people working at a desk thinking about refinancing student loans

Tips for Refinancing Your Student Loan

You make it out into the real world – and all of the sudden – it dawns on you that you have real bills to pay and the debt you racked up in school is looming over your head like a dark cloud. Depending on how much debt you accumulated, your student loan payments may be slightly unmanageable on a starting salary.

Don’t despair. Refinancing your student loans, rather than getting a forbearance or loan deferment, can help cushion the hurt of student loan payments while still making progress in paying them off.

Can Student Loans Be Refinanced?

Yes, your student loans can be refinanced if you meet certain criteria set by your lender.

Each lender will set their own rules, but you will generally need to meet the following rules:

  • Have eligible student loans
  • Have a degree from a qualifying college
  • Your credit score is at least in the high 600s
  • You need to be making enough income to afford all debts

What Is Student Loan Refinancing?

You know what they say: out with old, in with the new. Well, that’s sort of the same principle as refinancing your loans.

Student loan refinancing is when you take out a new loan from a private lender to pay off one or more of your old loans, creating a new loan with a new lender.

Basically, this brings all of your debt together to be paid down with one monthly payment.

Here’s a pro of refinancing: If you qualify, you’ll most likely snag a new loan at a much lower interest rate.

While you’re in the process of taking out a new loan to pay off outstanding student loan debt, you can also take this time to change your repayment plan.

What’s the Difference Between Private Refinancing and Federal Consolidation?

Private refinancing is done through a private lender. You can use this loan to consolidate both private and federal loans. With federal consolidation, you can only consolidate federal loans.[1]

Federal consolidation is when you take out a direct consolidation loan from the government. This consolidates all federal education loans into one. You can apply for federal loan consolidation through the office of Federal Student Aid.

Refinancing Student Loans: Pros

There are definitely pros to refinancing your student loans through a private lender. If you choose this route, you can enjoy:

  • One single payment per month
  • Lower monthly payments and interest rates can help avoid default, which protects your credit, too
  • A fixed monthly interest rate for the remaining life of the loan
  • The chance to pick a new repayment plan
  • Possible loan discounts depending on the lender

Refinancing Student Loans: Cons

While there are pros to refinancing, there are also cons. When refinancing your student loans, consider the following:

  • More interest is paid over time. When you consolidate, you might push out your loan payment schedule, which means more interest paid.
  • If you are doing a federal consolidation, you may lose benefits, such as time put towards the Public Service Loan Forgiveness program. Basically, the clock restarts.
  • There’s no 6-month grace period at the start of the loan when you consolidate. Some offer a 2-month grace period.
  • You can only consolidate once. If you still can’t manage the interest rate, there are no do-overs.

Tips for Refinancing Student Loans

Refinancing can be a helpful tool for managing student loan repayment. Before you dive headfirst into the process, consider these five #MoneyTips for refinancing your student loans.

Know your objective

Before applying for refinancing, know what your main goal is for consolidating your student loan debt.

Do you want a lower interest rate? Do you need to make monthly payments easier and more manageable? Are you interested in a new repayment plan? These are things you want to be sure about so you can articulate your goals to a potential lender.

Consider the type of loan

Do you want to go private? Are you only looking to consolidate your federal loans?

Most private lenders won’t consolidate federal loans (although there are a few that will), so you may want to consider federal loan consolidation if you have troublesome federal loans.

Factor in your current financial situation

Look critically at your income to determine what you are willing to pay (and what you can realistically afford).

Your credit score is going to play a role in determining your interest rate. When talking to lenders, be transparent about your score, which you can check for free from all three lenders here.

When you refinance your student loans, you’re also able to set a new repayment schedule, which can be adjusted to better fit your current financial situation.

A longer loan term means more interest paid overtime, but it will be a more manageable monthly payment.

A shorter loan term means a higher monthly payment, but a lower interest rate and gets you out of debt faster.

Know your current interest rate

Federal student loan rates are considerably lower than private student loans. Note what loans you are looking to consolidate and what their respective rates are. Knowing the benchmark will help you shop for a lower rate that works for your financial situation.

Ask: Who is my lender and what do they offer?

While student loan refinancing works just about the same across the board, each lender is different. Shop around and collect the following information on lenders:

  • Required minimum credit
  • Income requirements
  • Terms/repayment schedules offered
  • Interest rates offered

Best Student Loan Refinancing Options

Check out our MoneyTips’ picks for the best student loan refinancing options:

LenderFixed APRMin. Credit Requirement:Max Loan Amount:
Earnest2.50% APR to 5.79% APR650$500,000
U-fi3.59% APR to 12.34% APR680$125,000
LendKey2.95% APR to 7.63% APR660$300,000
SoFi2.74% APR to 6.74% APRTBDTBD
Discover4.24% APR to 12.99% APRTBDTBD
Citizens BankStarting at 2.97% APR670$150,000
Splash Financial2.49% APR to 6.25% APR650No Max

The Short Version

  • Refinancing student loans and federal consolidation are different. One happens through a private lender, while the other tackles federal loans only
  • While refinancing can make loan repayment easier to manage, there are disadvantages, such as more interest paid over time or a loss of loan benefits
  • Research a handful of lenders to make sure you not only qualify for their refinancing program, but you’re getting the best interest rates possible
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  1. Federal Student Aid Information Center. “Consolidating your federal education loans can simplify your payments, but it also can result in the loss of some benefits.” Retrieved November 2021 from

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