Should I consider student loan refinancing? 

Understand the pros and cons of refinancing and qualification criteria.

Student loans weigh heavily on many of us. One in four U.S. adults with a bachelor’s degree or higher has at least some student debt.1 And, the average borrower owes $37,693.2

This is a large amount of debt, especially for people who are already struggling financially, such as the 12 million Americans who are behind on rent.3

But if you’re having trouble keeping up with your student loan payments, refinancing your loans could give you some relief.

A quick primer on student loan refinancing

Refinancing student loans means taking out a new loan to pay off your existing loans. Most borrowers refinance to obtain a lower interest rate (making their monthly loan payments more manageable), shorten their repayment period, or remove a co-signer from their loan. 

You can refinance both private and federal student loans. But there are tradeoffs you should consider when refinancing your federal loans. While you can still benefit from a lower interest rate or a lower payment, once you refinance, you will no longer be eligible for federal deferment, forbearance, federal repayment plans, or loan forgiveness since you are swapping to a private lender.

So, take the time to understand whether the benefits of refinancing outweigh your loss of access to federal programs. 

How much can I save by refinancing? 

You could save a lot. It all depends on your current interest rate and the new rate you can snag.

Let’s say you currently have $38,000 in student loans at an 8% interest rate and a 10-year repayment term. If you refinance with a 5% interest rate and a 10-year repayment plan, you’d save $6,959 over the life of your loan.

If your finances are in great shape and you can handle a larger payment, you could select a loan with a shorter repayment period, saving even more in interest over the lifetime of your loan.

But it’s not always about savings. Refinancing a loan to remove a co-signer would release your co-signer from all duties and obligations under the original loan.

Finally, refinancing loans generally have terms of 5-25 years.4 If you want to make your monthly payment lower, you can also choose a loan with a longer duration to make your monthly payments smaller. 

If you have a federal loan and qualify for refinancing, obtain refinancing quotes and compare federal repayment options to determine which path is right for you (check out our Student Loan Forgiveness Calculator to evaluate options based on your qualifications and needs). Remember to consider monthly payment, length of repayment period, and total amount paid, and note that if you refinance a federal loan, you will lose access to federal assistance programs like potential forgiveness. 

Do I qualify for refinancing?

About 53% of student loan borrowers were eligible for refinancing at the end of April 2022.5

To qualify though, you’ll typically need a minimum credit score of at least 650 (and even higher to qualify for the best rates) and a low debt-to-income ratio, or DTI. (Pro tip: If your credit score is below that threshold, enlisting a co-signer who has great credit can bolster your refinance application.) 

To calculate your DTI, add up your total monthly debts and divide that figure by your gross monthly income, then multiply by 100. While criteria may vary from lender to lender, typically a DTI of 20% or lower is considered excellent.6 (Tap here for a deeper dive on DTI)

Federal loan interest rates are set by Congress, and private loan interest rates are set by the loan provider. According to, private student loan interest rates for its top ranked lenders range from 2.49% to 11.28%, as of November 2022.7 This may go up as the Federal Reserve continues its efforts to fight inflation by raising interest rates.

Shop around

Since rates and loan terms can vary by lender and a borrower’s qualifications, getting quotes from several loan providers is a smart move. This advice may seem like a no-brainer, but 40% of student loan borrowers who refinanced admitted they only applied with one lender before refinancing.9

Don’t be afraid to hunt around for the best deal – your bank account, and future self, will thank you! 

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1 U.S. Census Bureau. “Student Debt Weighed Heavily on Millions Even Before Pandemic”. Accessed December 2022.

2 “Average Student Loan Debt”. Accessed December 2022.

3 Center on Budget and Policy Priorities. “Tracking the COVID-19 Economy’s Effects on Food, Housing, and Employment Hardships”. Accessed December 2022.

4 Credible. “Student Loan Refinancing Calculator”. Accessed December 2022.

5 “Average Student Loan Interest Rate in 2022”. Accessed December 2022.

6 Saving for College. “Student Loan Refinancing Requirements: Credit Score, Debt-to-Income, and More.” Accessed December 2022.

7, Refinance Student Loans: 35+ Lenders Compared | Nov. 2022 ( Accessed December 2022.

8 Federal Reserve, Federal Reserve Board - Federal Reserve issues FOMC statement. Accessed December 2022.

9 Student Loan Planner. “Survey: 85% of student loan borrowers fear refinancing”. Accessed December 2022.