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Federal student loan refinancing

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We look at whether it’s actually worth it — and what benefits you stand to lose.

You might have heard that refinancing can help you save on your student loan repayments and get you out of debt faster. But that’s not necessarily the case when it comes to federal loans.

That’s because federal loans come with some of the lowest rates out there, plus more favorable repayment terms and benefits than private lenders can offer. But if none of the benefits of federal loans apply to you, then refinancing could help you save on interest and give you access to perks that could help your career.

Our top pick: Splash Financial Student Loan Refinancing

  • Min. Credit Score Required: 660
  • Min. Loan Amount: $7,500
  • APR: Starting at 2.45%
  • Competitive rates
  • Parent loan refinancing
  • Referral bonuses
  • Risk-free rate check
  • Cosigner release on general refinancing

Our top pick: Splash Financial Student Loan Refinancing

Save on your student loans with this market-leading newcomer.

  • Min. Credit Score Required: 660
  • Min. Loan Amount: $7,500
  • APR: Starting at 2.45%
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You might benefit from refinancing federal loans if you …

  • Can afford to pay off your loan in 10 or 15 years
  • Have excellent credit or a cosigner who does
  • Have a low debt-to-income (DTI) ratio or a cosigner who does
  • Don’t work in public service or are a teacher
  • Can’t benefit from income-based repayment plans
  • Have life and disability insurance

How to refinance federal student loans

Refinancing federal student loans works the same as refinancing any other private student loan: You take out a new loan to pay off your current debt, ideally with more favorable rates and terms. While the process can vary depending on the lender, you might follow these steps.

  1. Weigh the pros and cons. Federal loans offer a lot of benefits that your refinancing company likely doesn’t offer. If you really think you can get a better deal and more perks that you can actually take advantage of, then refinancing could be the way to go. If you have a cosigner in mind, ask if they’d be willing to help you refinance your loans.
  2. Figure out how much you need to refinance. Contact your loan servicer and ask what your payoff amount is — how much you’d have to borrow to refinance your federal loans. Knowing this can help you find a lender that you can qualify with.
  3. Compare refinancing companies. Rates, terms and fees should all factor into your decision. But consider whether or not the company offers deferment and forbearance, if it allows cosigner release and what other perks are available.
  4. Prequalify. Once you’ve narrowed down your options to a few lenders, ask if you can prequalify without getting a hard credit check — which can damage your credit score. You can prequalify with most by filling out a quick online form and getting a quote of your potential rates, fees and terms.
  5. Fill out the application. Typically, you can fill out your application online in a few minutes. If you’re applying with a cosigner, they can usually complete the application with you or get access to their portion of the application through email.
  6. Submit your documents. Refinancing companies often ask to see your state-issued ID, pay stubs for you and your cosigner, tax returns, statements from your loan servicer and a letter from your servicer stating your payoff amount.
  7. Review and sign your loan contract. If you have any questions about your contract, reach out to your lender before you sign anything.
  8. Wait for your new lender to pay off your servicer. This is often the longest part of refinancing your student loans — it sometimes takes as long as a few months. Continue making payments to your current servicer until your new lender notifies you.
  9. Start making payments on your new loan. Since student loan refinancing tends to come with shorter terms, your repayments might be higher than they originally were.

Where to refinance federal student loans

Many student loan refinancing companies accept both private and federal loans, though not all. And those that do warn that most borrowers won’t be able to find a better deal. If you think you can, start by checking out these three providers.

SoFi

  • How much you can refinance: Full balance of your qualified education loans
  • Variable APR: 2.14% to 7.94%
  • Fixed APR: 3.71% to 8.19%
  • Terms: 5 to 20 years

SoFi is the closest thing to a household name when it comes to student loan refinancing. Its loans could be ideal for young professionals looking to strengthen their career. While you’ll lose the benefits that come with federal loans, it offers unemployment protection, access to wealth advisers and career support. But it doesn’t offer cosigner release, and you need excellent credit to get a truly good deal.

Earnest

  • How much you can refinance: $5,000 to $500,000
  • Variable APR: 2.05% to 6.49% with autopay discount
  • Fixed APR: 3.45% to 6.99% with autopay discount
  • Terms: 5 to 20 years

Earnest offers some of the lowest rates out there when it comes to student loan refinancing — both fixed and variable. And if you’re considering graduate school, this lender will let you hold off on full repayments for up to 36 months while you’re enrolled. It’s also one of the few lenders that refinances Parent PLUS Loans. However, it’s not available in all states and you need strong personal finances to qualify.

