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Home Personal Finance

5 steps to refinance your student loans

by DTB
May 19, 2023
in Personal Finance
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5 steps to refinance your student loans
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Our experts answer readers’ student loan questions and write unbiased product reviews (here’s how we assess student loans). In some cases, we receive a commission from our partners; however, our opinions are our own.

  • Refinancing your student loans can help you save money on overall interest payments. 
  • If you refinance federal student loans, you’ll lose key protections and repayment options.
  • You’ll have to refinance your loan through a private lender, as you can’t through the government.

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Access your favorite topics in a personalized feed while you’re on the go.

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as well as other partner offers and accept our
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Privacy Policy.

Refinancing your student loans can be a great way to save money and improve your financial situation. You may be able to get a better interest rate, switch to a fixed rate from a variable rate, or change your repayment term length. 

See Insider’s picks for the best student loan refinance lenders >>

Here are the basic steps it takes to refinance a student loan:

1. First ask yourself, ‘Should I refinance my student loan?’

You may want to think twice about refinancing federal student loans. You’ll have to do so through a private lender and will lose key protections and repayment options that you get with government-backed loans. 

The most common reasons to refinance your student loans are to:

  • Lower your interest rate. If you can get a better interest rate — maybe your credit score has improved, you’ve added a co-signer, or you’ve found a lender with more favorable terms — you’ll save money on your loan. 
  • Switch from a variable to a fixed interest rate. While variable rates can often start lower than fixed rates, there’s no guarantee they’ll remain low indefinitely. You may prefer the security of a fixed rate so you can create a consistent repayment plan for your loan.
  • Spread out payments over a longer term. If your monthly student loan payments are too high for your current budget, you may want to divide up your balance over an extended period. Keep in mind, if you extend your term length, you’ll likely pay more in total interest.
  • Shorten your payment term length. If you’re looking to save on overall interest, you can reduce the term length on your loan. This will allow you to aggressively pay down your debt by making higher monthly payments.

2. Do the math on your existing student loans

Know exactly how much you owe on all your student loans and break down all the details for each of them. This includes each loan’s interest rates and terms. This will help you analyze your actual cost of borrowing and decide which student loans to refinance.

3. Check your credit score

Student loan refinance lenders have requirements for borrowers, the most important of which is your credit score. And the better your credit score, the lower the interest rate you’re likely to get.

Nowadays it’s easier than ever to check your credit score for free. Most credit card companies will provide your score on your monthly statement or anytime you check your account online.

4. Research student loan refinance lenders

With all of your existing loan details and your credit score in hand, check out the various APRs you may qualify for to refinance by getting prequalified. Evaluate lenders individually or use a student loan marketplace like Credible to see offers from several all at once. 

Check your terms with each lender and see which one offers you the rate and term length that works the best for you. When you look at your rates, lenders will typically perform what’s known as a soft credit pull, which doesn’t affect your credit score.

See the most current student loan refinancing rates >>

You’ll need to apply to refinance your student loans through a private lender. You can’t refinance a student loan through the federal government.

5. Apply to refinance your student loan

Once you’ve found a lender you like, complete its entire application. You’ll be asked to provide documents that verify your finances and identity, similarly to when you initially applied for a loan. After the lender sends you its final offer, you’ll need to sign on the dotted line and accept the terms. Then, your new lender will pay off your existing lender, and you’ll begin making payments on the on the refinancing loan.

The rates quoted when you prequalify may not necessarily be the ones you ultimately receive after the full application process. So you may want to apply with multiple lenders. But remember that they’ll each do what’s known as a hard credit inquiry after the prequalification process, which can lower your credit score for a short period.

What are the dangers of refinancing a federal student loan?

Be warned: If you refinance federal student loans, you’ll lose any borrower protections from the government. That includes loan forbearance and relief programs such as Public Service Loan Forgiveness.

You’ll also miss out on certain repayment options like Income-Driven Repayment plans, which take your specific income and family size into account when determining monthly payments. Depending on those factors, you pay back 10% to 20% of your income for 20 to 25 years. Income-Driven Repayment plans provide a safeguard if you happen to lose your job because your payments would scale down as a result.

Refinancing a private loan has minimal downside — these loans aren’t eligible for federal programs anyway.

How much does refinancing a student loan cost?

Unlike refinancing a mortgage, which can cost thousands of dollars in fees, refinancing a student loan is free. Reputable banks, credit unions, and online lenders won’t charge you to prequalify or apply to refinance with them, and there’s no amount due to receive your loan from most lenders. 

Almost all private lenders won’t charge origination fees or prepayment penalties on your student loan, though some may hit you with a late fee if you don’t pay on time.

Refinancing is different from consolidation. When you consolidate your federal loans through the government, you’ll combine multiple student loans into one, and then will make a single monthly payment at a fixed interest rate. It won’t cost any money to consolidate your debt, but you won’t receive a better rate or save money. 

While refinancing your student loans can be a good idea to lock in an improved interest rate or switch up your repayment term length, make sure the benefits of doing so don’t outweigh the potential perks you may leave behind.

Ryan Wangman, CEPF
Loans Reporter

Ryan Wangman is a reporter at Personal Finance Insider reporting on personal loans, student loans, student loan refinancing, debt consolidation, auto loans, RV loans, and boat loans. He is also a Certified Educator in Personal Finance (CEPF).
In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership. He graduated from Northwestern University and has previously written for The Boston Globe. 
Learn more about how Personal Finance Insider chooses, rates, and covers financial products and services here >>


Our experts answer readers’ student loan questions and write unbiased product reviews (here’s how we assess student loans). In some cases, we receive a commission from our partners; however, our opinions are our own.

