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Last update: March 25, 2024

Student Loans Refinancing: The Complete Guide

We’re here to teach you all about student loan refinancing. You’ll learn what to look for so that you can make the perfect choice for your unique needs.

By Brian Flaherty, B.A. Economics

Edited by Yerain Abreu, M.S.

Want to simplify your loan payments and potentially save thousands of dollars? Refinancing your student loan might be the answer. Student loan refinancing is a financial strategy that involves using a new loan to pay off your current student loans, typically with a lower interest rate—sounds tempting? Let's uncover the secrets to lowering your interest rates, simplifying your payments, and saving you a ton of money.

    What is student loan refinancing?

    Student loan refinancing is the process of taking out a new loan, typically with better terms or a lower interest rate, to pay off your current student loans. This isn't limited to just one loan either; If you've got multiple loans, you can combine 'em into a single one.

    When you refinance, you're often aiming to get a lower interest rate than what you currently have, which can save you some serious cash over the life of the loan.

    Before you commit to refinancing a student loan, it's essential to weigh the pros and cons, like you would with any financial decision. Let's dive into the good, the bad, and the "might-make-you-think-twice" aspects of student loan refinancing.

    Benefits of student loans

    • Lower interest rates

    • Simplified payments

    • Flexible repayment terms

    • Possibility to remove a cosigner

    Drawbacks of student loans

    • Loss of federal loan benefits

    • Won’t completely cancel the loan

    • Variable rates can increase

    • Impact on credit score

    TuitionHero tip

    Refinancing federal student loans with a private lender may help you get a lower rate. However, keep in mind that it will turn your federal loans into a private loan and lead to the loss of federal benefits, including income-based repayment plans and loan forgiveness programs.

    Student loan refinancing vs. consolidation

    Student loan refinancing and consolidation are two ways to potentially save money and simplify the repayment process. Knowing the difference is critical for making the right decision and avoiding mistakes.

    Loan refinancing

    Refinancing replaces an existing loan with a new one, often with better terms or a lower interest rate. This is common when a borrower's credit score improves, or interest rates drop.

    Great for students who:
    • Have high-interest loans

    • Recently improved their credit score

    • Want to change their loan term

    Loan consolidation

    Consolidation simplifies your loans by combining multiple loans so that there's just one monthly payment to manage. However, loan consolidation usually won't lower your interest rate.

    Great for students who:
    • Want to manage fewer loan payments

    • Want to keep federal loan benefits

    • Want to change their loan term

    TuitionHero’s best student loan refinancing offers for March 2024

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    5.99% - 11.99%¹


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    What to consider before refinancing a student loan?

    There are several factors that you should consider when refinancing a student loan. Let's break it down so you can make an informed decision about your financial future.

    1. Eligibility requirements

    Lenders have specific criteria for refinancing , so you'll want to make sure you fit the bill before you apply. This criteria can include your credit score, income level, job stability, and whether you've completed your degree. Familiarize yourself with these requirements to avoid wasting time on unsuitable lenders. Below are a few things that may impact eligibility:

    1. Citizenship or nationality status
    2. Proof of stable income
    3. Credit score and credit history
    4. Degree completion

    2. Interest rate type

    When you refinance, you can choose a new interest type. Interest rates are the cost of borrowing money, expressed as a percentage of the principal loan amount. They come in two flavors: fixed and variable.

    Fixed interest rates are predictable, as they stay the same throughout the life of the loan. Federal student loans only come with fixed rates. These rates can change for new loans each year, but your rate remains the same once you take out a loan.

    Variable interest rates can change over time based on market conditions. Private student loans can have either fixed or variable interest rates, which are determined by the lender. These rates are often based on your creditworthiness, term length, and repayment options.

    3. Interest rate percentage

    When refinancing, you should aim for a lower interest rate than your current loan. A lower interest rate can significantly reduce the amount you pay over the life of your loan. However, always be aware that the lowest advertised rates are usually variable and could rise in the future.

