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Student Loans Student Loan Repayment

How to Refinance Student Loans

Refinancing student loans works by taking out a new loan to replace your current student debt. Borrowers often refinance to secure a lower interest rate, reduced monthly payments, or more favorable repayment options. But it’s essential to understand the implications of refinancing before moving forward, especially if you have federal student loans. 

This comprehensive guide will walk you through whether refinancing makes sense for your situation, the application process, common pitfalls to avoid, and answers to questions about student loan refinance.

How do I refinance my student loans? 

We’ve broken refinancing into an easy-to-follow six-step process, and we’ll discuss each step below. 

An image showing the steps involved in the student loan refinance process

1. Assess your need

Before refinancing, it’s essential to assess your needs and goals. Borrowers often choose to refinance for one or more reasons, such as a lower interest rate or lower monthly payments. Here’s our insight into refinancing and whether it could make sense for you.

How does student loan refinancing work? infographic

You can refinance federal and private student loans into a new private loan. But you can’t refinance federal loans through the U.S. Department of Education. Instead, you must do so with a private lender, which means sacrificing federal loan benefits. 

Our expert weighs in: When to refinance

Erin Kinkade


An increase in interest rates would likely warrant remaining with your current loans, but a drop in interest rates would warrant a reason to refinance or consolidate into a lower-interest-rate loan. If economic conditions are favorable and you feel secure in your job and future outlook, it may make sense to refinance to remove a cosigner or obtain better terms (e.g., a lower rate).

Your alternative if you want to retain your federal student loan benefits, such as income-driven repayment plans and future student loan forgiveness, is consolidating with a Direct Consolidation Loan. Your new rate with a Direct Consolidation Loan is the average rate of your combined loans rounded up to the nearest 0.125%. 

Like refinancing, consolidation involves replacing your loans with a new one. Here’s how the two options compare: 

An example of how federal student loan consolidation works with hypothetical calculations.
Image showing an example of consolidating three private student loans into one to show how private student loan consolidation, or student loan refinancing, works.


If you’re unsure whether you have federal loans, private loans, or both, here’s how you can check: For federal loans, visit the Federal Student Aid website. This government site provides a detailed overview of all your federal loans. For private loans, check your credit report, which will list all student loans, federal and private (Federal loans are marked “Dept. of Ed.” or “Department of Education.”) You can request a free annual report from major credit bureaus or consult your lender.


  • Potentially lower interest rates could help you save over the life of your loan

  • Payments could be more manageable

  • New loan term could better align with your financial situation

  • No credit check for Direct Consolidation Loans

  • Could remove a cosigner from the loan


  • Stringent credit requirements for private loans

  • Loss of federal loan benefits if refinancing with a private lender

  • Credit check if refinancing with a private lender (could also affect cosigner’s credit)

“The decision to refinance depends on your income, expenses, life events, goals, and current and future cash flow projections.”

Erin Kinkade


2. Prequalify

If you determine refinancing is the right path, prequalifying could offer valuable insight into loan options from different lenders. 

Prequalifying for a loan involves providing basic information to a private lender; in exchange, the lender gives you a rate quote with potential terms and monthly payments.

You can use this information to compare options. Prequalification typically involves a soft credit pull, which won’t harm your credit. 

3. Select a lender

Finding the right lender to refinance student loans is a critical step in the process. It requires careful comparison, understanding of important terms, and more. Here’s what to consider when choosing a lender:

  • Rates: Look at the rates lenders offer. A small difference in your rate can mean higher or lower monthly payments. Also, consider whether rates are fixed or variable. (See more about how to refinance student loans to a fixed rate.)
  • Terms and repayment options: Research potential loan terms and what repayment options lenders offer.
  • Fees and penalties: Be aware of origination fees, prepayment penalties, and other hidden costs.
  • Lender reputation: Ask family members and friends for possible lender recommendations, read customer reviews and ratings, and ensure prospective lenders comply with all legal requirements. 

Our resource on the best student loan refinance options can help you choose a reputable lender.

