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Refinancing Federal Student Loans

You might be able to save money by refinancing your federal student loans. But there are also risks to keep in mind, such as losing access to income-driven repayment.

Eric Rosenberg Eric Rosenberg Updated August 21, 2020

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

Federal student loans can be a good way to pay for college, especially because they come with borrower protections.

But if you have good credit, you might be able to save more money with a lower interest rate if you refinance federal student loans. However, there are pros and cons to consider first.

Here’s what to know before you refinance federal student loans:

  • Is refinancing a good idea right now?
  • Can you refinance your federal student loans?
  • Benefits of refinancing
  • Risks of refinancing
  • How to refinance
  • Frequently asked questions

Can you refinance your federal student loans?

Yes, you can refinance federal student loans like most other types of student loans. When you refinance a federal student loan, you’ll pay it off with a new private student loan.

Refinancing is different from federal student loan consolidation, which combines federal student loans into one while also keeping federal student loan benefits.

Keep in mind that if you refinance your federal loans, though, you’ll lose access to federal benefits, including income-driven repayment and student loan forgiveness programs.


Is refinancing student loans a good idea right now? The CARES Act has paused federal student loan payments with no interest or penalties through Dec. 31, 2020.

Because of this, it might be a good idea to wait before refinancing, depending on your situation.

Learn More: Coronavirus Relief for Federal Student Loan Borrowers in Place Through 2020

Benefits of refinancing

Here are some of the benefits of refinancing to keep in mind:

  • You could get a lower interest rate. If you refinance, you might qualify for a lower interest rate, which could save you money over the life of your loan.
  • You could get a lower monthly payment. If you choose a longer repayment term, you could get a lower monthly payment. Just keep in mind that extending your repayment means you’ll pay more in interest over the life of your loan.
  • You could pay off your loans sooner. If you’re able to get a lower interest rate by refinancing, you’ll have fewer interest charges over the life of your loan. Because of this, you might be able to pay off your loan faster than if you hadn’t refinanced.

If you choose to refinance, be sure to consider as many refinancing lenders as possible to find the right loan for you. Credible makes this easy — you can compare your rates from all of our partner lenders in the table below in just two minutes.

LenderFixed rates from (APR)Variable rates from (APR)
advantage education loan consolidation4.54%+N/A
brazos student loan refinancing2.70%+1.93%+
citizens bank student loans2.97%+¹ 1.99%+¹
college ave student loans3.34%+23.24%+2
elfi student loans2.79%+32.39%+3
mefa refinancing3.46%+42.51%+4
invested refinancing3.05%+3.05%+
penfed purefy student loan consolidation2.99%+2.19%+
rhode island student loan authority refinancing3.19%+N/A
sofi refinancing2.99%+52.25%+5
Compare personalized rates from multiple lenders without affecting your credit score. 100% free!

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All APRs reflect autopay and loyalty discounts where available | 1Citizens Bank Disclosures | 2College Ave Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 5SoFi Disclosures

Risks of refinancing

While refinancing federal student loans could save you money in some situations, it isn’t right for everyone. Here are some of the risks to be aware of:

  • You’ll lose access to deferment and forbearance options. There are various situations that might qualify you for federal deferment or forbearance. If you refinance, you’ll no longer have access to these programs. Instead, the ability to pause payments will be at the discretion of your lender.
  • You’ll lose access to income-driven repayment. Once you refinance, you can’t sign up for any of the income-driven repayment plans. Instead, your repayment options will depend on the terms from your lender.
  • You won’t qualify for federal student loan forgiveness. Unlike federal student loans, a refinance private student loan won’t qualify for student loan forgiveness programs.
BenefitsRisks
  • Might get a lower interest rate
  • Can extend your repayment term to get a lower monthly payment
  • Might be able to pay off your loan sooner
  • No federal deferment or forbearance programs
  • No income-driven repayment plans
  • No student loan forgiveness

How to refinance

Follow these steps to refinance your federal student loans:

  1. Shop around and compare rates: Be sure to compare your rates from as many lenders as possible to find a loan that fits your needs. This might include deciding between a fixed or variable rate, considering different loan repayment terms, and more.
  2. Complete a full application: Once you’ve reviewed your options, you can choose your favorite and submit a full application to the lender.
  3. Sign your loan documents: If your application is accepted, you’ll need to sign your loan documents to complete the process. Be sure to follow up and make sure your old loan is paid off as expected.

If you decide that refinancing is right for you, you can easily compare your rates from multiple lenders with Credible after filling out a single form.

Find out if refinancing is right for you

  • Compare actual rates, not ballpark estimates – Unlock rates from multiple lenders in about 2 minutes
  • Won’t impact credit score – Checking rates on Credible won’t impact your credit score
  • Data privacy – We don’t sell your information, so you won’t get calls or emails from multiple lenders

See Your Refinancing Options
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Frequently asked questions

What is the difference between federal consolidation vs. refinancing?

With federal loan consolidation, your existing federal student loans are merged into one new federal student loan. If you consolidate your loans this way, you’ll keep benefits like access to income-driven repayment plans and potential eligibility for student loan forgiveness.

When you refinance student loans, your old loans are paid off with a new private student loan. If you refinance federal student loans, you’ll no longer have access to federal protections and benefits.

Learn More: Private Student Loan Consolidation

What types of loans are eligible?

Most federal student loans are typically eligible for refinancing, including Direct Subsidized Loans, Direct Unsubsidized Loans, and Parent PLUS Loans. You can refinance all or some of your federal student loan balance into a new private loan.

You’ll also need to meet the lender’s other requirements, which often includes a minimum credit score and verifiable income.

Learn More: How to Refinance Your Student Loans

Are there fees that come with refinancing federal loans?

There might be fees that come with refinancing your federal student loans, depending on the lender. Some common fees include:

  • Origination fees
  • Loan application fees
  • Prepayment penalties
  • Late fees for missed payments

If you refinance through Credible, though, you won’t have to worry about prepayment penalties, loan application fees, or origination fees since our partner lenders don’t charge these. This could help you save money by refinancing with Credible right from the start.

Compare Rates Now

What credit score do I need?

Every lender has its own requirements for refinancing student loans, which often includes having a minimum credit score to qualify. For example, most of Credible’s refinancing partners accept credit scores between 670 and 700.

If you don’t meet a lender’s credit requirements, having a creditworthy cosigner might help you qualify for a loan.

Learn More: Refinancing Student Loans With Bad Credit

Do I need a cosigner?

While more than 90% of private student loans you take out during school have a cosigner, having a cosigner isn’t required for all refinance loans. If you have decent credit and income to qualify for a loan on your own, you won’t need one.

Keep in mind, though, that even if you don’t need a cosigner, having one could help you qualify for a lower interest rate.

If you do refinance with a cosigner, you might be able to also qualify for cosigner release depending on your lender. This means that after making on-time monthly payments for a certain amount of time, you can remove your cosigner from the loan.

What happens if I can’t make my payments?

If you can’t make your payments on a refinanced student loan, it’s a good idea to contact your lender as soon as possible. They might have options to temporarily pause your payments.

If you’re dealing with a long-term financial hardship, you might consider refinancing again to extend your repayment period, as this could reduce your monthly payments. Just keep in mind that this can also lead to paying more in interest over the life of the loan.

Keep Reading: 11 Strategies for Paying Off Your Student Loans Faster

About the author
Eric Rosenberg
Eric Rosenberg

Eric Rosenberg is a Credible expert on personal finance. His work has been featured at Business Insider, Investopedia, The Balance, The Huffington Post, MSN Money, Yahoo Finance, Mint.com and more.

Read More

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