Will refinancing your student loans save you money?

Refinancing student loans can allow you to pay off an old loan or multiple loans, saving you money and interest in the long run

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Refinancing student loans can save you money, but it depends on factors like your credit, interest rate, and the amount you want to refinance.  (Shutterstock)

Saving money is one of the top reasons people consider refinancing their student loans, but whether or not you’ll save money depends on your individual circumstances. How much debt you have, your credit score, the interest rate you qualify for, and the repayment term can all affect your potential to save after refinancing your student loans.

Here’s how much you could potentially save by refinancing your student loans, how to qualify for refinancing, and some pros and cons to consider.

Visit Credible to learn more about student loan refinancing and compare rates from multiple private student loan lenders.

How much could you save by refinancing your student loans?

Whether you refinance one loan or a few, you can potentially save money if you’re able to secure a lower interest rate and you don’t extend your loan term too much. 

Refinancing multiple loans into one new loan will streamline your debt repayment. But in order to save money by refinancing, you need to qualify for a lower interest rate than what you have on your original loans. If you’ve improved your credit score since first applying for student loans, you may qualify for a lower interest rate. 

If you stick to the same repayment timeline or choose a shorter repayment term, you’ll save money. But if you choose a longer repayment term in order to lower your monthly payments, you may pay more in interest over the life of the loan — even with a lower interest rate. 

For example: If you have a $10,000 student loan with a five-year repayment term and you switch from a 7% interest rate to a 4% interest rate, you could save more than $800 in interest. Ideally, because you’re spending less on interest, you’ll be able to afford to pay off your student loan debt faster than originally planned, which can help you save even more in interest. 

Should you refinance with a cosigner?

If your credit score isn’t ideal, you may need a cosigner with good credit who can help you qualify, or get a lower interest rate than what you currently have. 

Your cosigner is someone who agrees to be responsible for your debt if you fail to make your loan payments. Otherwise, both your credit scores could be damaged. Because of this risk, it’s important that cosigners understand what they’re taking on and that you have a clear plan in place for making your loan payments on time. Many private student loan lenders allow you to release a cosigner after meeting certain criteria.


How much does it cost to refinance your student loans?

The good news is that student loan refinancing typically doesn’t involve application or origination fees, and you likely won’t pay prepayment penalty fees if you pay off your loan early. It’s always a good idea to double check what fees the lender charges before you apply. 

Because fees aren’t super common when you refinance student loans, your main costs are going to be interest charges. Refinancing is usually only a good move to make if you can secure a lower interest rate and save money on your student loan payments. 

If it’s going to cost you money to refinance your student loans instead of saving money, you may want to hold off on refinancing. Remember — even if you get a lower interest rate and extend your repayment term, you can still end up paying more in interest over the life of the loan. 

You can easily compare prequalified rates from multiple lenders using Credible.

Pros and cons of student loan refinancing

Refinancing student loans isn’t right for everyone, so it’s important to weigh the advantages and disadvantages carefully before making a decision:


  • You could potentially save money on interest.
  • You can consolidate multiple sources of student loan debt.
  • You can choose a new repayment term.
  • You typically won’t pay any application, origination, or prepayment penalty fees.


  • You need a high credit score to qualify for good interest rates.
  • If you refinance federal student loans into private ones, you become ineligible for federal loan benefits.
  • Private student loans aren’t eligible for the recently announced student loan forgiveness from the U.S. Department of Education.
  • There’s no guarantee that you’ll qualify, or that refinancing will save you money.


How to qualify for student loan refinancing

Here’s a closer look at some general refinancing qualifications and how the application process typically plays out: 

  • Start by prequalifying. Prequalify with multiple lenders to avoid a hit to your credit when you’re still shopping around. This gives you an idea of the rates and terms a lender might offer you.
  • Consider your credit score. When you apply with a lender to refinance, your credit score is one of the most important factors a lender will consider when deciding to lend money to you and what type of interest rate you’ll qualify for. Lenders also consider other factors, like your income and debt-to-income ratio.
  • Apply online. Most private lenders, such as banks or credit unions, make it possible to apply online, but some may require you to apply in person. You’ll generally need to submit supporting documentation, such as official forms of identification, proof of income, and tax forms.
  • Begin making payments. If you’re approved, the lender will disburse the funds so you can pay off your old loans (some lenders may pay them off for you). Then you’ll begin making payments on your new loan as agreed.

It’s important to shop around for different lenders to see which one offers you the lowest interest rate and the best terms.

To get started on refinancing your student loans, visit Credible and compare prequalified rates from multiple lenders.