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
An extensive overhaul of federal student loans ushers in significant changes that will impact new and existing borrowers in 2026. These changes could motivate some borrowers to consider refinancing.
Several repayment plans are going away, and current borrowers in those plans will be transitioned into other plans, which will likely affect their monthly payments and may also extend the number of years they must pay before loans are forgiven.
While some repayment plans won’t be phased out until 2028, the most affordable option is expected to be eliminated in the coming months. The Saving on a Valuable Education plan, which offered monthly payments as low as $0 for some lower-income borrowers as well as other benefits, will be ending following a court settlement announced by the Department of Education in late 2025. That agreement is awaiting court approval. Borrowers enrolled in the SAVE plan have been in forbearance since mid-2024 amid legal challenges to the plan, and many haven’t made any payments in years.
A subset of parent borrowers may also find themselves eyeing refinancing due to pending federal changes. Parents who take out new Parent PLUS loans on or after July 1, 2026, will lose access to income-driven repayment plans for any of their student loans, including existing loans currently in an income-driven plan. That could mean a sudden sizable jump in monthly payments for parents with multiple children in the college pipeline as well as the loss of some federal benefits that come with income-driven plans.
However, federal loans still offer flexibility and protection against financial setbacks that you won’t find with private lenders if you refinance.
“Unless a borrower qualifies for a significantly lower fixed interest rate through refinancing, I would stay put in the federal system for now,” says Colleen Salchow, an accredited financial counselor. “There are protections for federal loans that help borrowers by offering unemployment deferment and forbearance.”
Student Loan Refinance Rates in 2026
Borrowers looking to refinance may be able to find lower interest rates on student loans in 2026 than last year, after the Federal Reserve trimmed its benchmark rate three times in late 2025, reducing it to a target range of between 3.5% and 3.75%. Although the federal funds rate doesn’t directly affect student loan rates, it is generally used as a benchmark interest rate and impacts the cost of borrowing.
While observers generally anticipate further cuts to the federal funds rate, 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 and the host of the “Smart College Buyer” podcast, 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.”
[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
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.
To understand how you might potentially save by refinancing, it may help to explore current rates for federal and private student loans.
Federal student loans come with fixed interest rates based on a formula created by Congress. Rates are set on July 1 of each year for loans disbursed from July 1 through June 30 of the following year. Here are the current federal rates for student loans through June 30, 2026:
— Direct subsidized or unsubsidized loan for undergraduate: 6.39%
— Direct unsubsidized loan for graduate or professional: 7.94%
— Parent or Grad PLUS loan: 8.94%
Refinancing rates offered by private lenders vary significantly depending on factors such as your credit score, debt-to-income ratio and the current interest rate environment. Not all borrowers will qualify for refinancing. Current student loan refinance rates generally range from 4% to 14%, and both fixed and variable loans are worth a look.
While numerous factors come into play when determining whether refinancing is a wise financial decision, a simple example can help illustrate potential savings. Let’s consider a borrower with $30,000 in student loans at a rate of 8% who is in a 10-year repayment plan. If that borrower refinances to a 10-year repayment term at 4%, here’s how much they could save:
| 8% APR for 10 years | 4% APR for 10 years | Savings | |
| Monthly Payment | $364 | $304 | $60 per month |
| Total Payment | $43,678 | $36,448 | $7,230 |
| Total Interest Paid | $13,678 | $6,448 | $7,230 |
[Personal Loan Calculator: Estimate Monthly Student Loan Payments]
Borrowers Who Might Want to Refinance Student Loans in 2026
The decision to refinance largely depends on your specific financial situation, the new interest rate you’re offered and whether you want to maintain access to the protections and benefits that come with most federal loans. That said, there are several types of borrowers who may particularly benefit from refinancing in 2026.
“Converting these federal loans into a new private loan may be a good move in 2026 if you meet some very specific criteria,” says Andy Smith, executive director of financial planning at Edelman Financial Engines.
You Have Grad PLUS or Parent PLUS Loans With a High Interest Rate
For years, graduate students and parents of students have been able to borrow up to the cost of attendance through federal PLUS loans. Like other federal student loans, PLUS loans come with a fixed rate that is set each summer based on a formula created by Congress.
However, the rate offered on PLUS loans isn’t as generous as that extended to undergrads. And if you took out one of these loans in a high-rate year, you might be staring at 8% or 9% APR. In fact, the PLUS rate for the 2024-25 school year stood at 9.08% APR, an all-time high. A borrower who is just beginning to pay off that loan may want to inquire with lenders about current refinancing rates, especially with years of payments likely left on the loan and interest rates having fallen since then.
“(Recent PLUS loans) have got a lot higher rates than what private lenders are offering to borrowers right now,” says Smith.
You Have Existing Parent PLUS Loans and Plan to Borrow More
Parents who take out PLUS loans have for years gained access to more affordable income-driven repayment through a process of consolidating those loans. That option is going away on July 1, 2026.
And while parents with existing PLUS loans in those income-driven plans can remain in them, they can also lose them. That’s because by taking out any new student loan after the July cutoff, parents forfeit their previous repayment plans, and all of their loans transition to the less affordable new tiered standard repayment plan.
If you know you’ll need to take out more PLUS loans in the future, now might be a good time to look into refinancing, since those affordable repayment plans will be off the table.
You Have Parent PLUS Loans but Didn’t Consolidate Them
The same situation applies to borrowers with Parent PLUS loans who don’t get them consolidated before July 1, 2026. They’ll also be closed off to any income-driven repayment plans, and the loss of those potential benefits may increase the appeal of refinancing with a private lender.
(For parents seeking to gain access to income-driven plans, there is still time to consolidate, but you likely need to apply for consolidation by April 1, 2026.)
You Already Have Private Student Loans
With interest rates declining since late 2024, borrowers with private student loans could benefit from exploring their refinancing options this year.
“If you already have private student loans, there is zero downside to refinancing if you can find a lower rate,” says Smith. “You’re not giving up any federal benefits because you don’t have them anyway.”
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 and Public Service Loan Forgiveness.
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.
Smith says where he sees a lot of refinancing is with borrowers who now have a higher income and want to get that student debt paid off as they focus on other life plans.
“They’re of that mindset where they’re already thinking in terms of appropriately utilizing debt for a home, car or other borrowing,” says Smith.
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
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 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 … 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.
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. Some private lenders also offer additional discounts and rewards.
— 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.
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Should You Refinance Your Student Loans in 2025? originally appeared on usnews.com
Update 02/20/26: This story was previously published at an earlier date and has been updated with new information.