  • Refinancing your student loans can help you save money on overall interest payments. 
  • If you refinance federal student loans, you’ll lose key protections and repayment options.
  • You’ll have to refinance your loan through a private lender, as you can’t through the government.

Get the latest tips you need to manage your money — delivered to you biweekly.
Loading Something is loading.
Thanks for signing up!
Access your favorite topics in a personalized feed while you’re on the go.

By clicking ‘Sign up’, you agree to receive marketing emails from Insider
as well as other partner offers and accept our
Terms of Service and
Privacy Policy.

Refinancing your student loans can be a great way to save money and improve your financial situation. You may be able to get a better interest rate, switch to a fixed rate from a variable rate, or change your repayment term length. 

See Insider’s picks for the best student loan refinance lenders >>

Here are the basic steps it takes to refinance a student loan:

1. First ask yourself, ‘Should I refinance my student loan?’

You may want to think twice about refinancing federal student loans. You’ll have to do so through a private lender and will lose key protections and repayment options that you get with government-backed loans. 

The most common reasons to refinance your student loans are to:

  • Lower your interest rate. If you can get a better interest rate — maybe your credit score has improved, you’ve added a co-signer, or you’ve found a lender with more favorable terms — you’ll save money on your loan. 
  • Switch from a variable to a fixed interest rate. While variable rates can often start lower than fixed rates, there’s no guarantee they’ll remain low indefinitely. You may prefer the security of a fixed rate so you can create a consistent repayment plan for your loan.
  • Spread out payments over a longer term. If your monthly student loan payments are too high for your current budget, you may want to divide up your balance over an extended period. Keep in mind, if you extend your term length, you’ll likely pay more in total interest.
  • Shorten your payment term length. If you’re looking to save on overall interest, you can reduce the term length on your loan. This will allow you to aggressively pay down your debt by making higher monthly payments.

2. Do the math on your existing student loans

Know exactly how much you owe on all your student loans and break down all the details for each of them. This includes each loan’s interest rates and terms. This will help you analyze your actual cost of borrowing and decide which student loans to refinance.

3. Check your credit score

Student loan refinance lenders have requirements for borrowers, the most important of which is your credit score. And the better your credit score, the lower the interest rate you’re likely to get.

Nowadays it’s easier than ever to check your credit score for free. Most credit card companies will provide your score on your monthly statement or anytime you check your account online.

4. Research student loan refinance lenders

With all of your existing loan details and your credit score in hand, check out the various APRs you may qualify for to refinance by getting prequalified. Evaluate lenders individually or use a student loan marketplace like Credible to see offers from several all at once. 

Check your terms with each lender and see which one offers you the rate and term length that works the best for you. When you look at your rates, lenders will typically perform what’s known as a soft credit pull, which doesn’t affect your credit score.

See the most current student loan refinancing rates >>

You’ll need to apply to refinance your student loans through a private lender. You can’t refinance a student loan through the federal government.

5. Apply to refinance your student loan

Once you’ve found a lender you like, complete its entire application. You’ll be asked to provide documents that verify your finances and identity, similarly to when you initially applied for a loan. After the lender sends you its final offer, you’ll need to sign on the dotted line and accept the terms. Then, your new lender will pay off your existing lender, and you’ll begin making payments on the on the refinancing loan.

The rates quoted when you prequalify may not necessarily be the ones you ultimately receive after the full application process. So you may want to apply with multiple lenders. But remember that they’ll each do what’s known as a hard credit inquiry after the prequalification process, which can lower your credit score for a short period.

What are the dangers of refinancing a federal student loan?

Be warned: If you refinance federal student loans, you’ll lose any borrower protections from the government. That includes loan forbearance and relief programs such as Public Service Loan Forgiveness.

You’ll also miss out on certain repayment options like Income-Driven Repayment plans, which take your specific income and family size into account when determining monthly payments. Depending on those factors, you pay back 10% to 20% of your income for 20 to 25 years. Income-Driven Repayment plans provide a safeguard if you happen to lose your job because your payments would scale down as a result.

Refinancing a private loan has minimal downside — these loans aren’t eligible for federal programs anyway.

How much does refinancing a student loan cost?

Unlike refinancing a mortgage, which can cost thousands of dollars in fees, refinancing a student loan is free. Reputable banks, credit unions, and online lenders won’t charge you to prequalify or apply to refinance with them, and there’s no amount due to receive your loan from most lenders. 

Almost all private lenders won’t charge origination fees or prepayment penalties on your student loan, though some may hit you with a late fee if you don’t pay on time.

Refinancing is different from consolidation. When you consolidate your federal loans through the government, you’ll combine multiple student loans into one, and then will make a single monthly payment at a fixed interest rate. It won’t cost any money to consolidate your debt, but you won’t receive a better rate or save money. 

While refinancing your student loans can be a good idea to lock in an improved interest rate or switch up your repayment term length, make sure the benefits of doing so don’t outweigh the potential perks you may leave behind.

Ryan Wangman, CEPF
Loans Reporter

Ryan Wangman is a reporter at Personal Finance Insider reporting on personal loans, student loans, student loan refinancing, debt consolidation, auto loans, RV loans, and boat loans. He is also a Certified Educator in Personal Finance (CEPF).
In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership. He graduated from Northwestern University and has previously written for The Boston Globe. 
Learn more about how Personal Finance Insider chooses, rates, and covers financial products and services here >>


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