When Is the Best Time to Refinance Your Student Loans? How to Know If the Circumstances Are Right

There’s no one-size-fits-all answer to when you should refinance your student loans—but the best time is when key conditions line up in your favor. If you’ve secured a steady income, built a strong credit profile, and can qualify for a lower interest rate, refinancing may lead to significant long-term savings.

But refinancing too early—or under the wrong circumstances—can cost you more in the long run. You might lose federal loan protections, forfeit your grace period, or accept less favorable terms. This guide walks through the right and wrong times to refinance, so you can make the most informed decision.

Table of Contents

1. When to refinance your student loans 
   1. 1. You can get better rates and terms
   2. 2. You have a steady job
   3. 3. Your credit score has improved
   4. 4. Your current payments are too high
   5. 5. You want to simplify the repayment process
   6. 6. You need to remove a cosigner
2. When not to refinance your student loans 
   1. 1. You might lose federal student loan benefits
   2. 2. You can’t afford the new payment
   3. 3. You’re in your grace period
   4. 4. You’re getting another loan soon
   5. 5. You have credit or finance issues

When to refinance your student loans 

Refinancing your student loans makes sense when the conditions are right. Here are situations where it might be the right move.

1. You can get better rates and terms

Refinancing makes the most sense when current market rates are lower than what you’re paying. As of June 2025, interest rates have moderated slightly after previous highs, creating opportunities for qualified borrowers to lock in better terms.

If your original loan has a relatively high rate—whether federal or private—this could be a good time to shop around. Refinancing could reduce your interest costs, shorten your loan term, or lower monthly payments, depending on what you’re looking for.

Just keep in mind that only private lenders offer true refinancing with lower rates—federal Direct Consolidation doesn’t reduce your interest rate.

Before you consider refinancing your student loans, ensure you have a strong credit score, a steady income, and a low debt-to-income ratio. You should also consider how the new payment affects your budget and how much you’ll save in total interest over the life of the loan.

2. You have a steady job

A reliable income is a key requirement for refinancing. Lenders want to see that you can comfortably handle monthly payments without financial strain. The steadier your employment, the more confident lenders will be in offering you favorable terms.

Each lender has its own criteria. For example, SoFi doesn’t list a specific income minimum, but it does require that you have free cash flow left after your monthly expenses. ELFI sets a minimum annual income of $35,000, and Earnest requires proof of steady employment—not just an offer letter.

If you’re in a solid job with predictable income, refinancing could help you secure a lower interest rate or more manageable repayment terms.

3. Your credit score has improved

Lenders rely heavily on your credit score when setting your refinance rate. If your score has gone up since you first took out your loans, you may now qualify for significantly better terms. Even a modest improvement can lead to savings.

Most private lenders require good to excellent credit. For instance, SoFi has a minimum credit score requirement of 650, while ELFI requires 680 or higher. The stronger your credit profile, the lower the interest rate you’re likely to be offered.

If you’ve been working to build your credit—by making on-time payments, reducing your debt, or increasing your credit limit—refinancing could be your reward.

4. Your current payments are too high

If your monthly student loan payments are making it hard to cover essentials or save for other goals, refinancing can provide some breathing room. This is especially helpful during times of financial transition—like starting a new job, moving to a high-cost-of-living area, or taking on other major expenses such as childcare, a mortgage, or medical bills.

By refinancing into a longer loan term, you can reduce your monthly payments and make your budget more manageable. Just keep in mind that while this lowers short-term pressure, it can increase the total interest paid over the life of the loan.

5. You want to simplify the repayment process

Managing multiple student loans—each with its own interest rate, servicer, and due date—can get overwhelming, especially if you’re navigating a busy life stage like starting a career, planning a move, or managing a family budget. If you find yourself constantly juggling payments or missing due dates, it might be time to simplify.

Refinancing allows you to combine all your loans—federal and/or private—into a single private loan with one monthly payment and one servicer. This can reduce stress, minimize the risk of missed payments, and make it easier to stay on track with repayment.

