You can refinance some or all of your existing federal or private student loans and combine them into a new loan with a private lender. Refinancing makes sense — especially for private loans — if you can get a lower interest rate or drop a cosigner from your current loans.
Keep in mind that refinancing federal student loans is risky. You’ll lose all the protections that come with them, including access to income-driven repayment plans and student loan forgiveness programs, like the Public Service Loan Forgiveness Program.
But if you don’t plan on taking advantage of those options and you want to pay off your student loan debt as quickly as possible, refinancing may be a good option.
You should look to refinance a second time to get a better rate. To qualify for the best rates and terms, you’ll need an excellent credit score, good income, and a low debt-to-income ratio. Read more about how student loan refinance affects credit.
A lower rate will save you money over time by decreasing the interest you’ll pay over the life of the loan. And if you need to free more room in your budget, refinancing can lower monthly payments if you choose a longer repayment term. Your loan terms will allow you to make extra payments towards the balance without being charged prepayment penalties.
Learn More: Student Loan Refinancing Calculator