basic information so the lender can do a soft credit pull. The soft credit pull — which does not hurt your credit score — is used to see what interest rate you qualify for.
For lenders that don’t offer pre-qualification, you’ll need to complete a full application to see personalized interest rates. Applications trigger a hard credit pull. Multiple hard inquiries can hurt your credit. But if you apply for multiple refinance loans within a short time period, the credit bureaus typically count it as a single hard pull. This can lessen the impact on your credit score.
2. Compare APRs. Once you have several estimates or offers, compare rates apples-to-apples by looking at the annual percentage rates. APRs represent the true borrowing cost, including any fees that apply.
3. Consider other loan features too. Getting the lowest possible rate will save you the most money, but there are other features to pay attention to. Term length can impact your savings. The longer you pay on a loan, the more you pay in interest. Choosing a shorter term can help you save the most money, but it can also require a higher monthly payment. See if you can qualify for a student loan refinance bonus as well.
How much could you save?
Student loan refinance lenders advertise that you could save "thousands," which isn't necessarily an empty promise. They typically determine this number by comparing the average amount of interest a subset of their customers would pay with and without refinancing.
For instance, say the average customer owes $100,000 in student loans with an 8% interest rate. On a 10-year repayment plan, that borrower would pay $45,594 in interest throughout the life of the loan. If the same customer gets a 5% interest rate after refinancing and keeps a 10-year loan term, he or she would save about $18,315 by lowering their total interest payments to about $27,279.
Remember that your rate will depend on your credit score, income and financial health. So shop for personalized estimates instead of relying on advertised interest rate ranges.
Readers also ask
Can you refinance student loans?
You can refinance both federal and private student loans. But you can only refinance federal loans through private lenders — the federal government doesn’t offer student loan refinancing. Refinancing federal loans forgoes borrower protections, like income-driven repayment and Public Service Loan Forgiveness.
To qualify for a refinance, you typically need good credit, positive credit history and enough income to afford debt payments and expenses.
You should refinance your student loans if you would save money, you can qualify and your finances are stable. To qualify for the lowest rates — and the biggest savings — you’ll need an excellent credit score, clean credit history and enough income to support your debts and expenses.
If you have federal loans and are struggling to make consistent payments, refinancing would disqualify you from more helpful programs. Instead, consider federal student loan consolidation or an income-driven repayment plan.
You can refinance student loans as often as you’d like. If you’ve already refinanced and your credit has recently improved, consider refinancing again to lock in a lower rate. There are no application or origination fees, so refinancing won’t cost you anything.
