How To Refinance Your Student Loans in 6 Easy Steps

When you refinance your student loans, you take out a new loan with a private lender to pay off your existing education debt. The goal is typically to qualify for a lower interest rate, reduce your monthly payment, pay off your debt faster, or simplify repayment by combining multiple loans into a single loan.

For some borrowers, refinancing can lead to significant savings over the life of a loan. However, it's important to understand the tradeoffs before applying — especially if you have federal student loans, since refinancing means giving up access to federal benefits such as income-driven repayment plans and loan forgiveness programs.

Before you decide to refinance, however, you’ll want to compare lenders, check your eligibility, and decide whether the potential savings outweigh any benefits you may give up.

Here’s how to refinance student loans and what factors to consider before submitting an application.

Compare current student loan refinancing rates

Should you refinance your student loans?

Refinancing your student loans is a useful option in many situations, but it’s not right for everyone. First, determine your goals: Do you hope to save money with a better interest rate, lower your monthly payment, or switch loan servicers? Setting your intentions upfront can help you choose the right lender later.

You should also consider which debts you plan to refinance. If you only have private student loans, you don’t risk much by refinancing. But if you plan to refinance federal student loans, you’ll have some trade-offs.

Federal loans come with special protections that private lenders generally don’t offer. For example, federal borrowers can access income-driven repayment plans, forgiveness programs, and more flexible deferment or forbearance options. By refinancing, you turn your federal loans into a form of private debt, and you’ll permanently lose access to these perks.

How to refinance student loans in 6 steps

If you decide that refinancing is the right option, the next step is to find the best lender and complete the application process. While requirements vary by lender, refinancing typically involves comparing rates, selecting a loan offer, and applying for a new loan to replace your existing student debt.

Follow these steps to refinance your student loans:

Step 1. Research student loan refinance lenders

Some refinancing lenders are better for certain life situations than others. Since not all lenders provide the same benefits, compare what each offers and which best fits your needs. 

Consider the following factors:

• Interest rate: While the interest rate you qualify for mostly depends on your credit score, each lender calculates your rate differently. You typically want to look for a lender that offers the lowest rate, the best terms, and the best monthly payment for your situation.
• Fixed vs. variable rate: Many lenders allow you to choose between fixed and variable interest rates. Fixed rates never change over the life of your loan, while variable rates can fluctuate based on economic conditions.
• Repayment terms: Your loan’s term is how long you have to repay your debt. If you want to pay off your student loans fast, consider a shorter loan term. However, if you need more room in your budget and want to lower your monthly payment, a longer loan term may be a better fit. Just keep in mind that the longer the repayment term, the more you’ll end up paying in interest.
• Monthly payment: Look at the estimated monthly payments for your new loan. If this number doesn’t fit into your budget, look for a different term or interest rate to lower it.
• Fees: It’s generally wise to prioritize lenders that offer low or no fees, and most lenders allow you to refinance for free.
• Eligibility requirements: Eligibility varies by lender, so be on the lookout for the one that best suits your needs. For example, if you don’t have stellar credit, you might want to add a cosigner. Or maybe you didn’t graduate — in that case, you can prioritize lenders that don’t require a degree to refinance.

Step 2. Prequalify with multiple lenders

Many lenders — but not all — allow you to prequalify for a loan. Doing so allows you to see estimated, personalized rates and terms you may qualify for. This can help you more accurately compare lender offers. To prequalify with a lender, visit their site and provide a few pieces of personal information.

Step 3. Compare rates, terms, and borrower benefits

Some lenders offer perks such as rate discounts, referral bonuses, or temporary payment pauses if you lose your job. Others have cosigner options available — including ways to release your cosigner later. Consider each lender's benefits as you review your choices.

Step 4. Choose the best refinance offer

Since not all lenders offer the same products or have the same qualifying criteria, the right lender depends on your financial situation. For instance:

• If you can afford a larger monthly payment, consider refinancing for a shorter repayment term. This can lead to the greatest savings because you’ll pay off your student loans faster. Plus, most lenders offer better interest rates on shorter loan terms.
• If you want to lower your monthly payment, consider extending your loan term. You likely won’t qualify for the lowest interest rate, and your total repayment costs may increase. But your payment will be more affordable — you can always pay more than required anytime you can afford it.

Step 5. Submit your application

Once you’ve chosen a lender, submit the application. You’ll typically need to provide personal information, proof of income, and details about your current student loans.

When you submit a full application, the lender will conduct a hard credit check (which can impact your credit score), verify your documents, analyze your debt-to-income ratio, and more.

Once this is done, the lender determines whether to approve your loan and at what rate. If you still like what you see, sign the final loan paperwork.

Step 6. Continue to make payments until your refinance is complete

After you finalize your refinancing, you’re still obligated to make payments on your existing debt until you receive confirmation otherwise. Your new lender will work with your old one to pay off your existing debt. The exact timeline varies, so it’s important to keep paying your current lender until your new one confirms the transaction is complete. Your new lender will set a date for when your monthly payment is due.

How much you could save with student loan refinancing

One of the biggest reasons borrowers refinance their student loans is to save money. Even a small rate reduction can lead to significant savings over the life of your loan.

For example, say you have a $50,000 student loan balance, a $620 monthly payment, a 10-year repayment term, and an 8.5% interest rate. If you qualify for a new 10-year refinance loan with a 6.5% interest rate, your monthly payment and total interest costs could decrease significantly. Using Credible’s student loan refinance calculator, refinancing this loan would lower the monthly payment by about $52 and reduce your total interest costs by more than $6,200.

How much you save depends on your credit score, income, debt-to-income ratio, loan balance, and the repayment term you pick. Borrowers with good credit and steady income usually qualify for the best refinance rates.

Student loan refinancing vs. student loan consolidation

Student loan refinancing and student loan consolidation can both simplify repayment by combining multiple loans into one. However, they have very different processes and qualifications, and choosing the wrong option could cost you valuable benefits.