Decide whether to refinance student loans and execute the process. Covers when refinancing makes sense, comparing lender offers, understanding what you give up with federal loans, application steps, and maximizing your savings.
Compare your current interest rates to available refinancing rates
Check your current rates on studentaid.gov (federal) and lender statements (private). Current refinance rates range from 4-8% for fixed rates and 3-7% for variable rates, depending on your credit score and income. Refinancing makes sense if you can lower your rate by at least 1 percentage point. On a 50,000 USD balance, reducing the rate from 6.5% to 4.5% saves approximately 5,700 USD over 10 years.
Understand what you lose by refinancing federal loans into private loans
Refinancing federal loans into a private loan permanently eliminates access to income-driven repayment plans, Public Service Loan Forgiveness (PSLF), federal forbearance and deferment, and the SAVE plan. If you work for a nonprofit or government employer, do not refinance federal loans (PSLF forgives the balance after 10 years). If your income is unstable, keep federal protections. Only refinance federal loans if you have stable, high income and will not need these benefits.
Check your credit score and debt-to-income ratio
Lenders typically require a credit score of 670+ for competitive refinance rates. The best rates (under 5%) go to borrowers with 750+ scores and low debt-to-income ratios (under 30%). Check your score for free through your bank or Credit Karma. If your score is below 670, work on improving it for 6-12 months before applying, as even a 50-point improvement can reduce your offered rate by 1-2%.
Compare Lender Offers
Get rate quotes from at least 5 lenders without affecting your credit
Most refinance lenders offer pre-qualification with a soft credit pull (no score impact). Check rates at SoFi, Earnest, Laurel Road, Splash Financial, and your local credit union. Each lender has different criteria and rate ranges. Pre-qualification takes 2-5 minutes per lender. Compare the APR (which includes fees), not just the interest rate. Rate quotes are typically valid for 30 days.
Choose between fixed and variable interest rates
Fixed rates stay the same for the life of the loan (predictable payments, currently 4-8%). Variable rates start lower (3-7%) but can increase with market rates (typically tied to SOFR plus a margin). Variable rates are riskier on longer repayment terms (10-20 years) because rates could rise significantly. Choose fixed for loans over 7 years. Consider variable only for short repayment periods (5 years or less) when you can handle rate increases.
Compare repayment term options and total cost
Shorter terms (5-7 years) have higher monthly payments but lower total interest cost. Longer terms (10-20 years) have lower monthly payments but cost more in total interest. A 50,000 USD loan at 5%: 5-year term costs 6,600 USD in interest with 943 USD monthly payment. 10-year term costs 13,600 USD in interest with 530 USD monthly payment. Choose the shortest term you can comfortably afford.
Apply and Complete the Refinance
Gather required documents for the full application
You need recent pay stubs (2-3 months), tax returns (most recent year), W-2s, current loan statements showing balances and account numbers, proof of graduation (diploma or transcript), and government-issued ID. Self-employed applicants need 2 years of tax returns and profit/loss statements. Having documents ready before starting the application speeds up approval from weeks to days.
Submit the formal application with your chosen lender
The formal application triggers a hard credit pull (5-10 point temporary score impact). Complete the application online, upload supporting documents, and sign the loan agreement. Most lenders provide a conditional approval within 1-3 business days and final approval within 1-2 weeks. Some lenders (SoFi, Earnest) offer same-day conditional approval for straightforward applications.
Consider adding a cosigner if your rate is higher than expected
A cosigner with strong credit (750+) and high income can lower your offered rate by 1-2 percentage points. Most lenders offer cosigner release after 12-48 consecutive on-time payments. The cosigner is equally responsible for the loan, so only ask someone who trusts your ability to repay. Parent cosigners are most common. The cosigner's credit score can increase if payments are made on time.
After Refinancing
Verify the new lender paid off your old loans completely
After the refinance closes (2-4 weeks from approval), log in to your old loan servicer accounts and verify balances are zero. The new lender sends payoff funds directly to your old servicers. If any old loans show a remaining balance, contact the new lender immediately. Keep your old servicer accounts accessible for 90 days to confirm full payoff and receive final account statements.
Set up autopay for a 0.25% rate discount
Most refinance lenders offer a 0.25% interest rate reduction for enrolling in autopay. On a 50,000 USD balance, this saves approximately 125 USD per year. Set up autopay immediately after the first bill is generated. Verify the autopay amount, date, and linked bank account are correct. Some lenders require the first payment to be made manually before autopay activates.
Make extra payments toward principal whenever possible
Refinanced loans typically have no prepayment penalty. Any extra payment reduces principal and the total interest you pay. Even 50 USD extra per month on a 50,000 USD loan at 5% over 10 years saves approximately 1,400 USD in interest and shortens the loan by 10 months. When making extra payments, specify that the additional amount should be applied to principal, not future payments.
Consider refinancing again if rates drop or your credit improves
There is no limit to how many times you can refinance. If interest rates drop 1%+ or your credit score improves significantly (50+ points), check new rates. Each refinance triggers a hard credit pull, but the savings from a lower rate typically outweigh the temporary score impact. Wait at least 6-12 months between refinances to minimize hard inquiry impacts.
Frequently Asked Questions
When should I not refinance student loans?
Do not refinance federal loans if: you are pursuing Public Service Loan Forgiveness (PSLF), you are on an income-driven repayment plan with a manageable timeline to forgiveness, your income is unstable and you may need income-driven plans or forbearance, or you have less than 2 years remaining on your current loan. Refinancing federal to private permanently eliminates all federal protections and forgiveness eligibility.
How much can I save by refinancing student loans?
Savings depend on the rate reduction, balance, and term. Reducing the rate by 2% on 50,000 USD over 10 years saves approximately 5,700 USD. On 100,000 USD, the savings is approximately 11,400 USD. The larger your balance and rate reduction, the more you save. Use a refinance calculator (credible.com or nerdwallet.com) to model your exact savings with different rates and terms.
Does refinancing student loans hurt my credit score?
The formal application triggers a hard inquiry that lowers your score by 5-10 points for up to 12 months. However, consistent on-time payments on the new loan build positive payment history. Most people see their score recover within 3-6 months and improve beyond the pre-refinance level within a year. Pre-qualification (soft pull) does not affect your score, so shop rates freely before committing to a formal application.
Can I refinance just some of my student loans?
Yes. You can choose which specific loans to refinance and keep others unchanged. This is useful if you want to refinance high-rate private loans while keeping lower-rate federal loans for their protections. When applying, select only the loans you want to refinance. This strategy lets you optimize rates while preserving federal benefits on loans where they matter most.