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How much can I save by refinancing my graduate student loans?
Potentially shave thousands of dollars off the total cost of your loan.
How much can I save on interest by refinancing?
Borrowers with graduate student debt receive on average a 2% lower interest rate by refinancing, according to data from student loan providers Credible and LendKey. How much you actually save in interest depends on several factors, including your current rate, loan balance and loan term.
Interest savings by APR
Let’s say you had a $60,000 loan balance with a 15-year term and refinanced for a 2% lower interest rate.
Here’s how much you’d save depending on your current rate:
|Current APR||New APR||Total interest savings|
As you can see, just getting a lower rate and changing nothing else about your loan can help you save thousands on interest over the life of your loan.
Interest savings by loan balance
Let’s take a look at how much you can save in interest depending on your student debt load. Say you had a loan with a 7% APR and refinanced for a 5% APR. You stuck with the same 15-year loan term.
Here’s how much you’d save depending on your loan balance:
|Loan balance||Total interest savings|
As the table shows, the higher your balance, the more you can save by refinancing for a lower rate.
Interest savings by loan term
How long you take to pay back your loan also affects your interest savings. Let’s say you had that same $60,000 loan with a 15-year term and refinanced from a 7% APR to a 5% APR.
Here’s how much you’d save depending on whether you shorten or lengthen your loan term:
|Loan term||Interest savings|
As the table shows, refinancing for a shorter term can help you save tens of thousands of dollars. Even a slightly longer term can help you save if you qualify for a lower rate. But refinance with too long a loan term and you could end up paying more in the long run.
How much can I save on monthly repayments?
How much you can save on your monthly repayments also depends on the loan amount, term and APR. While qualifying for a lower rate can cut down on monthly repayments, opting for a longer term can reduce them even more. However, it’s best to only refinance for a longer term if you can qualify for a lower rate so you don’t end up paying more in interest than you would on your current plan.
Monthly savings by APR
Let’s say you had $60,000 in grad school debt with a 15-year loan term. You refinanced your loan for a 2% lower rate.
Here’s how much reducing your interest rate could save you month to month, depending on your current rate:
|Current APR||New APR||Monthly savings|
As the table shows, refinancing for a lower rate is more effective at reducing your monthly cost if you’re starting out with a high interest rate. If you can qualify for an even larger rate decrease, you’ll save even more on your monthly repayments.
Monthly savings by loan term
Let’s say you had that same balance of $60,000 at a 15-year term and 7% rate. You couldn’t qualify for a lower rate, but you could change your term.
Here’s how getting a different loan term would affect your monthly repayments:
|Loan term||Monthly savings|
As the table shows, refinancing for a shorter loan term will seriously increase how much you owe each month unless you can qualify for a lower rate. But it will significantly lower the overall cost of your loan. Going for a longer loan term can help you save in the short run, but you’ll end up paying more in interest overall.
Should I refinance my graduate student debt?
Refinancing isn’t right for everyone. If you’re still not sure about your career or don’t have a full-time job, you might have a difficult time qualifying for a competitive deal. Federal loan holders also lose lots of benefits by refinancing, such as eligibility for some student loan forgiveness programs. But if you’ve improved your credit and earn a comfortable salary, refinancing could seriously help you save.
Generally, professionals in a field with a notoriously high rate of student debt — like doctors and lawyers — tend to have the most options when it comes to refinancing.
Other reasons to refinance
Savings aren’t the only reason you might want to refinance your student loans, especially if you borrowed from a private lender. You might also want to refinance for one of the following reasons:
- Change your loan servicer. Refinancing is the only way to switch the company that handles your repayments if you have private student loans — and one of the few options for federal loans.
- Drop your cosigner. Some private lenders offer cosigner release, but many don’t. If you want to let your cosigner off the hook, you might have to refinance.
- Get more flexible repayments. Refinancing companies might offer more deferment and forbearance options than your current private student loan provider. This could come in handy if you take a sabbatical or want to go back to school.
4 alternatives to refinancing graduate student loans
Not sure refinancing is right for you? These alternatives can also help you save on the short- and long-term cost of your loan:
- Adjust your current loan term. With federal loans, you can change your loan term by signing up for a different repayment plan. And some private lenders may be willing to work with you to adjust your repayment schedule if your loan becomes difficult to afford.
- Apply for forgiveness or repayment assistance. Signing up for one of these programs can cancel all or part of your loan if you meet the program requirements.
- Make extra repayments on your loan. Generally, there is no penalty for paying off your loan early, which can save you money on interest.
- Switch jobs. Some companies offer student loan repayment assistance as an employee benefit — especially in the tech industry.
Comapre student loan refinancing options
Refinancing your grad school loans can help you save tens of thousands of dollars in the long run. But how much you save depends on your rate, loan term and loan balance. And it might not be worth it if you were planning on taking advantage of perks that come with federal loans, like forgiveness.
You can learn more about how it all works with our guide to student loan refinancing.
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