When Should You Refinance Student Loans? 2026 Guide

If you're wondering when to refinance student loans, here's a simple guideline: Refinance when you can get a lower interest rate. If you can reduce your rate, it may be a good time to apply. 

There's an important caveat, though. Make sure refinancing makes sense for you. Ideally, your income is stable, and you understand that refinancing federal loans means losing access to programs like income-driven repayment and Public Service Loan Forgiveness (PSLF).

Current student loan refinance rates

When should I refinance my student loans?

Here are some signs it may be time to refinance your student loans: 

• You have a strong credit score: Lenders review your credit when they evaluate your application for student loan refinancing. A strong credit score can help you get approved for a low interest rate. 
• Your income is stable: Lenders also review your income to confirm you can afford payments on your refinanced loan. Some even require a minimum income to qualify.
• Market rates have dropped: It may be a good time to refinance if interest rates are low. The Federal Reserve adjusts its benchmark rate throughout the year, and private lenders typically adjust their rates accordingly. 
• You want to simplify repayment: If you're juggling multiple loans, refinancing can streamline the repayment process by combining them into a single loan with one monthly payment. 
• You want to remove a cosigner: If a parent or another adult cosigned your student loan, you may wish to remove them from the loan and assume sole responsibility for the debt. Refinancing gives you this option if you can meet the lender’s credit and income requirements on your own. 
• You don't need federal protections: If you don't anticipate needing federal programs like income-driven repayment, forbearance, deferment, or forgiveness, refinancing could make sense. Refinancing federal loans means you'll forfeit these protections, and the process is not reversible. 

When should I avoid refinancing my student loans?

Not everyone benefits from refinancing student loans. If any of these scenarios apply to you, it may be smarter to hold off. 

• You want to stay eligible for federal protections: Federal student loans qualify for benefits like income-driven repayment, forbearance, and deferment. If you want to retain access to these programs, avoid refinancing your federal loans.
• You're eligible for federal loan forgiveness: Refinancing may not be the right move if you qualify for programs like Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness (TLF). Once you refinance federal loans, they become private loans and are no longer eligible for forgiveness.
• You have a low credit score: Poor credit could make it hard to get approved or qualify for a better interest rate. If your FICO score is below 670, you may not get approved for a lower rate than what you’re currently paying. 
• You have an unstable income: If your income is uncertain, you may have trouble affording monthly payments. Missing payments can lead to late fees, damaged credit, and eventual default. 
• You haven't graduated from college: Many refinancing lenders require that you've graduated with your degree. However, some lenders work with current students or borrowers who didn’t finish college. 

Key differences between refinancing federal vs. private student loans

Refinancing federal loans and private loans is not the same. Federal student loans offer benefits that you may not want to sacrifice. 

“Federal loans come with protections people tend to undervalue until they need them,” says certified public accountant (CPA) Josh Katz. “When you refinance federal loans with a private lender, those go away permanently.”

Borrowers with federal loans are eligible for a variety of repayment plans, including income-driven repayment plans that adjust your monthly payments based on your income. Some borrowers may also qualify for forgiveness programs, deferment, and forbearance. 

The tradeoff may not be worth it if you anticipate needing any federal programs now or in the future. If you're only planning to refinance private student loans, you don't need to worry about losing federal benefits. 

“Private loans are a cleaner decision,” says Katz. “There are fewer protections to begin with, so refinancing is usually just a math problem.”

Learn More: Should You Refinance Federal Student Loans? Pros and Cons

How recent student loan policy changes impact refinancing

Federal student loan policy changes may reduce the flexibility of repayment plans and payment relief options. Changes to income-driven repayment (IDR) plans, along with limits on deferment and forbearance, could make refinancing more appealing for some borrowers who no longer benefit as much from federal protections.

For example, the SAVE Plan has been shut down, and other income-driven repayment plans are scheduled to be eliminated in the coming years. Starting July 1, 2027, deferment of unemployment or economic hardship will no longer be available. The total time you can spend in deferment will also be reduced. 

If federal repayment options become less flexible, you may feel less incentive to keep your loans in the federal system. In that case, refinancing could help you secure a lower interest rate or repayment terms that better fit your financial situation.

How to qualify for a lower student loan refinance rate

There are several steps you can take to qualify for a lower student loan refinance rate:

• Improve your credit score: A high credit score can lead to better rates. Paying all your loans on time, reducing your credit utilization, and disputing any errors you find on your credit report can help increase your score.  
• Stabilize your income: A high, steady income can also make you a strong candidate for refinancing and help you qualify for a lender's best rates. 
• Reduce your debt-to-income ratio: Lenders also look for a low DTI, as it suggests you can afford repayment on your loan. Aim to keep yours under 35%. 
• Shop around: Many lenders let you prequalify, so you can compare rates and terms before applying. Prequalification typically uses a soft credit check, which won’t affect your credit score.
• Consider applying with a cosigner: Adding a creditworthy cosigner could help you get a better rate, especially if your own credit is on the weaker side. 

How new loan terms affect your savings

When you refinance, you can choose new repayment terms, often between five and 20 years. The term you choose will affect your monthly payment and long-term savings. 

A shorter term will come with higher monthly payments, but you'll reduce your overall interest costs. A longer term, on the other hand, will make your monthly bills more affordable but increase your total interest costs. 

“A longer term gives you breathing room month to month, but you're paying for that comfort,” says Katz. “I always tell people to run both scenarios out to the total cost, not just the monthly payment.” 

Try to strike a balance between a monthly payment you can afford and keeping interest costs down. Keep in mind that most lenders don't charge prepayment penalties, so you could accelerate repayment in the future if your income increases. 

Can you refinance student loans more than once?

You can refinance student loans as many times as you like, as long as you meet a lender's requirements. Refinancing multiple times could be beneficial if your credit score has improved, interest rates have dropped, or both. 

“Shop around for the best interest rate available to you,” advises college financial aid expert Mark Kantrowitz. “It is a good idea to compare not just the monthly loan payments, but also the total payments over the life of the loan.”

How much money can I save by refinancing? 

The amount of money you can save by refinancing depends on several factors, including your loan balance, interest rate, and repayment terms. 

Let's say, for example, that you refinance a balance of $30,000 from a 12% rate to a 6% rate. 

On a 10-year repayment term, you'd reduce your monthly payment by about $97 and save about $11,682 on total interest charges. If you switch from a 10-year to a five-year term, your monthly payment would increase by about $150, but you'd save about $16,850 on interest. 

Crunch the numbers on your individual loans to determine your savings at different rates and terms.

Pros and cons of refinancing at the right time

Pros of refinancing

• Potential for a lower interest rate: Refinancing at the right time could mean you get a lower interest rate and save money on your loans. 
• Choice of new repayment terms: You can choose new terms that work for your monthly budget and debt payoff goals. 
• Streamlined repayment: Refinancing lets you combine multiple loans into a single loan, making your debt easier to manage. 
• Opportunity to release cosigner: Refinancing gives you the option to remove a cosigner from your loan if you can meet the refinance lender’s credit and income requirements. 

Cons of refinancing

• Loss of federal protections: Refinancing federal loans means you lose eligibility for federal protections, which could be useful if you run into financial difficulties. 
• Not eligible for forgiveness programs: Refinancing federal loans turns them into private loans, which are not eligible for federal forgiveness programs.
• Potential to increase borrowing costs: Extending your loan term or increasing your interest rate could mean higher long-term costs. 
• May be difficult to qualify: You'll need strong credit and sufficient income to get approved for refinancing and qualify for competitive student loan refinance rates. 

Learn More: Should I Refinance My Student Loans?