Student loan refinancing replaces existing loans with a new private loan, potentially at a lower interest rate. While refinancing can save thousands, it's not right for everyone—especially those with federal loans.

How Student Loan Refinancing Works

  1. Apply with a private lender
  2. Lender evaluates credit, income, and debt
  3. If approved, receive rate offer
  4. Accept offer and new lender pays off old loans
  5. You now make payments to new lender

The process is straightforward, but the decision requires careful consideration.

When Refinancing Makes Sense

Refinancing works best when:

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  • You have high-interest private loans
  • Your credit has improved significantly since borrowing
  • You have stable income and job security
  • You don't need federal loan protections
  • You won't qualify for loan forgiveness
  • Lower rate will save meaningful money

When NOT to Refinance

Avoid refinancing if:

  • You're pursuing PSLF: Refinancing federal loans eliminates forgiveness eligibility
  • You need income-driven repayment: Private loans don't offer this
  • Job instability: Federal forbearance options are more flexible
  • You might return to school: Federal deferment is better
  • Rate savings are minimal: Small rate drops may not be worth losing protections

Best Student Loan Refinancing Lenders

SoFi

  • No fees whatsoever
  • Unemployment protection
  • Member benefits (career coaching, events)
  • Competitive rates for excellent credit

Earnest

  • Skip one payment per year
  • Precision pricing (customize exact payment)
  • No fees
  • Merit-based underwriting

Laurel Road

  • Specialized for medical and dental professionals
  • Residency and fellowship options
  • No fees
  • Career-specific repayment flexibility

CommonBond

  • Social mission focus
  • Hybrid loans available
  • Forbearance options
  • MBA/graduate focused programs

Splash Financial

  • Marketplace comparing multiple lenders
  • One application, multiple offers
  • Healthcare professional programs

Calculating Potential Savings

To determine if refinancing pays off:

  1. Find current loan balance and interest rate
  2. Calculate remaining interest with current loan
  3. Get refinance rate quotes
  4. Calculate new total interest
  5. Compare the difference

Example: $50,000 at 7% vs. 5% over 10 years:

  • At 7%: $19,665 total interest
  • At 5%: $13,639 total interest
  • Savings: $6,026

What Lenders Look For

Refinancing approval depends on:

  • Credit score: 680+ typically, best rates at 750+
  • Income: Sufficient to cover payments
  • Debt-to-income ratio: Usually under 50%
  • Employment: Stable job history
  • Education: Degree completion often required

Fixed vs. Variable Rate Refinancing

Choose based on your situation:

Fixed Rate

  • Predictable payments
  • Protection from rate increases
  • Better for longer terms

Variable Rate

  • Lower starting rate
  • Good if you'll pay off quickly
  • Risk of rate increases

The Refinancing Process

  1. Check rates with multiple lenders (no credit impact for prequalification)
  2. Compare APR, terms, and benefits
  3. Choose lender and complete full application
  4. Provide documentation (income, loans, identity)
  5. Review and accept final offer
  6. New lender pays off existing loans
  7. Begin payments to new lender

Most refinancing completes within 2-4 weeks.