How Do I Refinance My Federal Student Loans?

Kathryn Morstad

If you’ve been hearing a lot about student loan refinancing but aren’t sure what it is exactly, here is a breakdown of how it works.

Once you graduate, you may find yourself with multiple federal and private student loans. In fact, the average amount of debt for an undergraduate degree is just under $30,000 and for a graduate level degree it is averaging a total of $66,000.

Under normal circumstances, that amount of debt commonly takes up to 20 years to pay off. And if you went through a post-graduate program, like medical school or law school, it could take even longer.

So why refinance student loans?

Simply put, refinancing is a way to save money. The refinancing process became popular in the mortgage industry years ago but has a much shorter history in the student loan arena.

About a decade ago, someone had the foresight to see that student loan debt was growing exponentially (and is currently over $1.6 trillion – more than total credit card debt). That created an opportunity to introduce refinancing to the private lender student loan marketplace.

Like mortgage refinancing, taking existing federal student loans and refinancing them to a lower interest rate is a great way to lower your overall costs and possibly get your loans paid off more quickly.

It can be a great solution for people who have strong income and good credit.

How does refinancing my federal student loans work?

Once scholarships, gifts, and grants have been exhausted, many people finance their education by taking out student loans. They usually start first with federal loan programs, like direct subsidized and unsubsidized loans and direct PLUS loans (e.g., Parent PLUS loans).

Then, if there is still a gap in education financing, people often supplement with private loans from banks, credit unions, and other private lending sources.

After they graduate, they find themselves with tons of student loans that all have different interest rates, and a variety of monthly payment amounts and due dates.

When you refinance your federal and private student loans at the right time, you have the opportunity to lower your interest rates into a single consolidated loan with a more favorable monthly payment amount and a single payment date and loan servicer.

When is the right time to refinance?

The right time to refinance any loan is when interest rates are lower than what you are currently paying.

While it can be especially beneficial when the difference is several percentage points, it can often make sense even when the rates are only a point or two under what you are currently being charged. That’s because, unlike refinancing a mortgage, many student loan lenders don’t charge any application fees or origination fees, so it doesn’t cost a thing.

To determine your possible savings, first average your interest rates from all of your private and federal student loans and compare that number to the daily rates being offered at financial institutions that offer refinanced student loans.

The 4 Best Companies to Refinance Student Loans

Our Top-Rated Picks for 2022 Offer Low Rates and No Fees

No Maximum Loan Amount

Fixed Rate

4.83% – 7.64% APR 4

Variable Rate

3.99% – 7.24% APR 4
98% of surveyed customers would recommend SoFi to a friend

Fixed Rate

4.49% – 8.99% APR 3

Variable Rate

5.09% – 8.99% APR 3
Precision Pricing — Pick Your Monthly Payment

Fixed Rate

4.47% – 8.99% APR 2

Variable Rate

4.47% – 8.94% APR 2
Loans Available in All States but Maine and Oregon

Fixed Rate

6.94% – 11.58% APR 5

Variable Rate

Not Offered

5 Steps to Refinancing Federal Student Loans

This is a great time to explore options — the student loan refinance marketplace is highly competitive, and rates are at all-time lows. Plus, refinancing federal student loans is super easy and can be done entirely online at no cost to you.

There are five basic steps to get you to a new refinanced federal student loan. Let’s take a look at each in turn:

1. First thing to do is gather and review your financial and college information to make sure that you will be eligible to refinance your federal student loan(s). You will need the following information:

  • A credit score of 670 or higher for most private lenders (although, the simple truth is the higher your credit score, the better the interest rate you can qualify for).
  • To help you understand where you are — obtain a free credit report annually that summarizes information from each of the three major credit companies.
  • That will give you a current credit score and a breakdown of any issues that may need to be disputed or resolved. As a general rule, it’s a good idea to do an annual review of all three credit reports to correct inaccuracies and spot identity theft.
  • Your total income which can include W-2 (paycheck) information, 1099 earnings, and self-employed income that you show on your annual 1040 tax form, Schedule C. This is the income a lender will consider when reviewing your ability to repay your refinanced student loan.
  • Your debt-to-income ratio (DTI) which calculates your fixed monthly payments (e.g., mortgage or rent, auto loans, credit card minimums, and student loan payments) divided by your pre-tax monthly income to come up with a percentage. Less than 38-40% is usually considered favorable, but the lower the better.
  • Add together your total outstanding student loans – most lenders have a minimum of $5,000 – plus your monthly payments and current interest rates (you’ll need these when comparing rates and terms).
  • When refinancing, you’ll want to tell them the type of degree you obtained and what school you attended.

2. Get quotes from various private lenders, including their best interest rates and terms based on your personal financial position (e.g., credit score, expendable income, etc.). You can do this by researching and reviewing various student loan refinance lenders or, better yet, use a site like that does the legwork for you.

With Purefy’s Compare Rates tool, you can add your personal information and submit for a list of pre-qualified quotes that give you the interest rates you qualify for, as well as term options and any special programs or deals available. Note: Purefy uses a ‘soft-pull’ credit report which won’t affect your credit score.

