Refinancing student loans: what it is & how to decide if it’s right for you
Key takeaways
with a new private loan, potentially at a lower interest rate or with better terms.
when federal student loans are refinanced into a private loan.
What is student loan refinancing?
Student loan refinancing means taking out a new private loan to pay off one or more existing student loans — ideally at a lower interest rate or with more favorable repayment terms. Borrowers may refinance federal loans, private loans, or a combination of both.
What happens to your old loans
When you refinance, your new lender pays off your existing student loans. From that point forward, you make payments only to the new lender under the new loan’s terms.
Refinancing vs. student loan consolidation
It’s important to understand the difference:
Refinancing: Offered by private lenders, refinancing creates a new loan with a new interest rate and repayment terms.
Federal consolidation: Consolidation combines federal loans while preserving federal protections like income-driven repayment and forgiveness programs.
How refinancing student loans works
Step 1: Apply with a private lender
Borrowers can apply through banks, credit unions, or online lenders. Many lenders allow pre-qualification to check rates without affecting credit.
Step 2: Credit & income review
Lenders typically evaluate:
Credit score
Income and employment history
Debt-to-income ratio
Stronger financial profiles generally qualify for lower rates.
Step 3: Loan approval and payoff
If approved, the lender pays off your existing student loans directly.
Step 4: Repayment under new terms
You begin repaying the new loan with a new interest rate, loan term, and monthly payment.
Pros of refinancing student loans
Lower interest rate
A lower interest rate may reduce total interest paid over the life of the loan, though savings depend on loan term, fees, and repayment behavior.
Lower monthly payments
Extending the loan term may reduce monthly payments, although this can increase total interest over time.
Simplified payments
Refinancing multiple loans into one can streamline repayment with a single monthly bill.
Option to remove a cosigner
Some lenders may allow cosigner release after a period of consistent, on-time payments.
Cons and risks of refinancing student loans
Loss of federal loan protections
Refinancing federal loans typically means permanently giving up access to:
Income-driven repayment plans
Public Service Loan Forgiveness (PSLF)
Federal deferment and forbearance options
Credit-based approval
Borrowers with lower credit may:
Receive higher interest rates
Be denied approval
Need a cosigner to qualify
Longer loan terms can cost more
Lower monthly payments spread out over a longer period of time may come with higher total interest costs.
Who should consider refinancing student loans?
Borrowers with strong credit
Borrowers with stronger credit scores are more likely to qualify for competitive rates.
Those with private student loans
Private loans generally lack the protection that comes with federal loans, making refinancing less risky for someone with private loans only.
Borrowers with stable employment
Refinancing may be considered by borrowers who do not anticipate needing income-driven repayment or federal hardship protections.
People focused on interest savings
Borrowers focused on reducing total interest costs may explore refinancing as one possible option.
Who should avoid refinancing student loans?
Borrowers seeking loan forgiveness
Borrowers pursuing Public Service Loan Forgiveness would lose eligibility if they refinance federal loans.
Those using income-driven repayment
Federal flexibility may outweigh the potential interest savings of refinancing.
Borrowers with unstable income
Private loans generally offer fewer options during financial hardship.
Refinancing federal vs. private student loans
Refinancing federal loans
Refinancing federal loans into a private loan typically results in the permanent loss of federal protections, which generally cannot be reinstated.
Refinancing private loans
Refinancing private loans is often safer and more straightforward, since protections are already limited.
Mixed loan strategies
Some borrowers refinance only their private loans while keeping federal loans intact to preserve benefits.
Fixed vs. variable rates when refinancing
Fixed interest rates
Generally offer stable, predictable payments
Often better for long-term budgeting
Variable interest rates
May have lower initial rates
Rates may increase over time
Because variable rates can increase over time, total repayment costs may become less predictable
How often can you refinance student loans?
Refinancing multiple times
Borrowers can refinance more than once, but it’s generally only beneficial if rates or terms improve significantly.
Risks of frequent refinancing
Multiple credit inquiries
Resetting loan terms can extend repayment and increase total interest
Common mistakes to avoid
Refinancing without understanding trade-offs
It’s important to weigh the permanent loss of federal loan protections against the benefits of refinancing.
Only looking at monthly payment
Ignoring the total interest cost can lead to paying more over time.
Not shopping around
Interest rates and terms can vary widely between lenders.
Bottom line
Refinancing student loans can help lower interest costs, simplify payments, and speed up repayment, but it isn’t a one-size-fits-all solution. The decision depends on factors such as your credit profile, income stability, loan type, and long-term goals.
If you’re searching for ways to meet your long-term financial goals, you may want to consider a high-yield savings account. Raisin can help you instantly compare the best rates in one place.
Frequently asked questions
Does refinancing hurt your credit?
A hard credit inquiry may cause a small, temporary dip in your credit score.
Can I refinance federal student loans?
Yes, but doing so may permanently eliminate federal protections.
Can I refinance student loans more than once?
Yes, if you qualify and the new terms offer meaningful improvements.
Is refinancing worth it?
Whether refinancing makes sense depends on individual circumstances, loan types, and long-term financial goals.
The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
Related Content
© 2026 Raisin SE. All rights reserved.
The Raisin name and logo are trademarks of Raisin SE. All other trademarks, logos, marks, and brand names are the property of their respective owners.
*APY means Annual Percentage Yield. APY is accurate as of April 26, 2026. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.
Raisin is not an FDIC-insured bank, and FDIC deposit insurance only covers the failure of an insured bank.
Raisin is not an NCUA-insured credit union. NCUA deposit insurance only covers the failure of an insured credit union.
Raisin does not hold any customer funds. Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through Raisin.com. The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered by the applicable bank or credit union through Raisin.com. Each customer also authorizes the Service Bank to move funds among the various banks and credit unions at the customer’s request. First International Bank & Trust (FIBT), Member FDIC, is the Service Bank. Bell Bank and Starion Bank, each Member FDIC, are the Custodial Banks.
†Based on $250,000 in FDIC or NCUA insurance coverage per insurable category of ownership at each partner bank or credit union on the Raisin platform (each a "Product Bank"), when aggregated with all other deposits held by you at such Product Bank and in the same insurable category. Deposits made through Raisin will be eligible to receive deposit insurance from the FDIC or the NCUA (each a "Deposit Insurer") in accordance with and up to the maximum amount permitted by law at each Product Bank. Raisin is not a bank or credit union and does not hold any customer funds. Funds are held at FDIC-insured banks and NCUA-insured credit unions. Deposit insurance covers the failure of an insured bank or credit union. Certain conditions must be satisfied for pass through deposit insurance coverage to apply. Customers may choose to deposit funds with identically registered accounts at different Product Banks on the Raisin platform to be eligible for Deposit Insurer coverage up to $10 million for individual accounts and $20 million for joint accounts when at least 40 Product Banks are utilized. Please be aware, however, that any deposits you have at a Product Bank, whether through the Raisin platform or outside the Raisin platform, that you may hold in the same capacity (such as in an individual capacity or joint capacity) count toward the applicable Deposit Insurer's deposit insurance maximum amount, and any such amounts that you hold in the same capacity at a Product Bank that exceed the maximum insurance coverage by the applicable Deposit Insurer will not be insured. For more information on FDIC deposit insurance, please see here. For more information on the NCUA share insurance fund, please see here. You are solely responsible for monitoring the amount of funds you have on deposit at each a Product Bank, whether through the Raisin platform or outside the Raisin platform, to confirm that the deposits you hold in the same capacity at each Product Bank do not exceed the maximum deposit insurance coverage provided by the applicable Deposit Insurer.