Should I Refinance Federal Student Loans?

Refinancing replaces your student loans with a single new private loan, usually at a lower rate, with a lower monthly payment, or with a faster payoff. For some borrowers, the savings are significant. 

But if you refinance federal loans, you permanently give up income-driven repayment (IDR), forgiveness programs, and eligibility for Public Service Loan Forgiveness (PSLF). In some cases, consolidating your student loans is the better option.

Before you apply, find out how to compare lenders, confirm your eligibility, and decide whether the savings outweigh those protections.

Compare student loan refinance rates

What happens when you refinance federal loans? 

Refinancing federal student loans means taking out a new private loan to pay off your existing federal debt. The Department of Education doesn’t offer refinancing, so you’ll need to apply through a private lender, such as a bank, credit union, or online lender. If approved, your new lender pays off your old federal loans, and you begin making payments on the new private loan.

Private lenders don’t offer federal benefits like income-driven repayment or Public Service Loan Forgiveness (PSLF). However, some offer hardship options. For example, RISLA offers an income-based repayment option, and Earnest offers a temporary deferment.

The Department of Education offers a Direct Consolidation Loan, which combines qualifying federal loans into one new federal loan. However, it’s not the same as refinancing, since it doesn’t lower your interest rate. Your new rate is the weighted average of your current rates, rounded up to the nearest one-eighth of 1%.

2026 Federal repayment plan options

Refinancing federal student loans also means losing access to the following federal repayment plan options available as of July 2026:

Pros and cons of federal student loan refinancing

Refinancing has trade-offs. Consider the pros and cons of taking out a new private student loan to pay off your federal debt.  

Details on the pros

• Potentially lower interest rate: Refinancing may get you a lower rate, which can reduce the interest you pay.
• New repayment term: Most lenders offer 5- to 20-year terms. A longer term lowers your monthly payment but usually costs more interest.
• Simplify repayment: Refinancing lets you combine multiple loans into a single monthly payment.

Details on the cons 

• Permanent loss of federal protections: Once a private lender pays off your federal loans, you lose federal deferment and forbearance options. Some private lenders offer their own hardship options.
• No income-driven repayment: You’ll lose access to income-driven repayment and other flexible federal repayment plans.
• Not eligible for loan forgiveness: Federal programs, including PSLF, no longer apply.
• May be difficult to qualify: Private lenders typically require good credit, often a minimum score in the mid- to upper-600s, and stable income. If you can’t qualify on your own, consider applying with a cosigner.

When to refinance federal loans 

If you qualify for refinancing at a lower interest rate than you’re currently paying and you’re confident you'll never need any federal benefits or protections, refinancing may make sense. 

When not to refinance federal loans

Refinancing may not be the right choice in some situations.

If you plan to take advantage of federal income-driven repayment or loan forgiveness programs, either now or in the future, you should avoid refinancing your federal loans. 

Once you refinance federal loans, you can’t convert them back. If the government forgives student debt in the future or pauses payments during another national emergency, you likely won’t benefit. Likewise, if your income drops or you work for a nonprofit, you won’t have access to income-driven repayment (IDR) or PSLF. Or, if you teach in a qualifying low-income school, you may also lose access to Teacher Loan Forgiveness. 

Also, avoid refinancing if it would raise your rate, since a higher rate makes repayment more expensive.

Check Out: Should I Refinance My Student Loans?

Student loan refinancing vs. consolidation

Refinancing is available through private lenders, while federal student loan consolidation is offered through the Department of Education. 

A Direct Consolidation Loan combines federal loans into one new federal loan. Your rate is rounded up, based on a weighted average of your current rates. Consolidation keeps your loans federal, but a loan made on or after July 1, 2026, generally limits your repayment to the RAP or the Tiered Standard Plan. 

If your loans include a parent PLUS loan, refinancing may cost you fewer benefits than it would for other federal borrowers. Parent PLUS loans aren’t eligible for the RAP, even after consolidation. You would still give up federal deferment, forbearance, and discharge protections, so compare your federal options before you decide. 

If consolidation may fit better, see our guide to consolidating federal loans.

How to refinance federal loans

Refinancing your federal student loans starts with researching private refinancing lenders. Many let you check prequalified rates without a hard credit pull. A full application usually triggers a hard inquiry, which can temporarily lower your score. After entering your financial information, you can see what rates and terms you'd likely be offered by different lenders.

When you find an offer you want, submit a full application with your financial details and information about the loans you’re refinancing.

If approved, your new loan will be used to repay your federal debts, and you'll begin making payments to your new lender. Keep paying your federal servicer until your balance transfers to the new lender.