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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.
Because of this, it might be a good idea to wait before refinancing, depending on your situation.
Learn More: Borrowers Get 6-Month Break on Federal Student Loan Payments and Interest
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.
| Lender | Fixed rates from (APR) | Variable rates from (APR) |
|---|---|---|
 | 4.54%+ | N/A |
 | 3.50%+ | 3.58%+ |
 | 3.20%+¹ | 2.49%+¹ |
 | 3.74%+2 | 3.64%+2 |
 | 3.19%+3 | 2.39%+3 |
 | 2.92%+4 | 1.99%+4 |
 | 4.65%+ | 4.65%+ |
 | 3.23%+ | 2.58%+ |
 | 3.49%+ | N/A |
 | 2.99%+5 | 1.99%+5 |
| Ready to see how much you can save? |
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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 |
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Citizens Bank Education Refinance Loan Rate Disclosure: Citizens Bank Disclosures Citizens Bank Education Refinance Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2020, the one-month LIBOR rate is 0.17%. Variable interest rates range from 2.49%-8.38% (2.49%-8.38% APR) and will fluctuate over the term of the borrower's loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 3.20%-8.63% (3.20%-8.63% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan. |
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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.
| Benefits | Risks |
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How to refinance
Follow these steps to refinance your federal student loans:
- 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.
- Complete a full application: Once you’ve reviewed your options, you can choose your favorite and submit a full application to the lender.
- 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.
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.
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
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