Refinancing student loans.
In plain English
Refinancing student loans is when a private lender (a bank, credit union, or online lender) pays off one or more of your current student loans and issues you a single new private loan in their place, with a new rate and term. Lenders set your new rate based on your credit and income, so a stronger financial profile can mean a lower rate. The catch is that refinancing federal loans turns them into private debt, which permanently gives up federal protections like income-driven repayment, deferment options, and forgiveness programs. It is most often worth considering for private loans, or for federal loans only when you are confident you will never need those federal protections.
01Why it matters
A lower rate can save real money over the life of the loan, but giving up federal safety nets can cost far more if your income drops or you lose a job. This is a one-way door for federal loans, so the decision deserves care.
02The math, step by step
You have private loans at a high rate and a steady income with good credit. A lender refinances them into one new loan at a lower rate, lowering your total interest. The exact rate you qualify for varies by lender and depends on your credit, so compare quotes from a few lenders before you commit.
03What this is NOT
Refinancing is NOT federal consolidation. Refinancing is done by a private lender and can lower your rate but strips federal protections; federal consolidation is a government program that keeps your loans federal and uses a weighted-average rate that does not save you interest.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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