As a college borrower, you’re largely at the mercy of the interest rate environment that exists when you’re ready to start your education. If interest rates happen to be low when you’re pursuing your degree, you’ll benefit from lower monthly payments and overall costs once repayment begins. If interest rates are high, college could cost significantly more over time.
Borrowers can combat the high rates of their initial loans by refinancing them when market conditions improve. This involves taking out a new private loan to pay off one or more of your existing student loans. In addition to cutting overall costs, people may refinance to create more manageable monthly payments, to simplify their finances by combining several loans into one or to remove a cosigner from the original loan.
Only about 10% of eligible borrowers refinance their student loans, according to a recent analysis by the private lender Earnest. One key reason is that the overwhelming majority of the total student loan volume is federal, and refinancing a federal loan means forfeiting benefits such as loan forgiveness and income-driven repayment plans.
But for certain borrowers, refinancing student loans can result in thousands of dollars in savings. Lower interest rates typically trigger a new wave of borrowers seeking to take advantage of favorable conditions to trim their payments.
Interest rates have fallen in the past couple years, so you might be wondering whether now is a good time to refinance your student loans.
“Current rates are in a reasonable range,” says Paul Gentile, president and CEO of Merck Employees Federal Credit Union, which offers student loan refinancing as well as new loans to undergraduate and graduate students. “Not historically low, but competitive enough that it’s worth checking what you’d qualify for.”
Here’s a look at what to consider when deciding whether to refinance your student loans in June 2026.
[Read: Best Student Loan Refinance Lenders.]
Why It Might Make Sense to Refinance Student Loans Now
Private student loan refinancing rates have remained about the same over the past year, according to a U.S. News analysis of rates reported by top private lenders.
The average low student loan refinancing fixed rate offered in May was 5.33%, while the average high was 10.85%. The lowest refinancing rates available were just slightly below 4%, although those only go to the most creditworthy borrowers. The highest reported rates hovered around 14%.
“Private refinancing rates today are meaningfully higher than what borrowers could get in 2020 and 2021, when five-year fixed rates were touching 2 to 3% for well-qualified borrowers,” says Jeff Judge, a certified financial planner and managing partner with Chesapeake Financial Planners. “Right now, I’m seeing competitive offers in the 5.5% to 7.5% range depending on credit profile and loan term, which is respectable compared to 2023 peaks but still well above the lows.” The current rates might be unappealing to someone sitting on low-rate loans from 2020, but they could present a savings opportunity for borrowers who took out loans in the past several years.
Federal student loans, which come with a fixed rate set once each year based on a formula tied to the May 10-year Treasury auction, hit their highest marks in a decade in 2024-25. A graduate student or parent borrower who took out PLUS loans at 9.08% that year, for example, might be paying an interest rate that exceeds the highest rate reported by some private lenders.
Federal Student Loan Rates Since 2020
| Year | Direct Loans — Undergrads | Direct Loans — Grad Students | Parent PLUS and Grad PLUS |
| 2026-27 | 6.52% | 8.07% | 9.07% |
| 2025-26 | 6.39% | 7.94% | 8.94% |
| 2024-25 | 6.53% | 8.08% | 9.08% |
| 2023-24 | 5.5% | 7.05% | 8.05% |
| 2022-23 | 4.99% | 6.54% | 7.54% |
| 2021-22 | 3.73% | 5.28% | 6.28% |
| 2020-21 | 2.75% | 4.3% | 5.3% |
“For borrowers with strong credit scores, private refinance rates can actually come in below the federal rates they’re currently carrying, which changes the math considerably,” says Michael Jerkins, president and co-founder of Panacea Financial, a fintech platform that specializes in student loan refinancing for doctors, dentists and veterinarians. “It’s not a universal answer, but for the right borrower, the rate environment right now is more favorable than people might assume.”
Jerkins emphasizes that borrowers should only refinance federal loans if they’re certain they won’t benefit from a federal income-driven repayment plan or loan forgiveness in the future.
Who Should Consider Refinancing Now?
Whether you should refinance depends largely on your financial situation and the terms of your existing loans. Here are some signs you might benefit from refinancing your student loans.
You Have a High Interest Rate
If you have private student loans at a relatively high interest rate, checking with lenders to see if you could improve your rate is likely worth the effort. As long as the terms otherwise remain the same and there’s no origination fee, you’re not risking any benefits.
Your Credit Score and Income Have Improved
Two of the biggest factors that most lenders weigh when determining your rate are your credit score and your debt-to-income ratio. If you’re earning a higher salary and you’ve built up your credit profile in recent years, you may qualify for a much better rate than you would have when you were in school.
You Want to Simplify or Consolidate
Sometimes borrowers just want to stop juggling multiple payments with more than one lender. Refinancing can allow you to consolidate those loans into one payment and simplify your finances.
In fact, Jerkins says he’s even seeing an increase in borrowers refinancing federal loans after becoming weary from the various court rulings, repayment plan overhauls and other legislative changes that have taken place in recent years. They’re seeking predictability as much as they’re seeking a better rate, he says.
“Borrowers are anxious and confused after six years of whipsaw changes to the federal student loan system, and they want to simplify,” Jerkins says. “For a lot of borrowers, refinancing isn’t just a financial calculation anymore; it’s about getting out of a system that feels unpredictable and finally having a loan that makes sense to them.”
