You can't refinance student loans through the federal government. You can consolidate federal student loans, but federal consolidation won't lower your interest rate or save you money. When you refinance loans, a private lender pays off your existing loans and issues you a new private loan with new terms.
Refinancing is one of the most popular methods for handling debt. In refinancing, existing loans are consolidated by a private lender — this may be your current lender or a different lender — and are replaced by a new, single loan. Student loan refinancing offers borrowers a new interest rate based on their current finances, potentially lower payments, and the ease of managing debt with a single company.
Like every method of financial management, student loan refinancing has potential benefits and drawbacks.
On the upside, refinancing leads to simplification. Borrowers can consolidate multiple loans — both federal and private — into a single monthly payment with a private lender of their choice. Refinancing also often leads to a lower interest rate, which can result in major savings over time. Borrowers can apply for their refinanced loan with a cosigner to lower this rate further. On the downside, lenders often have lofty eligibility requirements for loan refinancing, e.g., a strong credit record and/or a low debt-to-income ratio. Additionally, refinancing federal loans with private lenders removes protections like forgiveness programs and the flexibility to change your payment plan as needed.
Deciding whether school loan consolidation or refinancing is right for you depends on your individual financial situation, current loan terms, and repayment priorities.
If saving money is your primary concern, refinancing may be your best bet. When consolidating federal loans, any outstanding interest becomes part of the principal balance on your new loan. Combined with extended payment terms, you can expect to contribute more over time with consolidation.
Refinancing and consolidation are both useful tools for Americans facing student loan debt. Unfortunately, not every borrower qualifies for these options. Federal consolidation is limited to eligible federal student loans, while private lender refinancing comes with qualifications that can be difficult to meet.
If you have difficulty finding a private lender who will reconsolidate your loans, there are a few steps you can take. The most obvious — and often most difficult path involves improving your credit and increasing your income. You can also get a cosigner with good credit and income to help you qualify.
Student loan refinancing is the process of combining your existing federal student loans, private student loans or both into a new student loan with a lower interest rate. The goal of student loan refinancing is to get a lower interest rate, save money and pay off your student loans faster. When you refinance, your new lender pays off your old student loans and replaces them with a new student loan. Unlike Direct Consolidation, both federal and private student loans are eligible.