How to Refinance Student Loans: Lenders, Rules and the Real Math

Refinancing swaps your student loans for one new private loan, ideally at a lower rate. On a $40,000 balance, dropping from 7.5% to 5.5% over 10 years saves about $40.70 a month and $4,884 in interest. That’s real money. But it only works out if you qualify for the lower rate, and if you’re not giving up something worth more.

Who should refinance student loans

Here’s the short version. Refinancing is a good fit when the loans are private, the rate is high, and you’d now qualify for something meaningfully lower.

• You have private student loans, and your credit score or your income has gotten a lot better since you borrowed.
• A parent or relative cosigned your private loans and you want them off the hook. Refinancing in your own name is one way to do that.
• You have a variable rate that keeps climbing and you want a fixed payment.
• You have federal loans, a steady high income, no plan to use PSLF or income-driven forgiveness, and you’ve decided the protections aren’t worth what they cost you in interest.

That last group is the one to slow down on. If you’re not sure which side you’re on, our refinance or don’t checklist walks through it with a scenario table.

How student loan refinancing works

A private lender pays off the loans you pick and gives you one new loan with its own rate, term and payment. You don’t have to put everything in. Plenty of people refinance only their private loans and leave the federal ones alone.

1. Check your rate. Most lenders and marketplaces quote you with a soft credit pull, which doesn’t affect your score.
2. Compare offers side by side. Look at the APR and the term, and ask what happens if you lose your job.
3. Apply with one lender. This is where the hard credit pull happens. You’ll upload pay stubs and payoff statements for the loans you’re refinancing.
4. Keep paying your old loans until the new lender confirms they’re paid off. A missed payment during the switch still counts against you.

Your rate comes down mostly to your credit and your income, plus how much other debt you carry. Terms usually run 5 to 20 years, and some lenders go to 25 on variable loans.

Can you refinance federal student loans?

Yes, but only with a private lender, and there’s no going back. Federal loans can’t be refinanced inside the federal student aid system, so a refinance pays them off with a new private loan, and you lose the federal benefits that came with them.

So what are you actually giving up?

• Income-driven repayment. Federal loans come with plans that tie your payment to your income. A private loan’s payment is whatever your contract says, good year or bad.
• Forgiveness. Public Service Loan Forgiveness and the forgiveness at the end of an income-driven plan only work on federal loans. Refinance and that road is closed.
• Federal deferment and forbearance. Lose your job with a federal loan and your servicer can pause or lower the payment. A private lender sets its own hardship rules, and they’re usually a lot thinner.

What about federal consolidation? It isn’t refinancing, and it won’t lower your rate. A Direct Consolidation Loan gets a fixed rate equal to the weighted average of the loans you combine, rounded up to the nearest one-eighth of a percent. It keeps you in the federal system and can lower the payment by stretching the term, but that usually means more interest overall. A consolidation made now also limits you to the Tiered Standard plan or RAP.

When does refinancing federal loans make sense? When the rate drop is real, your income is steady, and you know you’ll never use PSLF or an income-driven plan. You also don’t have to refinance everything. Keep the loans you might need protection on federal and refinance the rest. Our checklist for which loans to keep federal walks through it, and this roundup of student loan refinance companies compares lenders if you decide to go ahead.

Do you qualify? What lenders look for

Every lender sets its own bar, but the same handful of things come up again and again.

Before you apply, pull your credit reports for free at AnnualCreditReport.com. Checking them there doesn’t affect your scores, and it’s worth fixing a mistake before a lender sees it. If your score needs work, here’s how to improve your credit score.

How to compare refinance offers

The rate in the ad isn’t the rate most people get. KeyBank, for one, discloses that about 10% of applicants qualified for its lowest advertised APR. So why does that matter? Because the only number that counts is the one you’re offered after a soft pull, and that’s what you should line up across lenders on these points.

• APR, not just the rate. APR folds in the autopay discount and any fees. Most refinance lenders charge no origination fee or prepayment penalty, so the two are usually close.
• Fixed vs variable. A fixed rate never moves. A variable rate can start lower and then rise. Some lenders cap it (SoFi at 13.95%, KeyBank at 15%), which tells you the worst case.
• Term. A longer term lowers the payment and raises the total interest. Run both numbers.
• Autopay discount. A 0.25% cut for autopay is common, including at SoFi and KeyBank.
• Hardship options. Ask what happens if you lose your job. Earnest, for example, lets you skip one payment every 12 months after six on-time payments, but it counts as forbearance and interest can be added to your balance. Federal loans give you far more room than any of this.
• Cosigner. Refinancing in your own name releases a cosigner from the old loans. ELFI also lets you add or remove a cosigner when you refinance.

Student loan refinance lenders to compare

These are the companies taking refinance applications right now. Rates change daily, so check each one’s current rate on its own site rather than trusting a number on any list, this one included.

Marketplaces and lenders overlap. Splash and Credible each show offers from other lenders, so you may see the same lender twice. That’s fine. Pick the lowest APR on terms you can live with.

Compare refinance offers with Splash Financial

• See offers from Splash’s lending partners with a soft credit pull. Continuing to apply leads to a hard pull.
• No application fees, no origination fees and no prepayment penalties.
• Fixed terms of 5 to 20 years and variable terms of 5 to 25 years. Minimum $5,000.
• Best fit: private loans, a four-year degree, and credit of 700 or higher.

Check your rate with Splash

Splash Financial is a marketplace, not the lender. Your loan comes from one of its lending partners, and some are credit unions you’d need to join. Not all rates and amounts are available in every state. If you refinance federal loans through Splash, you lose federal benefits for good.

How much can refinancing save?

It depends on the rate gap and the term. Here’s the math on a common balance.

Is about $40 a month worth the paperwork? Over 10 years it adds up to nearly $5,000, so for most people with private loans at a high rate, yes, it’s worth an afternoon of comparing offers.

Next stepPlug in your own balance and rates in our student loan refinance calculator.

Have federal loans? Look at these first

If your loans are federal, the federal tool for combining them is a Direct Consolidation Loan, not a refinance. It doesn’t lower your rate, but you keep federal protections. Our student loan consolidation guide covers how it works and the newer rules that come with it.

Also check the autopay discount. Direct Loans get a 1% rate cut through June 30, 2028 if you’re enrolled in autopay by December 31, 2026. On a 7.5% loan, that shrinks the gap with a 5.5% refinance offer from two points to one, and you keep everything federal.

Bottom line: refinance private loans when you can get a lower APR on a term you’d pick anyway. With federal loans, refinance only after you’ve priced what you’re giving up.

Student loan refinancing FAQ