Student loan refinancing involves taking out a new private loan to pay off existing student loans (federal, private, or both) at a potentially lower interest rate. Unlike federal consolidation, refinancing is done through private lenders (banks, credit unions, online lenders) and is credit-based.
10 steps across 1 sections
1. Steps Process
- Assess whether refinancing makes sense. Refinancing is beneficial if:
- You have high-interest private loans and strong credit
- You have a stable income and do not need federal protections
- You will NOT pursue PSLF or IDR forgiveness
- Your credit score is 670+ (or you have a qualified cosigner)
- You want to consolidate multiple private loans into one payment
- Check your current loan details. Gather information on all loans:
- Current interest rates (federal and private)
- Outstanding balances
- Monthly payment amounts
Common Mistakes
- Refinancing federal loans without considering the trade-offs
- Only comparing interest rates
- Choosing a variable rate for a long-term loan
- Not checking for fees
- Refinancing when your credit is poor
Pro Tips
- Use rate comparison tools
- Refinance private loans first
- Consider shorter terms
- Set up autopay immediately
- Refinance more than once