    4. Repayment terms

    Refinancing provides an opportunity to adjust your loan term . A shorter term means higher monthly payments but less paid in interest over time, while a longer term lowers your monthly payments but increases the total interest paid. Consider your current financial position and long-term income expectations when choosing your term.

    5. Cost of the loan

    It's essential to calculate the total cost of the refinanced loan before deciding to take it on. This includes not just the principal amount, but also the interest, origination fees, or any additional charges. Take a look at the annual percentage rate (APR) to get an idea of the total cost of the loan for a year, including interest and fees. Keep in mind that you may be able to reduce your loan costs by making extra payments or paying off the loan early.

    6. Monthly payments

    After calculating your total loan cost, you need to understand your monthly payments. Your monthly payments will be determined by several factors including your total loan amount, your loan term (the length of time you have to repay the loan), and the interest rate. Also, whether the interest rate is fixed or variable will impact if your payments can change over time.

    A longer term generally means smaller monthly payments, but you'll end up paying more in interest over the life of the loan. A shorter term means higher monthly payments, but less interest paid overall.

    7. Cosigner release

    A cosigner release is an option offered by some lenders that allow the removal of your cosigner from the loan after you've demonstrated reliable repayment, typically over a few years. This frees your cosigner from any financial liability linked to your loan, providing peace of mind for both parties.

    This feature isn't available with all lenders, so make sure to check if it's offered if it's important to you. If your lender doesn’t offer a traditional cosigner release, you may be able to remove your cosigner by refinancing your loan into a non-cosigned loan.

    8. Forgiveness and deferments

    Borrowers may have access to programs and policies that allow them to defer loan payments or even cancel them altogether. You'll want to look into if the loan you're considering has a cancellation, deferment, or forbearance clause.

    Student loan cancellation means the borrowers will no longer have to make any more loan payments and their remaining loan balance is forgiven. Students can also postpone their payments under certain conditions. Let's explore when your loans may be eligible for cancellation:

    • Public Service Loan Forgiveness (PSLF): Government or non-profit workers may have remaining balance forgiven after 120 qualifying payments.
    • Disability Discharge: Loans may be forgiven for those with total and permanent disabilities.
    • Perkins Loan Cancellation: Loans may be forgiven if the borrower works in certain public service jobs or professions, such as teaching, nursing, law enforcement, or the military.
    • Closed School Discharge: Loans may be forgiven if your school closes before you graduate.

    Deferment is like hitting the snooze button on your student loan payments. If you're going through a temporary rough patch, deferment allows you to postpone your loan payments. Here are some situations that might qualify you for deferment:

    • Unemployment: Job hunting can be as tough as finding a needle in a haystack, so if you're actively seeking employment, you may be eligible for deferment.
    • Economic hardship: If you're experiencing financial difficulties, deferment can give you some breathing room.
    • Military service: If you're serving your country, your student loans can take a back seat while you're on active duty.

    Forbearance is like asking your student loans to "chill out" for a bit. It's another way to temporarily postpone your loan payments when facing financial challenges. Unlike deferment, forbearance is often granted at the discretion of your lender, and interest will continue to accrue on your loan during this period. Common reasons for forbearance include:

    • Medical expenses: If you're dealing with hefty medical bills, your lender might grant you forbearance.
    • Change in employment: If you lose your job or experience a reduction in income, forbearance can offer temporary relief.
    • Other financial difficulties: Unexpected expenses, like a car repair, can make it tough to keep up with loan payments.

    9. Lenders reputation

    Ensure the lender you're considering for refinancing has a good reputation. Make sure you check out other customers' experiences by reading online reviews. A lender with a solid reputation will likely provide better service and have fewer bumps along the road.

    Also, consider the lender's customer service track record. If issues ever arise or circumstances change, you'll want a lender who is easy to contact, helpful, and responsive.

    TuitionHero tip

    Our detailed lender reviews make it fast and easy to find private student loan lenders that you can trust.

