You can refinance both federal student loans and private student loans, but one is riskier than the other. When you refinance federal loans, you’re no longer eligible for federal benefits and repayment options.
Right now, there are many changes in the student loan space, and borrowers looking for assistance might consider student loan refinancing to get a lower rate. However, you want to do your research to make sure it’s a wise decision. Here, we cover what’s happening with federal student loans, when it does and doesn’t make sense to refinance, and what to know about student loan refinance rates.
[READ Best Student Loan Refinance Lenders]
The State of Federal Student Loans
Federal student loan borrowers had a three-year payment pause with COVID forbearance. Once repayment resumed, 63% of borrowers reported difficulties making student loan payments, according to a November 2024 report from the Consumer Financial Protection Bureau, or CFPB.
The Saving on a Valuable Education, or SAVE, Plan was supposed to give borrowers a reprieve with lower payments and interest benefits. However, the SAVE Plan has been blocked due to an injunction. Borrowers who enrolled in the SAVE Plan are in general forbearance. That means they’re not required to make payments and interest isn’t accruing. However, this period doesn’t count toward student loan forgiveness.
Given that SAVE is no longer on the table, borrowers might wonder if now’s a good time to refinance or not.
“Unless a borrower qualifies for a significantly lower fixed interest rate through refinancing, I would stay put in the federal system for now. There are protections for federal loans that help borrowers by offering unemployment deferment and forbearance,” says Colleen Salchow, an accredited financial counselor.
Student Loan Refinance Rates in 2025
The Federal Reserve didn’t budge with the federal funds rate after its March meeting. The federal funds rate is generally used as a benchmark interest rate and impacts the cost of borrowing.
Currently, the Fed anticipates more cuts in 2025, but those depend on economic conditions. It might not make sense to wait for rate cuts if you find competitive student loan refinance rates.
“If a borrower qualifies for a lower interest rate now than they are paying on their federal loans, then it may be worthwhile to refinance now, as opposed to waiting for an uncertain future interest rate cut,” says Mark Kantrowitz, author of “How to Appeal for More College Financial Aid.”
Jack Wang, college financial aid advisor at Innovative Advisory Group, notes that your interest rate on a new refinancing loan plays a major role in repayment. But it’s not the only factor to consider. “It’s about the payment and cash flow. So if someone’s looking for breathing room in their monthly budget, and by refinancing they can free up a lot of money per month, why not do it now?” says Wang.
If consumers refinance now and rates drop later, Wang says they “can always refinance again. There’s nothing preventing them from doing that.”
Current student loan refinance rates have recently dropped, and both fixed and variable loans are worth a look.
[Related:Private vs. Federal Student Loans: What’s the Difference?]
How Much Can Student Loan Refinancing Save You?
Goals for student loan refinancing include a lower rate, a more affordable payment, a faster loan payoff, a lower lifetime cost or (ideally) a combination of these benefits. How much student loan refinancing can save you depends on your:
— Current interest rate
— Outstanding loan balance
— Repayment term
— New interest rate
— New term
Understand that refinancing student loans to drop your monthly payment can increase your lifetime costs if it extends your repayment, even at a lower interest rate. That’s OK as long as you’re aware of this and it fits into your financial plan.
When You Should Refinance Student Loans
Student loan refinancing can help you change the terms of your loans and ideally secure a lower rate. That can save you money over the life of the loan. However, when you refinance federal loans, you miss out on significant federal benefits and protections such as income-driven repayment, or IDR, and Public Service Loan Forgiveness, or PSLF.
It’s important to carefully weigh the decision and understand what you’re gaining versus what you’re losing. You want to make sure refinancing is the right move and is worth it in the long run.
“Would the borrower qualify for a lower fixed interest rate? What are the application and origination fees for the newly formed private student loan? If a borrower runs those calculations and knows what their monthly budget is, then they can make a confident decision,” Salchow says.
Here are some scenarios in which it can make sense to refinance your student loans.
Your Credit Score Is Strong
Federal student loans are accessible, as most don’t require any credit check. That’s not the case with student loan refinancing, which is a private loan. As such, these are credit based.
Minimum credit score requirements are unique to each lender. In general, most refinancing lenders want a credit score of 670 or higher. If you have a creditworthy cosigner who is willing to assume the risk of the loan, you may boost your shot at approval and qualify for lower rates.
You Want to Pay Off Debt Fast (And Not Pursue Forgiveness)
A lower interest rate can help expedite your student loan repayment. So if your No. 1 goal is to pay off debt in the most cost-effective way, refinancing can help. But of course, this is contingent on two things:
— You actually qualify for a lower APR.
