Does refinancing student loans hurt your credit score?

Initially, a hard credit inquiry may cause a small, temporary dip in your credit score. However, if you make on-time payments on the new loan, your score can recover and even improve over time. The impact is generally minor compared to the long-term benefits of a lower rate.

Can you refinance federal student loans?

Yes, you can refinance federal loans through a private lender. However, doing so will permanently surrender federal benefits such as income-driven repayment plans, loan forgiveness programs, and generous deferment or forbearance options. Evaluate whether you are likely to need those protections before refinancing.

What is the difference between APR and interest rate?

The interest rate is the cost you pay each year to borrow the principal, expressed as a percentage. The APR (annual percentage rate) includes the interest rate plus any fees (such as origination fees) charged by the lender, giving a more complete picture of the total cost of the loan. When comparing refinance offers, use the APR to make a fair comparison.

How to Refinance Student Loans

Reviewed by the LoanPolicies Editorial Team · Updated 2026-09-05

Learn how to refinance student loans to potentially lower your interest rate and monthly payment. Compare loan terms, APR, and credit score requirements.

Refinancing student loans means taking out a new loan to pay off one or more existing student loans. The goal is typically to secure a lower interest rate, reduce your monthly payment, or change your loan term. This guide explains how to refinance student loans and what factors to consider for a sound decision. (This is general educational content, not financial advice.)

What Does It Mean to Refinance Student Loans?

When you refinance, a private lender pays off your current student loans and issues you a new loan with new terms. The new loan may have a different interest rate (fixed or variable), a different repayment period, and possibly an origination fee. Because the new loan replaces the old ones, you will have a single monthly payment going forward. This can simplify your finances and, if you qualify for a lower rate, reduce the total cost of your debt.

When Should You Consider Refinancing?

Refinancing can be a smart move, but it is not right for everyone. Generally, you may want to consider it if:

You have a steady income and a credit score in the good to excellent range (typically 670 or higher).
Your current interest rates are higher than what new lenders are advertising for your profile.
You want to lower your monthly payment by extending the loan term (though this may increase total interest paid).
You no longer need federal loan protections, such as income-driven repayment plans, loan forgiveness programs, or deferment options.

Keep in mind that refinancing federal loans with a private lender means losing those federal benefits. (This is a general observation; your situation may differ.)

Steps to Refinance Your Student Loans

Follow these steps to make an informed refinancing decision:

Check your credit score. Lenders use your credit profile to determine eligibility and the APR offered. Improve your score before applying if needed.
Gather your loan details. Know the balances, interest rates, and servicers of all loans you want to refinance.
Shop around. Compare loan terms, APRs, and any origination fees from multiple lenders. Each lender may weigh your credit score and income differently.
Prequalify if possible. Many lenders allow a soft credit check to show estimated rates without impacting your score.
Choose a loan term. Shorter terms usually have lower rates but higher monthly payments; longer terms lower the payment but increase total interest.
Submit a formal application. Provide documentation (income, ID, loan statements). The lender will perform a hard credit check.
Review and sign. Once approved, read the loan agreement carefully, then sign. The lender pays off your old loans, and you start making payments on the new loan.

How Loan Term and Credit Score Affect Your Refinance

Two of the most important factors in a refinance are your credit score and the loan term you select. The table below shows a general idea of how these elements may influence your monthly payment and APR. (Actual rates vary by lender and market conditions.)

Credit Score Range	Typical Impact on APR
720+ (Excellent)	Lowest rates available; best chance for significant savings.
690–719 (Good)	Competitive rates, but slightly higher than top tier.
670–689 (Fair)	Rates may be moderate; consider improving score first.
Below 670	Higher rates or difficulty qualifying; a cosigner may help.

Choosing a shorter loan term (e.g., 5–7 years) often gives the lowest APR but a higher monthly payment. A longer term (e.g., 15–20 years) lowers the payment but increases total interest paid. Balancing your budget with long-term cost is key.

What to Watch Out For

Before you refinance, check for any prepayment penalties on your existing loans and any origination fees on the new loan. Some lenders charge a fee to set up the loan, which can offset savings from a lower rate. Also, understand that variable-rate loans may start low but increase over time. (These are general considerations; read your loan documents.)

Refinancing student loans can be a powerful tool to reduce your debt burden, but it requires careful comparison of lenders and terms. Use this guide to evaluate your options and make a choice that aligns with your financial goals.

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