    10. The fine print

    Be sure to review the terms of your refinancing, and make sure you're comfortable with the loan's terms before committing to it. When you read the fine print, make sure you ask yourself:

    1. Are there penalties for paying your loan off early?

    2. How much are late payment fees?

    3. Are there any loan forgiveness programs?

    4. Are there other additional fees or penalties?

    How to refinance your student loan

    Ready to get your student loans refinanced? Here's how you can do it in 4 easy steps:

    1. 1

      Research and compare lenders

      Give us some basic details, and we'll show you some loan rate estimates. TuitionHero can show you rates in just a few minutes, without affecting your credit score. Don't just look at rates though. Be sure to consider the whole package, like repayment protections and fees.

    2. 2

      Gather necessary information

      Before you apply, gather essential details and documents such as your Social Security number, proof of income, tax returns, and specifics about your school and program. If you're adding a cosigner, make sure to get their info as well.

    3. 3

      Wait for loan approval

      After submitting your documents and application, you'll need to wait for the lender to review and approve it. This can take anywhere from a few days to a few weeks, depending on the lender and the type of loan you’re refinancing. Remember to be patient and stay in contact with your lender.

    4. 4

      Review and sign

      Once your refinancing loan is approved, carefully review the terms and conditions, including the interest rate, fees, and repayment options. This includes the repayment schedule, interest rates, penalties for late or missed payments, and any other relevant terms. Make sure you know your responsibilities as a borrower before accepting the loan.

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    Frequently Asked Questions

    We've got answers to just about any question you can think of.

    There's no limit to how many times you can refinance your student loans. It might make sense to refinance again whenever interest rates decrease or your financial situation improves. Refinancing is also usually free from fees like prepayment penalties and origination fees.

    Student loan refinancing and consolidation are strategies to manage student loans, with key differences. Refinancing, done through private lenders, combines both federal and private loans into a single loan, typically with a lower interest rate for reduced payments but requires good credit and forfeits federal loan benefits. Conversely, consolidation merges only federal loans into a single loan with a fixed interest rate (a weighted average of existing loans), maintaining federal loan benefits but not reducing the interest rate. The choice depends on personal factors such as loan type, interest rates, and need for federal benefits.

    You can refinance both federal and private student loans. This includes loans such as Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans from the federal government, as well as private loans from banks, credit unions, and other lending institutions. Keep in mind, though, when you refinance federal loans with a private lender, you will lose federal benefits such as income-driven repayment plans, potential loan forgiveness, and forbearance or deferment options. Always consider your individual situation and goals before deciding to refinance your loans.

    Refinancing student loans can have tax implications. While the principal isn't tax deductible, the interest paid on refinanced loans can be deducted from taxable income, up to $2,500. Income level and eligibility criteria apply. Refinancing may affect taxes differently, so it's crucial to understand the distinction between deductions and credits, and to evaluate the long-term savings. Consulting a tax professional is recommended to assess the potential tax implications before refinancing.

    The best time to refinance student loans depends on your individual financial situation and goals. Here are a few scenarios where refinancing might be beneficial:

    When interest rates are low: Refinancing can be advantageous when you can secure a lower interest rate than what you currently have. Lower rates can result in savings over the life of the loan.

    Improved credit score: If your credit score has significantly improved since you initially took out your student loans, refinancing could help you qualify for better rates and terms.

    Change in financial circumstances: If your income has increased or you have a more stable financial situation, refinancing can help you secure more favorable loan terms or a shorter repayment term.

    Transition from variable to fixed rate: If you have variable interest rate loans and want to switch to a fixed rate, refinancing can provide stability and protect you from potential rate increases in the future.

    Eligibility for federal loan benefits no longer needed: If you no longer need federal loan benefits such as income-driven repayment plans, loan forgiveness, or deferment options, refinancing to a private loan could make sense.

    As a cosigner, your primary responsibilities include guaranteeing the repayment of a loan if the primary borrower fails to make payments, maintaining open communication with the lender, being aware of the loan's status, and accepting the potential financial and credit risks associated with cosigning. You may be legally obligated to repay the loan in the event of default, and any missed or late payments can negatively impact your credit score. It's crucial to carefully consider these responsibilities and assess the borrower's ability to repay before agreeing to cosign a loan.

