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Should I refinance my student loans or keep the Graduated Repayment Plan?

It depends on where you are in your career.

Updated Feb 10, 2021

Fact checked

The Graduated Repayment Plan and refinancing both allow you to adjust your federal student loans to your needs while likely costing less than other long-term repayment plans. Which is best for you depends on your career. Graduated repayments can help you save while you’re just starting out in your career, while refinancing can help you save after you’ve built up your credit.

Graduated Repayment Plan vs. refinancing

	Graduated Repayment Plan	Student loan refinancing
Best for when …	You’re initially launching your career and can’t afford the Standard Repayment Plan.	You’ve established your career and have excellent credit.
How it works	Make repayments that increase every two years over a 10-year term.	Take out a new loan with different rates and terms.
Pros	Keep federal benefits like in-school deferment Repayments increase with your salary Still potentially eligible for federal forgiveness programs	Potentially get better rates Extend your term for lower repayments Potentially get out of debt faster
Cons	No way to change your rate High monthly repayments at the end of your loan term Potentially pay more in interest	Lose all federal benefits like forgiveness eligibility Might not be able to defer if you get another degree Hard to qualify straight out of school

How does the Graduated Repayment Plan work?

The Graduated Repayment Plan works by giving you repayments that start off low and increase every two years over a 10-year term. This plan is best for borrowers with a low student debt load because the increases are less dramatic.

If you’ve consolidated your federal loans with a Direct Consolidation Loan, you can stretch this out over 30 years. While this makes repayments less dramatic, you’ll pay much more in interest.

When should I stick with the Graduated Repayment Plan?

You might want to consider the Graduated Repayment Plan in the following situations:

You’re starting a career with lots of room to grow. Graduated repayments are designed for borrowers who think their salary will increase over the next 10 years.
You’ve recently graduated. Maybe you’re not sure what you want to do, but you know you’ll probably earn more than you do right now.
You have little debt. The larger your loan balance, the more dramatic the jump will be in repayments every two years.
You might want to switch federal repayment plans. You can always switch to another federal repayment plan if graduated repayments aren’t working for you.

When should I consider another plan?

You have a lot of debt. Depending on your student debt load and salary, you could end up with exorbitant monthly repayments by the end of your term.
You’re in a low-paying field. Even if you’re new to your career, if you don’t expect to have a dramatic increase in your salary over the next decade, graduated repayments can be difficult to manage.
You want to save on interest. Those low starting repayments mean you might not pay the full amount of interest that adds up in the beginning, which can increase the cost of your loan.

How does refinancing work?

Student loan refinancing works by taking out another loan from a private company to pay off your current loan. You end up with an entirely different loan, along with new rates, terms and benefits. What you qualify for depends on factors like your credit history and income. You can apply with a cosigner if you don’t qualify on your own, though you often still need to have good credit.

You might be able to qualify for a lower interest rate if you’ve built up your credit and are settled in your career. But you’ll lose all of the benefits that come with federal loans, such as a wide range of deferment options and eligibility for some forgiveness programs.

When should I consider refinancing?

You have excellent credit. You need to have strong credit to beat the rates you already have on your federal student loans.
You’ve established your career. If you don’t see yourself earning significantly more over the next 10 years, refinancing might make more sense than graduated repayments.
You want to save on interest. Refinancing can be a better way to save because you have the chance of getting a lower rate — especially if you have Direct PLUS Loans.
You don’t plan on going back to school. Private lenders are often less flexible when it comes to in-school deferment if you want to get another degree.

When should I avoid refinancing?

You’re thinking of making a career switch. Changing careers can be risky and lead to a pay drop. Keeping your loans federal gives you more repayment flexibility than you’ll find with a private lender.
You might want to apply for forgiveness. Private loans have fewer forgiveness options than federal loans.
You have fair or poor credit. You likely won’t be able to qualify for a better deal by taking out a loan with a private lender.

Not sure which is best? Let’s take a look at an example …

If you’re still not sure which is right for you, lets’ take a look at an example of how the Graduated Repayment Plan and refinancing might work:

You have a student loan balance of $41,570 at an interest rate of 6%. You qualify to refinance for a 15-year term at a 3.9% APR.

Here’s how the two options compare:

	Graduated Repayment Plan	Refinancing
First monthly repayment	$263	$305.41
Last monthly repayment	$790	$305.41
Total interest paid	$17,362	$13,403.67

In this example, refinancing might be a better option from a cost perspective. While it costs a little more in the beginning, you’d end up paying more than twice per month by the last year and more in interest if you stuck with the Graduated Repayment Plan.

Want to make this comparison yourself? Use the FAFSA4caster tool on StudentLoans.gov to see how much the Graduated Repayment Plan will cost you. Then prequalify with a few student loan refinancing providers to find the best offer you can qualify for. Compare the results to find out which option makes the most sense for you.

Compare student loan refinancing offers

Name	APR	Min. Credit Score	Loan amount	Loan Term
Purefy Student Loan Refinancing (Variable Rate)	1.88% to 5.54%	650	$5,000 - $300,000	5 to 20 years	Refinance all types of student loans — including federal and parent PLUS loans.	Get started More Info	Compare	loading Fetching your data...
Credible Student Loan Refinancing	1.80% to 8.90%	Good to excellent credit	Starting at $5,000	5 to 20 years	Get prequalified offers from top student loan refinancing providers in one place.	Get started More Info	Compare	loading Fetching your data...
SoFi Student Loan Refinancing Variable Rate (with Autopay)	2.25% to 6.59%	650	Starting at $5,000	5 to 20 years	A leader in student loan refinancing, SoFi can help you refinance your loans and pay them off sooner.	Get started More Info	Compare	loading Fetching your data...
Splash Financial Student Loan Refinancing	1.89% to 6.66%	650	Starting at $7,500	5 to 25 years	Save on your student loans with this market-leading newcomer.	Get started More Info	Compare	loading Fetching your data...
Education Loan Finance Student Loan Refinancing	2.39% to 6.01%	680	Starting at $15,000	5 to 20 years	Lower your student debt costs with manageable payments, affordable rates and flexible terms.	Get started More Info	Compare	loading Fetching your data...
Earnest Student Loan Refinancing	1.88% to 5.64% APR with autopay	650	$5,000 - $500,000	5 to 20 years	Get a tailored interest rate and repayment plan with no hidden fees.	Get started More Info	Compare	loading Fetching your data...
Supermoney student loan refinancing	Starting at 1.9%	No minimum credit score	$5,000 - $300,000	5 to 20 years	Compare options to combine both private and federal debts into one monthly payment.	Get started More Info	Compare	loading Fetching your data...

Compare up to 4 providers

Bottom line

Which option is best for you depends on how you think the next 10 years of your career will play out. If you’re fairly certain you’re going to stay in the same job with a similar salary, refinancing might be the way to go. But if you’re just starting out or think you might want to switch careers, keeping your loans federal gives you more flexibility.

You can learn more about how it all works by checking out our guide to student loan repayment plans.

Frequently asked questions

Thank you for your feedback!

Anna Serio

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Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.

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Should I refinance my student loans or keep the Graduated Repayment Plan?

It depends on where you are in your career.

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