You Don’t Plan to Pursue Federal Loan Forgiveness
High earners carrying high-rate federal loans might consider refinancing if they don’t have plans to pursue either public service or time-based forgiveness of their debt. Parents who haven’t federally consolidated their PLUS loans may also be more incentivized to refinance, as they’ll no longer be eligible for income-driven repayment or loan cancellation starting July 1, 2026.
“Anyone paying above 6% or 7% who has stable employment and no plans to pursue federal forgiveness programs should take a serious look,” says Gentile.
[Read: Best Parent Student Loans: Parent PLUS and Private.]
How to Decide if Refinancing Is Worth It for You
When you’re trying to determine whether refinancing student loans is worth it, start by focusing on what you’re trying to accomplish. Are you trying to lower your monthly payments to free up funds now? Are you trying to trim the overall cost of the loan? Are you trying to combine a mix of loans into one?
Here’s one example of how refinancing could make a difference.
Let’s say you have a 10-year student loan with an 8% interest rate and a $50,000 balance. Your current monthly payment is $607. At that rate, by the time you’ve paid off the loan, your total payment would be about $72,797. Here’s a look at what you would pay if you refinanced the loan to 6.5% for various term lengths.
| Term | Monthly Payment | Total Cost |
| 5 Years | $978 | $58,698 |
| 10 Years | $568 | $68,129 |
| 15 Years | $436 | $78,400 |
If you can refinance to the lower rate at the same term length, you’d end up trimming both your monthly payment and the total cost over the lifetime of the loan. In many cases, lenders will give you a better rate for a shorter term. That can often mean significant total savings but higher monthly payments, as shown here in the example. If you’re able to get that 6.5% rate for an extended 15-year term, your monthly bill would fall considerably, but your total cost would actually increase even with the lower interest rate.
“Start by calculating your current weighted average rate across all loans and compare it to what you’re being offered,” says Gentile. “Factor in your remaining balance and how many years are left; the higher the balance, the more a rate reduction matters. It’s also important to consider whether you’re extending your repayment term to get a lower monthly payment, because that can cost more in interest over time even if the monthly number looks better. The application process is short, so the simplest way to answer this question is just to apply and see what you qualify for before making any decision.”
Jerkins says many of the doctors who refinance with his company have six-figure debts, and he cautions people with larger balances to take an even closer look before making a refinancing decision.
“Balance size amplifies everything, both the upside and the downside,” says Jerkins. “A 1% rate reduction on a $400,000 loan saves $4,000 a year, which is meaningful. But a wrong decision at that balance is also significantly more costly than it would be at $50,000.”
Borrowers considering refinancing should choose lenders who will run a soft credit check to determine whether potential rates, says Tom O’Hare, holistic college advisor at Get College Going.
“It does not obligate them to the lender, and they can determine if the rate adjustment is sufficient to complete the refinancing transaction,” he says.
Refinancing Federal Loans to Private
Experts generally caution borrowers against refinancing federal loans into private products.
Income-driven repayment plans available from the government can provide meaningful relief in the form of much lower payments. Because those payments are based on your income, the interest rate of your loan typically won’t play a role in your monthly bill. These plans also allow the remaining balance of your loan to be discharged after a certain amount of time, usually 20 or 25 years. (Although you may owe a hefty tax bill on the forgiven amount.)
Private lenders rarely offer these benefits.
“One reason not to refi from a federal loan to private is the more favorable and flexible terms of federal student loans as well as the possibility of loan forgiveness,” says Kevin Ladd, chief operating officer and co-creator of Scholarships.com. “Once you refinance a federal loan with a private one, you will never have the balance forgiven.”
Judge says its rare that all the factors weigh in favor of shifting loans from federal to private.
“I almost never recommend it unless the borrower has a high income, no realistic path to forgiveness, and the spread between the federal rate and a private offer is materially significant,” he says, noting that he’d want to see the rate improve by at least 1.5 to 2 percentage points. “Even then, we model both scenarios out through payoff before I’d recommend pulling the trigger.”
[Read: Best Student Loans for Graduate School]
What Will Happen With Rates in 2026?
Private student loan rates generally move in response to decisions made by the Federal Reserve. If the Fed cuts its benchmark rate, private lenders may drop theirs in turn.
After a series of cuts to close out 2025, the federal funds rate has held steady in 2026 in a range of 3.5% to 3.75%. Most forecasters expect rates to remain unchanged at the Fed’s June meeting and perhaps for the coming months as well.
“I’d plan around rates being in a similar band through at least mid-2026, with some room for modest downward movement in the back half of the year,” says Judge. “I wouldn’t hold off refinancing expecting a windfall.”
Jerkins says it’s probably better to focus on your immediate financial situation rather than pausing plans in hopes of lower rates.
“I’d caution anyone against trying to time the market on this,” he says. “If refinancing makes financial sense for you today, waiting around for a marginally better rate could easily cost you more than whatever you’d save. I generally recommend borrowers to make the decision based on your situation, not on rate speculation.”
More from U.S. News
Why Banks Aren’t Lining Up to Give You a Student Loan
Why Student Loan Caps Could Lead to a Rise in Mid-Degree Dropouts
How Many People Take Out Variable-Rate Student Loans? (Answer: Very Few)
Is Now a Good Time to Refinance Your Student Loans? originally appeared on usnews.com
