Student loan refinancing: what you gain and what federal borrowers give up

What does it mean to refinance student loans?

A private lender pays off your loans and gives you one new private loan with its own rate and term. Private and federal loans can both go in.

The CFPB lists what refinancing can do: lower your rate, lower your payment by stretching the term, or release a co-signer from your old loan ^[1]. Stretching the term can raise what you pay overall, so the CFPB says to compare APRs, not just monthly payments ^[1]. Our guide to APR vs interest rate covers why those two numbers differ.

Servicemembers and anyone claiming the interest deduction should look closer. Active-duty servicemembers can lose the 6% interest cap under the Servicemembers Civil Relief Act if they refinance, and mixing student and non-student debt in one loan can cost you the student loan interest deduction ^[1].

What do you lose when you refinance federal loans into a private loan?

Your federal rights, including income-driven repayment, deferment, forbearance and forgiveness. The CFPB says you can't reverse the move.

• Income-driven repayment, deferment, forbearance and cancellation rights under the federal program. A private lender may still offer forbearance of its own ^[1].
• Public Service Loan Forgiveness and teacher forgiveness ^[1].
• Discharge if you die or become permanently disabled. The CFPB says many, but not all, private lenders offer something similar ^[1].
• A fixed rate, if you choose a variable one. Most federal loans are fixed, and a variable rate can climb above where you started ^[1].

Some lenders spell it out. Earnest's refinance page warns that you'll lose benefits tied to your federal loans, such as income-driven repayment plans and Public Service Loan Forgiveness ^[6].

How is a Direct Consolidation Loan different from refinancing?

Consolidation keeps your loans federal and combines them into one bill. It won't cut your rate, and private loans can't go in.

There's no application fee, and the rate is fixed: the weighted average of the loans you combine, rounded up to the nearest one-eighth of a percent ^[2]. Consolidation can lower your payment by giving you more time, but that means more interest overall, and any unpaid interest is added to the new principal ^[2]. Once loans are consolidated, it can't be reversed, and private loans aren't eligible ^[2].

Does the 2025 federal law change whether refinancing makes sense?

It changes what you'd give up. RAP covers unpaid interest each month and adds a principal match, so leaving federal loans means leaving those too.

Under RAP, if your on-time payment doesn't cover the month's interest, the unpaid interest is covered, and if your principal falls by less than $50, a matching payment brings it to $50 or to the amount you paid, whichever is less ^[3]. Federal Student Aid says that if you keep paying on time without breaks, your balance never rises above what it was when you entered RAP ^[3]. The PAYE and ICR plans end no later than July 1, 2028 ^[4].

None of this is worth much to someone who will pay off quickly at a lower private rate. It's worth a lot to someone whose income may drop or who works in public service. That's the trade to weigh. The private vs federal student loans guide lays out every federal plan and limit.

What do lenders look at when you refinance?

Credit score and history, income, existing debt and often your degree. A co-signer can help if you fall short on your own.

Few lenders print their full criteria. ELFI does, so we use it as an example of what one lender publishes, not as a pick. It asks for U.S. citizenship or permanent residency, at least $10,000 in student debt, a bachelor's degree or higher, a minimum income of $35,000, a minimum credit score of 680 and at least 36 months of credit history, with terms of 5 to 20 years ^[5]. It says these apply "among other factors" ^[5].

NerdWallet says lenders keep their best rates for strong applicants, a creditworthy co-signer can help, and most lenders let you check an estimated rate with a soft credit pull that doesn't affect your score ^[7]. A full application is a hard inquiry; here's how hard inquiries affect your score. To see how lenders read your debt load, try the debt-to-income calculator.

Is refinancing private student loans different?

Yes, it's lower stakes. Private loans have no federal protections to lose, so the question is mostly whether the new rate and terms beat the old ones.

The CFPB suggests looking for better terms on private loans, including a lower rate or co-signer release once you've built a good record ^[8]. It also says to think carefully before refinancing federal loans, because you'd lose their flexible repayment options and borrower protections ^[8].