3. Next, comes the job of comparing the various interest rates, loan terms, and special offers or incentives to find the optimum lending package for you and your lifestyle. It’s important to understand the financial implications, so be sure to ask questions or talk to your financial advisor.

If you’re using Purefy’s tool, take advantage of their free student loan refinance consultation services. Purefy has student loan advisors with extensive knowledge of refinancing federal student loans available to help you compare rates and answer your questions. They can also guide you through the entire application process once you decide on a lender.

4. Once you have found the lender with the best overall package, it’s time to fill out the application form. At this point, the lender will pull a ‘hard’ credit report that may have an impact on your credit score, at least temporarily. The application process usually takes about 15 minutes and since you are already pre-qualified (if you used Purefy), there shouldn’t be any surprises.

Your new lender will ask that you to submit some financial documentation. This may include:

  • Proof of Income – recent pay stubs or tax returns
  • Your ID which could be a driver’s license, passport, or other state-issued ID
  • Proof of your degree
  • Residency proof – usually a document that confirms where you live.
  • Your current loan documents that will detail payoff information, etc.

5. After you are officially approved, your new lender will pay off your existing loans and you will start paying a single loan payment each month. Be sure to continue paying your current loans until you receive absolute confirmation – you don’t want to damage your credit report by missing a payment.

See How Much You Can Save

Student Loan Refinance Calculator

View Details


Student loan refinancing combines your current loans into a single loan with a new rate and term. See how much you can save by entering your loan information below, or by getting quotes from multiple lenders using Purefy’s rate comparison tool.

Step 1: Enter Current Loan Information

Loan Balance
Your remaining student loan debt to be repaid.
Interest Rate
The amount that the lender charges in interest, expressed as a percentage.
Current Monthly Payment
The total amount of your monthly student loan bill.
Add Multiple Loans to Calculate

Step 2: Enter New Loan Information

New Interest Rate
Your updated interest rate after refinancing student loans.
The length of time you have to repay your student loan debt in full.

Add Multiple Loans

Insert additional loan

Step 3: See How Much You Can Save


Lifetime Interest


New Monthly



Current Loan New Loan Savings
Rate 6.7% 4.2% 2.5%
Lifetime Interest $37,520 $22,210 $15,310
Monthly Payment $1,146 $1,018 $128

Like what you see? Check your actual prequalified rates from the industry’s top lenders in just 2 minutes or less.

Can I Use a Cosigner?

Yes, in most cases. If you are unable to meet the criteria, many lenders will allow you to use a cosigner to qualify. That person will have to meet or exceed all of the credit requirements on your behalf. They will also have your student loan debt on their credit report until it is paid or released.

If you have good income, but just need to build up credit worthiness, some lenders allow a cosigner release. That allows you to request the cosigner be taken off your loan after you have demonstrated that you can pay in a timely manner – usually after 12 – 24 months.

It is an excellent way to build up credit without keeping your cosigner tied up for the full term of the loan.

5 Top Benefits of Refinancing Federal Student Loans

When you ask yourself “How do I refinance my federal student loans?” you also want to know what benefits you might enjoy if you choose to move forward.

Let’s start with the best reason of all!

1. A lower interest rate saves you money – There’s a good chance that you are paying over five or six percent interest on your federal student loans and even more if they are unsubsidized direct loans or Parent PLUS loans.

When you refinance those student loans at today’s historically low rates, you can score significantly lower interest (depending on your credit rating and DTI). Many companies are offering interest rates at around 2.5% for fixed rate loans and 1.88% for variable rate loans.

To understand what that means, let’s say you have $35,000 in federal and private student loans and are paying 6.5% interest for ten years. That equates to a $397.42 monthly payment and total interest paid of $12,690.15.

If you refinance that same $35,000 loan package at 2.6% interest for 10 years, your monthly payment will drop to $331.54, and your total interest paid would be $4,784.64. Check out our college loan refinance calculator to see how much your savings would be.

If you choose a variable loan, it saves you even more. But remember variable rate loans are recalculated monthly or annually and with the anticipated rate hikes coming in 2022 and 2023, variable rate loans may become less desirable.

2. You can choose shorter terms to pay off your loan sooner. When you refinance you can choose from a number of term options, e.g., 5-year, 7-year, etc. That will allow you to pay off your loan more quickly and free up your buying power for other things.

Be sure to keep an eye on how this impacts your monthly payment – it will go up if you condense the payment schedule, so be sure you can afford the new payment amount.

3. Choose longer terms to lower your monthly payments. Many private refinance lenders offer loan terms for 15 and even 20-25 years. Spreading out your payments over a much longer period will make your monthly payments smaller. However, you may pay more in interest over the entire life of the loan.

4. Letting a cosigner go – if you have used a cosigner and are now in a position to take full responsibility for your student loan debt, refinancing is a great way to relieve a cosigner of further obligation. This can be a welcome help if you used a parent or grandparent who now would like to focus their financial resources on retirement or some other goal.

5. And here’s a real plus — it’s free! When refinancing your federal student loans through Purefy, it doesn’t cost you a thing. There are no application fees or origination fees, and most don’t have any pre-payment penalties. That means if you want to pay off your loan early or refinance again down the road, there is no charge.

