Should I Refinance My Student Loans?

If you can qualify and have stable finances, consider refinancing private student loans if it will save you money.
Cecilia Clark
By Cecilia Clark 
Edited by Des Toups

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Forbearance extended (again)
With federal student loan payments paused, consider all options before you refi.

Student loan refinancing means swapping your current student loans for a new loan with a lower interest rate. That could save you big money over time.

Whether you should refinance student loans depends on your situation. You should refinance your student loans if:

  • You have private student loans. Borrowers should wait until 2023 to refinance federal student loans. The current interest-free forbearance for federal loans is scheduled to end after Dec. 2022, and the president recently announced up to $20,000 in forgiveness for some federal borrowers. You will lose these benefits if you refinance your federal student loans, but there is no risk to refinancing private ones.

  • Your finances are rock solid. If you refinance federal loans, they won’t be eligible for benefits like loan forgiveness and student loan relief. Think twice if it's possible you won't be able to make payments consistently.

  • You would save money. There is no reason to refinance your loans if you can't lower your total repayment costs or lower your monthly payment. Use the student loan refinancing calculator below to find out how much you could save.

  • You can qualify. You generally need a credit score at least in the high 600s and enough income to consistently pay your debts and other expenses. If you don't meet those criteria, you could refinance with a co-signer who does.

How much will refinancing save?

You can potentially save tens of thousands of dollars throughout the life of your loan by refinancing. There are three main benefits to refinancing student loans:

  • You can get a lower monthly payment, freeing up cash for other expenses.

  • You can pay off your loan faster, saving you money in interest.

  • A lower monthly payment decreases your debt-to-income ratio, which can make it easier to qualify for a mortgage or other large purchase.

Unlike refinancing a mortgage, there are typically no fees to refinance student loans. These include origination, application and prepayment fees. But read your loan agreement carefully to make sure you understand costs you could incur in the future, like late fees.

If you decide to refinance student loans, compare multiple lenders to see which offers you the best deal. If you have similar offers, give greater weight to lenders that offer the most flexibility with payments and the longest possible forbearance options. Consider which offers the best student loan refinance bonus as well.

Student loan refinancing calculator

Note: This calculator assumes that after you refinance, you’ll make minimum monthly payments.

Readers also ask

You may want to refinance private student loans as soon as you qualify for a lower interest rate. You generally must wait until after you finish school to refinance.

Don't refinance federal student loans if you're making payments on an income-driven repayment plan and/or are pursuing a federal loan forgiveness program. Refinanced federal student loans are ineligible for federal loan programs.

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.

Yes, if you qualify for a lower interest rate. With a lower rate, you’ll have a lower monthly payment, freeing up cash for other expenses. You could also choose a shorter repayment schedule, which will help you become debt-free faster and save money in interest long-term.

Will I qualify for student loan refinancing?

Student loan refinance lenders’ requirements vary, but you’ll have a good shot at qualifying if you:

  • Have good credit. At a minimum, you’ll need a score in the mid-600s. Many borrowers who are approved for refinancing have FICO scores in the 700s.

  • Have enough income to afford your expenses. You can refinance with low income, provided your debt-to-income ratio, or DTI, is solid. DTI is the amount of money you owe relative to your income. The required debt-to-income ratio for student loan refinancing varies by lender. Many lenders look for DTIs at least less than 50%, but a DTI below 20% is excellent.

  • Attended an eligible school. Most refinance lenders require that borrowers attended a school authorized to receive federal aid dollars. Only a few lenders will refinance your loans if you don't have a degree.

If you don’t meet the credit and income requirements for refinancing, you may still qualify if you apply with a co-signer who does. Contact the lender to find out why your application was rejected, then take steps to meet that requirement, if possible. That may mean building your credit score or paying off one of your student loans to lower your debt-to-income ratio.

Are my finances stable enough to refinance?

If you have federal loans and are struggling to make consistent payments, refinancing is also not for you. Instead, consider federal student loan consolidation or an income-driven repayment plan, if you’re not on one already. These options won’t save you money in the long term, but they can lower your monthly student loan payment and free up cash for other expenses.

If you have private student loans, you have nothing to lose by refinancing because private loans aren’t eligible for federal loan programs. You also can't transfer private loans to the federal loan program.

To find out whether your current student loans are federal or private, log into the government’s online Federal Student Aid portal or the National Student Loan Data System. Any student loans that don’t appear in these two places are private. They will most likely be listed on your credit report.

Other student loan calculators

Student loan payoff calculator: Find your debt-free date and see how extra payments can make it arrive more quickly.

Student loan calculator: Determine your monthly student loan payment based on your interest rate, term length and the amount you borrowed.

Student loan consolidation calculator: Compare your payments under federal loan consolidation plans with your current bills.

Parent PLUS loan calculator: Find out how much you'll pay monthly on federal direct PLUS loans.

Discretionary income calculator: Determine what you would pay under federal income-driven repayment plans.

Weighted average interest rate calculator: Determine the combined interest rate on all your student loans. You’ll need that average to estimate your loan payments under federal loan consolidation programs or to compare student loan refinancing offers.

» See more of NerdWallet's loan calculators

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