“If you are concerned about job loss, you may want to consider a loan provider with unemployment protection (for example, SoFi) or maintaining your federal loans and discussing forbearance options with your loan servicer.”

Erin Kinkade


4. Apply with your selected refinance lender

Understanding the refinance application process ensures you’re well-prepared. Here’s the information you’ll likely need on hand when you apply:

  • Proof of income and assets: Recent pay stubs, tax returns, W-2s, bank statements, and investment account statements. (See our resource on how to refinance student loans with low income.)
  • Current debt information: Recent statements from your student loan lenders, credit card statements, and information about other monthly obligations, such as rent or mortgage payments. (Find out how your debt-to-income ratio affects student loans.)
  • Identification: A government-issued ID, such as a copy of your driver’s license or passport.

Once you have this information on hand, you can start the loan application process. Many lenders let you apply online, inputting your information and uploading copies of required documents. 

You’ll then need to wait for the lender to review it and determine whether you’re approved. Loan decisions can take a few days. If approved, you’ll review and sign your loan documents to finalize the process.

5. Get approval

Once you’ve signed and sent your final loan documents to your lender, it will disburse your refinance loan. Lenders typically use the loan proceeds to repay student debts, sending payments to the lenders. 

The time it takes to repay your loans varies by lender. It could take up to a few weeks. Check with your new lender about the payoff time frame and how it will notify you once your old student loans are paid off. While you’re waiting, continue paying your old loans on time. 

6. Begin repayment

Your old lenders should send you a loan payoff statement, which you can likely download by logging into your online account. It will likely also notify you by mail. 

Once your old loans are paid off, begin making monthly payments on your new loan via your lender’s online dashboard, mobile app, or by mail. Your new lender can guide you on how to sign up for an online account if you prefer to pay via the web. 

Common mistakes to avoid when refinancing student loans

Before moving forward with a student loan refinance, it’s essential to understand common mistakes so you can avoid them. Here are common borrower pitfalls:

  • Applying with a low credit score: If you have poor credit, you’re unlikely to qualify for the lowest rates. The lender might also deny your application, further lowering your credit rating. Consider instead what you can do to raise your credit score before refinancing. (See what credit score you need to refinance student loans.)
  • Overlooking details: Review potential loan terms and conditions so you understand your obligations before formally applying.
  • Ignoring cosigner implications: Consider whether you should refinance student loans with a cosigner.

Refinancing student loans can be complex, and it’s important to analyze your situation and compare potential loans to find an affordable option with decent terms. 

Also, understand the implications of refinancing federal student loans with a private lender. If you’re looking at how to refinance a student loan, tools and calculators can help you make the best decision. 

Check out these additional resources:

Our expert’s advice

Erin Kinkade


If your credit score is poor, it’s wise to repair and build your credit score before refinancing. If refinancing doesn’t provide an economic benefit, such as lower payments or a reduced repayment term (saving interest dollars), or if refinancing doesn’t present other benefits your current loans don’t provide, it may not make sense to make a change.

Student loan refinance FAQ 

What credit score do I need to refinance my student loans?

Many lenders prefer a credit score of at least 650 to refinance student loans. However, exact requirements may vary among providers. 

If you don’t meet these requirements or you have federal student loans, consider a Direct Consolidation Loan to make payments more manageable while retaining federal benefits.

Do I need to refinance all my student loans, or can I just refinance a portion?

You don’t need to refinance all of your student loans if you don’t want to. You can choose to refinance part of your student loans if that makes more sense.

Is there a cost to refinance student loans?

Most lenders don’t impose a fee for refinancing student loans. But always check the terms with the lender you’ve selected.

How long does the refinancing process take?

Refinancing can take several days to a few weeks, depending on the lender and your circumstances. 

Will refinancing student loans affect my credit score?

Refinancing can cause a temporary dip in your credit score. However, by demonstrating responsible repayment behavior, you can rebuild and even elevate your credit score over time, allowing lenders to view your financial profile more positively.