Can you refinance student loans? The short answer is: yes, you can refinance student loans. Both federal loans and private loans can be refinanced.
Even if you don’t necessarily need to refinance your student loans, you may be able to save money by doing so.
Can You Refinance Federal Student Loans?
If you have federal student loans, you have two options for refinancing:
- Consolidating your federal loan or loans with another federal loan (Direct Consolidation Loan).
- Refinancing your federal loan or loans with a private loan.
Consolidate Federal Loans with a Direct Consolidation Loan
Your first option for refinancing or consolidating your federal student loans is a Federal Direct Consolidation Loan. You can use this option to consolidate multiple federal student loans into one consolidated loan.
Because federal student loan interest rates are set by the federal government, your interest rate will stay the same (rounded up to the nearest one-eighth of a percent) after consolidating into a Direct Loan.
Direct Consolidation Loans are often overlooked as a refinancing option because they don’t offer reduced interest rates, and may slightly increase your rate.
However, consolidating with this type of federal loan still has benefits, including the following:
- Minimize the stress of making payments. Making payments on multiple federal student loans every month can be tedious and complicated, which is the last thing you need if you’re already struggling to pay.
Consolidating those payments into one monthly amount can help you make sure everything is always paid on time and in full.
- Reduce your monthly payments. While it’s true that refinancing with a Direct Consolidation Loan won’t lower your interest rate, it can lower your monthly payment.
Taking out a Direct Consolidation Loan can extend your repayment term up to 30 years, in turn reducing what you pay monthly. This makes it a viable option if you’re having trouble making your monthly payments.
- Get a fixed interest rate if you have an older loan. If you have an older loan, you may have a variable interest rate. This means that your interest rate for a given time period can be higher or lower, depending on market conditions.
Consolidating with a Direct Consolidation Loan will give you the benefit of a fixed interest rate that stays the same throughout the life of the loan.
- Qualify for IDR and PSLF if you don’t already. If you have loans under an older program (FFEL or Perkins), you can’t benefit from Income-Driven Repayment (IDR) plans or Public Service Loan Forgiveness (PSLF).
But if you refinance those loans with a consolidation loan, they become part of the Direct Loan Program. Therefore, you would be eligible for both IDR and PSLF going forward.
Refinancing Federal Loans with a Private Loan
Your second option for refinancing federal student loans is taking out a private loan. Unlike consolidating with a Direct Consolidation Loan, a private loan can offer the benefit of a lower interest rate if you have good credit and a stable source of income, or if you have a co-signer.
However, you will lose your government loan benefits by transferring your federal loan to a private one. That includes qualification for IDR plans and PSLF.
Still, many college graduates find that they’re able to pay less on their student loans—and pay them off faster—by refinancing with a private lender.
See “Refinancing Student Loans with a Private Lender” below for the pros and cons of refinancing your loans privately.
Can You Refinance Private Student Loans?
Unlike federal student loans, private student loans have only one option when it comes to refinancing. You can only refinance private loans with another private loan. You cannot use a federal consolidation loan to refinance a private loan, or to consolidate your federal and private loans together into the federal Direct Loan program.
When you refinance a private student loan with another private loan, there’s no downside in terms of a loss of benefits. While refinancing a federal student loan with a private lender means you’ll miss out on federal loan benefits, you have nothing to lose by refinancing a private loan.
Keep reading to learn the pros and cons of refinancing your loans with a private lender.
Refinancing Student Loans with a Private Lender
The most common method of refinancing student loans is refinancing with a private lender. With this method, you can shop for the best terms and rates, and select the lender who suits you best.
Below are the pros and cons of refinancing your student loans privately.
Pros of Private Refinancing
- Lower interest rate. Whether you’re refinancing federal student loans or private ones, you can often qualify for a lower interest rate by refinancing.
If you have private student loans, you likely have much better credit and possibly a lower debt-to-income ratio now than you did when you first took out your loans. If a private lender can see that you’ve made your payments on time and are a reliable borrower, you’ll qualify for a better rate than you did as a student borrower.
If you have federal student loans, your rates on those loans are set by the government. Private loans offer more leeway and variety, which can be a benefit if you have good credit and a stable source of income.
Fixed interest rate. If you have a private loan—or a very old federal student loan—with a variable interest rate, you can refinance privately to get a loan with a fixed interest rate.
As interest rates are expected to continue rising at least until 2020, signing new terms with a fixed interest rate now will likely save you a good deal of money later on.
- Refinance multiple times. You don’t have to wait until you have perfect credit to refinance your student loans. It’s worthwhile to check in with private lenders every year or so to see if you qualify for a lower interest rate than you have now.