    Yes, it is possible to refinance your student loans while you're still in school with specific lenders such as RISLA, Discover, and Earnest. However, eligibility typically requires a good credit score and income. Keep in mind that refinancing, especially federal loans, could lead to the loss of certain benefits and may require immediate repayment. Therefore, it's essential to carefully consider your financial situation and long-term implications before making this decision.

    This may vary from lender to lender. Still, a general rule of thumb is that you'll need the following key documents: a copy of your credit report, proofs of stable income and employment (like recent pay stubs or tax returns), a government-issued ID, and current loan documents detailing your account information and payoff amounts. If required by the lender, provide proof of your degree and proof of residency. If a co-signer is involved, they'll need to submit similar documents. Before applying, ensure to pay down existing debts, compare lenders, and consider other repayment options if needed. Be sure to check with the specific lender.

    Yes, most lenders allow you to set up automatic payments for your refinanced student loans. This is a convenient option as it ensures your payments are made on time each month, helping you avoid late fees and potential negative impacts on your credit score.

    In addition to the convenience, some lenders offer a slight reduction in your interest rate if you set up automatic payments. This discount can typically range from 0.25% to 0.50%, but it varies from lender to lender. This could result in substantial savings over the life of your loan.

    Absolutely, you can typically put your student loan payments on hold if you enroll in a graduate program. This is known as an "in-school deferment." As long as you're enrolled at least half-time in an eligible college or career school, both your principal and interest payments on federal loans may be deferred. However, the terms for private loans vary by lender. It's important to consult with your loan servicer for specifics on their deferment policies and to initiate the process.

    If you can't make your student loan payments, consider contacting your loan servicer or lender as soon as possible to discuss options such as deferment, forbearance, or changing your repayment plan. Taking action early can help you avoid late fees, damage to your credit score, and the risk of default.


    As you journey down the road to refinancing your student loans, the path might seem confusing at times. But with the right info, you'll conquer those loans like a champ! We hope this guide has enlightened you on student loan refinancing, so you can make educated decisions and confidently invest in your financial future.

    TuitionHero is your one-stop shop for comparing and choosing the perfect refinancing option. We're by your side every step of the way. And remember, when it comes to controlling your finances and future, you're the ultimate hero!

    Key takeaways

    • Student loan refinancing involves using a new loan with better terms or a lower interest rate to pay off existing student loans
    • Advantages of refinancing include potentially lower rates and simpler payments
    • Disadvantages include the loss of federal loan benefits (if refinancing federal loans)
    • Refinancing can be done multiple times, and can be beneficial whenever interest rates change or your financial situation improves
    • Eligibility for refinancing depends on factors like credit score, income stability, and degree completion
    • Refinancing differs from consolidation, as consolidation combines loans but won’t lower your interest rate
    • The process involves researching lenders, gathering necessary information, waiting for loan approval, and reviewing and signing the loan agreement


    Brian Flaherty avatar

    Brian is a graduate of the University of Virginia where he earned a B.A. in Economics. After graduation, Brian spent four years working working at a wealth management firm advising high-net-worth investors and institutions. During his time there, he passed the rigorous Series 65 exam and rose to a high-level strategy position.


    Yerain Abreu avatar

    Yerain Abreu is a Content Strategist with over 7 years of experience. He earned a Master's degree in digital marketing from Zicklin School of Business. He focuses on college finance, a niche carved out of his journey through the complexities of academic finance. These firsthand experiences provide him with a unique perspective, enabling him to create content that's informative and relatable to students and their families grappling with the intricacies of college financing.

    At TuitionHero, we're not just passionate about our work - we take immense pride in it. Our dedicated team of writers diligently follows strict editorial standards, ensuring that every piece of content we publish is accurate, current, and highly valuable. We don't just strive for quality; we aim for excellence.

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