— You’re not pursuing any kind of student loan forgiveness.
“If someone is not pursuing any type of loan forgiveness, and I would say that they are in a really stable job in a really stable industry, I think going for refinancing is fine,” Wang says.
If you have a mix of federal student loans and private student loans, you can choose to refinance only your private student loans. Refinancing private student loans doesn’t come with the same risks as refinancing federal student loans or the same loss of benefits.
You Want to Streamline Repayment
If you have several student loans and are juggling multiple monthly payments, refinancing can be one way to streamline repayment. Your new refinance loan can consolidate several student loans.
This strategy works best if you have multiple private student loans. If you have federal student loans in the mix, it’s still possible and may be a good idea, but weigh the pros and cons first. You want to assess carefully if giving up federal protections makes sense.
If you want to consolidate your federal loans without going through a private refinancing lender, you can apply for a direct consolidation loan. Unlike with refinancing, you’re not getting a lower rate but you may be able to lower your payment and retain some federal protections and benefits.
You Want to Release Your Cosigner
You might have private student loans with a cosigner. Maybe your mom or dad cosigned when you were starting college and hadn’t built up a credit history yet. Now, you’d like to release them. First, see if your current lender offers cosigner release as an option.
If not, a workaround might be to refinance your cosigned loans and have the new refinancing loan only in your name. To qualify, you must meet the lender’s underwriting criteria on your own. This can be a good move if you’ve built up a solid credit history and have an established income and payment.
[READ: Fastest Co-Signer Release Student Loans]
When It Doesn’t Make Sense to Refinance Student Loans
Student loan refinancing could score you substantial savings. But it’s not worth it for everyone. Here are some situations where it doesn’t make sense to refinance student loans.
Your Job or Finances Aren’t Stable
The federal government and other private companies have laid off thousands of people in 2025. If your industry is facing the threat of layoffs, you’ll want to keep your federal student loan benefits.
Additionally, refinancing isn’t the right fit if you’re struggling to pay your student loans. In that case, having access to an income-driven plan that could offer you a $0 monthly payment is invaluable. Especially if you qualify for forgiveness later on.
“I strongly encourage borrowers to understand their realistic monthly expenses. Do you have a fully funded emergency fund? If not, then get that in order before refinancing anything. Do you work for an employer that the newly proposed tariffs will impact? If yes, focus on having a three- to six-month emergency fund accessible and having a plan to reduce your debt-to-income ratio,” says Salchow.
You’re Interested in Student Loan Forgiveness
Federal student loans may come with certain student loan forgiveness options. For example, if you work in the public sector, you could get your loans forgiven after 10 years of service with PSLF. Though President Donald Trump has signed an executive order about PSLF, nothing has changed as of this writing.
Income-driven repayment also offers forgiveness with no employment requirements. However, that will take 20 to 25 years.
“Borrowers who are pursuing Public Service Loan Forgiveness, or who are close to the 20- or 25-year forgiveness in an income-driven repayment plan, should not refinance,” says Kantrowitz.
You’re Close to the Finish Line
If you’re nearing the end of your repayment, it doesn’t make sense to do something as risky as refinancing. Because you’re close to paying down your debt, any refinancing benefits would be minimal.
You Might Change Fields
If you’re thinking of changing careers or fields in the near future and have federal student loans, you might want to hold off on refinancing. Having access to IDR plans can be helpful during transitions. Plus, you might move to a sector that qualifies for forgiveness.
Alternatives to Student Loan Refinancing
Choosing to refinance your student loans isn’t something to take lightly. It’s not something to rush into, either. Here are some alternatives:
— Sign up for auto pay. You don’t have to refinance to get a lower interest rate. You may qualify for a 0.25-percentage-point reduction if you sign up for automatic payments on your student loans.
— Switch to an IDR. If you want to refinance to lower your payment, a better option might be one of the income-driven repayment plans.
— Consolidate federal loans. You can apply for a direct consolidation loan to have all of your federal loans consolidated into a single loan. This can lower your payment.
— Change your due date. If making monthly payments is tough due to cash flow issues, see if you can change your due date to after pay day or something else that works for you.
— Employer student loan repayment. See if your employer has any programs available to help pay down your student loans as an employee benefit.
The Bottom Line
Student loan refinancing is one way to tackle repayment and save money on interest. But it’s not the right fit for everyone. Be sure to check out various student loan refinance rates and see if you can get prequalified with various lenders. Read the terms and conditions, and weigh the potential advantages and disadvantages.
You might realize refinancing isn’t the right choice for you. If you do, make sure you calculate the numbers and know how much you’ll save in interest and how refinancing will impact your monthly payments.
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