When your credit improves in a few years, you can refinance your loans again at an even lower rate.
- Refinance right away. Most federal student loans and some private student loans give students a grace period before repayment must start. For most loans, interest will still accrue during this grace period.
Many top private lenders allow student borrowers to refinance their student loans during this grace period, before repayment even begins. This can end up saving you a great deal in interest.
- Access lower interest rates with a co-signer. Most college students who are still within their grace period—and many college graduates—won’t qualify for lower interest rates on their own. But many private lenders offer the benefit of allowing co-signers to help bring down your interest rates. Many private lenders also offer co-signer release, so they aren’t on the hook for the life of the loan.
If you have a parent or family member with excellent credit and a stable source of income who’s willing to take out the loan with you, you could qualify for a significantly lower rate.
- One monthly payment. If you have both federal and private student loans, you’re not alone. Many college students rely on a combination of federal and private lenders to get through school.
A significant benefit of refinancing your loans with a private lender is that you can refinance all of your loans—private and federal alike—into one brand-new loan.
This means you’ll only have to deal with one monthly loan payment, rather than several. For many borrowers, this alone can make loan repayment half as burdensome and ensure every payment is made on time, every time.
- Variety of repayment plans. With your federal loans, you only have the repayment terms offered by the Department of Education. Generally speaking, this gives you a range of terms between 10 years and 25 years.
When you refinance with a private lender, you can choose repayment terms that last anywhere from 5 years to 30 years. This means you can pay off your loan very quickly if possible and spare yourself a great deal of interest, or you can take your time and make small monthly payments.
Use this refinance calculator to see how much you could save by refinancing your student loans
Cons of Private Refinancing
- Loss of federal loan benefits. If you refinance your federal student loans with a private loan, you’ll lose your federal loan benefits.
You’ll no longer be able to take advantage of programs like Public Service Loan Forgiveness or income-driven repayment plans.
- Fixed repayment plan. If you have federal loans, you have the option of switching between different repayment plan options. For example, you can switch from the 10-Year Standard Repayment Plan to an Income-Driven Repayment Plan, which calculates your monthly loan payment on your discretionary income for a term of 20 to 25 years.
When you refinance these loans privately, you lose those options. Instead, you need to choose a repayment plan that you expect to be able to meet for the whole lifespan of the loan.
As mentioned above, you will have a great deal of variety when choosing your repayment plan with a private lender. But it’s essential to pick a plan and terms that you know you can uphold for years to come.
- High eligibility requirements. The top private lenders have lofty requirements if you want to get a good interest rate. Many private student loan companies require borrowers to have a good or excellent credit score to qualify for a loan.
Student Loan Refinancing FAQs
Q – Can you refinance private student loans into federal?
A – No. Private student loans can only be refinanced with another private loan. You cannot refinance a private student loan into a federal loan.
Q – Can you refinance federal loans into private?
A – Yes. Federal loans can be refinanced into a private loan.
Q – Can you refinance student loans that you’ve already refinanced before?
A – Yes. All student loans can be refinanced—even those which have already been refinanced before.
Q – Can you refinance federal and private student loans together?
A – Yes. You can refinance and consolidate your federal and private student loans into one loan with a private lender.
Q – Does a Direct Consolidation Loan offer a better interest rate?
A – No. Your interest rate for federal student loans is fixed by the Department of Education. It won’t change if you consolidate with a Direct Consolidation Loan.
Q – Is refinancing a student loan a good idea?
A – Whether or not refinancing a student loan is a good idea depends on your loans and your financial situation. You can learn more about when to refinance and when not to refinance here.
Q – How do you refinance a student loan?
A – Take a look at the table below with the lenders we think are the best in the market. Follow the link to get started with an application.
Refinancing Student Loans Bottom Line
Refinancing your student loans, whether you have federal loans, private loans, or both, is always a worthwhile option to consider.
Before you dive into refinancing, make sure to carefully compare your current loan rates and terms with the new loan, and consider all of the pros and cons of refinancing or consolidating.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. (2)$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. (3)This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 1/27/2021. Variable interest rates may increase after consummation.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
Ascent: Ascent’s undergraduate and graduate student are funded by Bank of Lake Mills or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 9/1/2023 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs require interest-only payments, the shortest loan term, and a cosigner, and are only available to our most creditworthy applicants and cosigners with the highest average credit scores.
*The minimum amount is $2,001 except for the state of Massachusetts. Minimum loan amount for borrowers with a Massachusetts permanent address is $6,001.