When Should You Refinance Student Loans? 2025 Guide

The best time to refinance student loans is when you can qualify for a lower interest rate. Even a small rate reduction can save you thousands over the life of your loans if you have significant debt. But refinancing isn't always the right move. If you have poor credit or rely on federal programs like income-driven repayment or Public Service Loan Forgiveness (PSLF), refinancing may not be a good idea.

Before you refinance, think about your financial goals and today's interest rate environment to determine whether now is the right time, or if it makes sense to wait.

Current student loan refinance rates

Why refinance my student loans?

Refinancing means replacing one or more of your existing student loans with a new loan. The main goal of refinancing is to get a lower interest rate or better repayment terms. A lower interest rate could save you money and reduce your monthly payments. It might even help you pay off your student debt faster.

“You can save quite a lot if your interest rate can be lower and you pay the loans off sooner rather than later,” says Meagan McGuire, certified financial planner (CFP) and certified student loan professional (CSLP).

When you refinance, you can also choose new repayment terms, typically between five and 20 years. A shorter term helps you get out of debt more quickly, while a longer term makes your monthly payments more affordable.

When should I refinance my student loans?

If any of the following scenarios apply to you, it may be a good time to refinance your student loans:

• Your credit score has improved: The best student loan refinance rates are reserved for borrowers with a strong credit profile. If you (or a cosigner) have a good credit score in the 700s or higher, you may qualify for a competitive rate.
• You've gotten a stable job or income boost: Lenders review your income when you apply for student loan refinancing to make sure you can afford repayment. Having a stable income will help you get approved and avoid missing payments. This is especially important if you're refinancing federal student loans, since you'll lose access to protections like income-driven repayment, deferment, and forbearance.
• Interest rates have dropped: Refinance timing can also depend on broader interest rate trends. The Federal Reserve's benchmark rate shifts throughout the year, and lenders usually adjust their rates in response. Compare your current rate to what's available now. For example, refinance rates on the Credible marketplace currently start at 3.99% for fixed-rate APRs.
• You want to remove a cosigner: If you borrowed a student loan with a cosigner, refinancing can relieve them of responsibility for your debt. As long as you can meet a lender's requirements on your own, you can refinance the loan in your name alone.

When should I avoid refinancing my student loans?

Refinancing isn't always the right move. It's usually best to avoid refinancing if:

• You have federal loans and want to retain borrower protections: Once you refinance federal loans, they become private loans, and you can't reverse the decision. That means losing access to income-driven repayment plans, forgiveness programs, and federal relief options like deferment and forbearance.
• You're pursuing Public Service Loan Forgiveness (PSLF): Refinancing federal loans also makes you ineligible for PSLF, which can erase your remaining balance after 10 years of qualifying payments in public service.
• You don't have strong enough credit to qualify for better terms: If your credit is weak or your income is unstable, refinancing may not improve your situation. Without strong credit, you're less likely to get a lower rate or favorable repayment terms. In that case, focus on building your credit and financial stability before applying.

Am I eligible for refinancing?

Each lender sets its own requirements, but most look at the same key factors when reviewing your application:

• Credit score: Your credit history is one of the biggest factors in getting approved. Lenders typically reserve their lowest rates for borrowers with strong credit. On the FICO scale, a good score starts at 670, very good at 740, and exceptional at 800 or higher. If your score is lower, some lenders allow you to apply with a cosigner.
• Debt-to-income ratio (DTI): This measures how much of your monthly income goes toward debt payments. Most lenders prefer a DTI of 35% or less, since it shows you have room in your budget for another loan. If your DTI is higher, paying down existing debt or increasing your income may improve your chances.
• Income stability: Lenders want to see reliable income, and some set minimum income requirements. You'll typically need to upload pay stubs or tax returns as proof.
• Degree completion: Some lenders only approve refinancing after graduation, while others don't have this restriction. If you want to refinance before finishing your degree, look for lenders without a graduation requirement.

How much can refinancing save me?

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

Consider the following example with a $29,400 loan balance on a 10-year term. Assuming you refinance from a 7% interest rate to a 5% interest rate and keep the 10-year term, here's how the savings would break down:

In this example, your monthly payment would drop by about $29, and you'd save $3,543.16 over the life of your loan. Many refinancing lenders let you check your rates online through prequalification, which is a quick process that doesn't affect your credit score.

“Make sure the terms are more favorable than your existing loan terms,” advises Daniel Cieniewicz, a certified financial planner (CFP) at Hyperion Financial. “Depending on how much of a difference in interest and the length of the term, you could be saving thousands of dollars, and in some cases, ten thousand or more in interest over time.”

If a more affordable monthly payment is your primary goal, you could also refinance for a longer repayment term. Keep in mind that extending your term could increase your overall interest charges.