6. You need to remove a cosigner

If a parent or other individual cosigned your loan to help you qualify, there may come a time when you’re ready to take full financial responsibility. Refinancing is one way to remove a cosigner from the loan—replacing the original loan with a new one in your name only. This can free the cosigner from financial liability and may improve their credit by reducing their debt-to-income ratio.

This move makes the most sense once your credit and income are strong enough to qualify on your own, and you could qualify for a better rate and terms than your current loan. It’s especially timely if the cosigner is planning a major purchase or loan of their own and needs to shed the obligation.

Some lenders do offer cosigner release without refinancing—for example, Sallie Mae allows release after 12 on-time payments. Before refinancing, check your current lender’s policy—you might not need a full refinance to remove your cosigner.

When not to refinance your student loans 

Before refinancing your student loans, it’s essential to consider whether it’s the right move. Situations, where you shouldn’t refinance, include if you don’t want to lose federal student loan benefits if you can’t afford the new payment if you’re getting another loan soon, or if you have the credit or financial issues.

Here are more details about when refinancing your student loans might not make sense:

1. You might lose federal student loan benefits

Some of the best features of federal student loans are their benefits. For instance, you can get help if you’re facing financial hardship, federal loans offer various loan forgiveness programs, and you might be able to sign up for an income-driven repayment plan. 

If you refinance your federal student loans into a private one, you’ll lose all federal benefits. Before refinancing your federal student loans into a new private loan, consider whether you might need to use these benefits in the future. 

You can’t undo a refinance, so weighing this decision carefully can help you avoid regret. Your future self will thank you.

Refinancing your student loans means losing the protections and benefits of federal student loans and transferring them to a private lender. Before making this decision, ensure you’re in a financial position to eventually pay the loan off. This means steady income and employment and a manageable loan amount. If you are unsure about your future job stability, believe you may qualify for loan forgiveness soon or are not confident you can pay off the loans, it may be worth continuing to pay a higher interest rate to keep your loans in the federal system.

2. You can’t afford the new payment

Getting into a loan you can’t afford to repay doesn’t make sense. Whenever you take out a loan—whether a new loan or a refinance—a critical step is to ensure you have room in your budget for the payment. 

Before you sign on the dotted line, evaluate whether you can afford the payment. If not, consider other options. 

For example, if you’re experiencing a short-term financial hardship, speak with your lender to see whether it might be willing to modify your loan temporarily. 

3. You’re in your grace period

Refinancing your student loans during the grace period—typically the six months after graduation—can trigger early repayment. When you refinance, your new lender may require you to begin making payments immediately, even if your original loans weren’t due yet.

If you’re not financially ready to start making payments, or you want to use the grace period to get settled, find a job, or build up some savings, it’s better to wait. Once your grace period ends, you’ll be in a stronger position to refinance without giving up that valuable breathing room.

4. You’re getting another loan soon

When you refinance your student loans with a private lender, you can expect the lender to pull a hard credit check. The new loan and credit check can lower your credit score by a few points. 

Getting your credit as strong as possible is essential whenever you plan to get a new loan, such as a mortgage. It’s best to avoid any activity that might lower your credit score, even if the reduction is temporary. 

5. You have credit or finance issues

If you have bad credit or any negative items on your credit report, you might not be able to qualify for a low interest rate on a new student loan. Depending on the severity of the issues, it’s possible you might not be approved at all. 

You can expect the lender to review your finances before approving you for the refinance. If you don’t have a steady source of income or are experiencing financial difficulties, you may not be approved. If you are approved, the interest rate will likely be high. 

Rather than refinancing your student loans, consider taking other actions to improve your credit and finances. For instance, work on reducing high-interest-rate debt, clear any delinquencies, and make your payments on time. 

Once your credit is in better shape, you can reconsider whether refinancing is right. 

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Check out some of our other resources on student loan refinancing:

• How often can you refinance student loans?
• How may times can you refinance a student loan?
• Should I refinance my student loans?
• The best student loan refinance companies