CommonBond

  • How much you can refinance: $5,000 to $500,000
  • Variable APR: 2.55% to 7.07% with autopay discount
  • Fixed APR: 3.2% to 7.25% with autopay discount
  • Hybrid APR: 4.32% to 6.27% with autopay discount
  • Terms: 5 to 20 years

Borrowers who want to pay it forward will like what CommonBond’s all about. It’s one of the few refinancing providers out there with a social mission — part of the company’s profits goes toward education initiatives in developing countries. And like Earnest, it also refinances Parent PLUS Loans in addition to other types of federal and private student loans. It’s not available in Mississippi, Idaho, Vermont or Nevada, however.

Go to CommonBond's site

Compare more student loan refinancing providers

Updated October 16th, 2019
Name Product Min. Credit Score Max. Loan Amount APR
660
None
Starting at 2.45%
Save on your student loans with this market-leading newcomer.
Good to excellent credit
None
Starting at 2.8%
Get prequalified offers from top student loan refinancing providers in one place.
680
None
3.29% to 6.69%
Lower your student debt costs with manageable payments, affordable rates and flexible terms.
650
None
2.05% to 6.49%
Get a tailored interest rate and repayment plan with no hidden fees.
650
Full balance of your qualified education loans
2.14% to 7.94%
A leader in student loan refinancing, SoFi can help you refinance your loans and pay them off sooner.
620
$300,000
3.01% to 8.61%
Refinance all types of student loans — including federal and parent PLUS loans.

Compare up to 4 providers

Does the government refinance federal loans?

No, the government doesn’t refinance federal loans. Since everyone gets the same rates on their student loans, you wouldn’t have a chance to become eligible for a better rate down the line.

It does, however, offer a Direct Consolidation Loan. This allows you to make one monthly repayment instead of multiple monthly repayments. The rate you get is a weighted average of the interest on all of the loans you’re consolidating.

How to decide if refinancing is right for you

Not sure if refinancing your federal loans is a good idea? Ask yourself these questions:

How much can I save?

If you have excellent credit, a steady income and few other debts, you could potentially qualify for student loan refinancing at a better rate than you have on your federal loans. Especially if you have Direct Unsubsidized or PLUS Loans.

Try prequalifying with a few lenders to get an idea of what rates you’d be eligible for. Then, use our loan comparison calculator to find out how much you can save — if at all.

Can I afford standard repayments?

By refinancing your federal loans, you won’t have access to the government’s extensive list of repayment plans. Some are based on your income, while others increase over a period of time to give you more affordable repayments at the beginning of your career. But if you’re in a field that pays enough to afford making standard repayments on a shorter loan term, you might not want to take advantage of these plans anyway.

Am I eligible for forgiveness?

Anyone who works for nonprofits, the government or other public service positions are eligible to have their entire federal debt load forgiven after making 10 years of repayments. Teachers are also eligible for partial forgiveness after working at a low-income school for five years. And the government forgives whatever you don’t pay off after 20 or 25 years on an income-based repayment plan.

If you’re eligible for any of these programs, refinancing probably isn’t worth it.

Am I protected from an accident?

The government forgives your student loans if you become permanently disabled and can’t work. It also forgives your student debt if you die before paying it off. You could lose these protections if you refinance to a private student loan. One way to keep this protection is to get disability and life insurance, but that might defeat the purpose of refinancing if you were trying to save money.

What do I stand to lose by refinancing federal student loans?

  • Public Service Loan Forgiveness (PSLF). Get your student debt forgiven after working 10 years at an eligible public service job.
  • Teacher Loan Forgiveness. Get up to $17,500 forgiven after working five years at an eligible school.
  • Income-driven repayment plans. Pay what you can afford and have your loan forgiven after 20 or 25 years, depending on your plan.
  • Graduated Repayment Plan. Make repayments that increase over time while you’re building your career.
  • Death and disability discharge. Have your loans discharged if you die or are permanently disabled.
  • Default rehabilitation. The government goes to greater lengths to help you avoid defaulting on your loan than a private student loan provider does.

Bottom line

There’s a reason many student loan refinancing companies don’t recommend refinancing federal loans — only the most creditworthy borrowers can save and you’ll lose access to a long list of benefits. But if you wouldn’t be able to take advantage of those benefits anyway and have the means to qualify for better rates and terms, it might be worth considering.

You can check out our student loans guide to learn more about how they work. Or read our guide to student loan refinancing to compare even more lenders.

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