Free eBook: How to Conquer Student Loans

Free eBook: How to Conquer Student Loans

5 Potential Drawbacks of Refinancing Federal Student Loans

As with anything, there are drawbacks to refinancing federal student loans. When looking at how do I refinance my federal student loans, it’s important to weigh these five potential drawbacks:

1. The federal loan program doesn’t offer any type of refinancing options other than a direct loan consolidation. With a direct loan consolidation, the federal government allows you to consolidate your federal loans into one loan at an interest rate equal to the average of all your federal loans. There is also no cost to you to consolidate your loans.

There is only one drawback to a consolidation loan — interest rates are at historic lows and by refinancing you have the opportunity to take advantage of the lower rates and better terms. With a consolidation loan, you will end up with the same average interest for one loan that you had with multiple loans.

2. If you have an income-driven repayment plan, or are planning to apply for one, you lose this benefit with a private lender. This is specifically offered for federal student loans only and isn’t transferable to the refinance market.

An income-driven repayment plan is when your monthly loan payment is capped at a percentage of your discretionary income (usually between 10 and 20% depending on the type of plan you have). Plus, your repayment terms are extended to as long as 25 years, again depending on the type of plan.

3. If you have or plan to apply for a loan forgiveness program for your federal student loans, this benefit is not available through refinancing. If you are already participating in a loan forgiveness program, you will want to carefully weigh your options.

This includes public service loan forgiveness and teacher loan forgiveness programs where your balance is forgiven after you make 120 qualifying monthly payments working for a designated employer. It also includes discharging loan responsibility due to permanent disability, bankruptcy, or death.

Another drawback on loan forgiveness — if there is eventually any loan forgiveness issued by Congress, it will be for federal loans only and won’t impact private refinanced loans.

4. You may not qualify for an advantageous interest rate that is significantly lower than what you are already paying on your existing student loans. Depending on the rate you originally received and what you can qualify for now, there may not be much difference.

If you want to opt for a variable rate loan where you pay a smaller interest rate at the beginning of the loan, you need to carefully weigh the current economic situation before proceeding. Variable rate loans are adjusted based on the prevailing interest rates and can go up over time.

With the potential for interest rate increases in 2022 and 2023, you want to be sure you understand the impact to your loan payments each month. Again, Purefy offers expert loan advisors who can answer your questions about the best refinancing options for you.

5. Access to federal deferment and forbearance options will change. While most private lenders have some form of deferment or forbearance, you lose access to the generous federal options.

If you face a financial hardship, like loss of a job or a medical issue, you no longer have access to the more lenient federal deferment or forbearance choices. That can be a strong consideration if you are dealing with health issues that could potentially worsen or are employed in an unpredictable job category.

Should You Refinance Your Federal Student Loans?

That question will depend on several things. First, will you save money by refinancing your federal and private student loans? When you look at all of your loans together, is the average interest rate you are now paying more than what you will get with a refinanced loan through a private lender?

Second, if your intention is to either shorten or lengthen your terms, does the interest rate you qualify for make it feasible with the new payment terms? Can you actually save money overall?

Last, you need to evaluate if losing access to federal repayment, deferment, or forbearance plans will be problematic. While some private lenders offer similar options, it’s important to understand the difference between what you anticipate needing and what’s available. Read our post on the pros and cons of refinancing federal student loans for a deeper look at this topic.

How to Compare Lowest Student Loan Refinance Rates

What was once a long, drawn-out process is now something that you can do online in minutes and at no cost to you.

At, you can type your personal information into their Compare Rates Tool and have pre-qualified offers in two minutes or less. They work with top industry lenders that each have proven track records for refinancing student loans and have a variety of progressive rates and programs.

Once you receive your pre-qualified offers, you can compare rates and then head to the lender you choose to submit an application – the whole thing takes about 15 minutes.

You can also rest assured that your personal information is handled in a 100% secured manner using industry-leading encryption.

The Comparison Rate Tool is free to use, and you will receive actual offers, not teaser rates that change once you apply. And there is no impact to your credit report until you actually apply.

To sum up

You have a lot of things to consider when it comes to refinancing your federal student loans. Start with the basics:

  • Credit score and credit report review.
  • What’s your income, whether you earn a paycheck, do gig work, are self-employed, or a combination of things?
  • How much money do you owe overall?

Once you know how you are positioned, it’s a breeze to obtain and compare pre-qualified quotes that can translate into real savings when you refinance your federal and private student loans.

At Purefy, the experts have done the research for you and selected the top refinance lenders in the industry. Each has been evaluated for things like trust and reputation, transparency, security, industry-best interest rates and flexible terms for repayment, and finally, no fees for applying or originating a new refinanced student loan.

Refinancing your federal and private student loans should be a simple, straightforward experience that ends with a successful new loan from your lender. Contact Purefy to learn more about the process and to try their quote tool to check current lender rates today.

You Might Also Like
purefy recommends

Student Loan Refinancing

Refinancing from 3.99% APR

Check your rate in 2 minutes

with no impact on your credit score.

ELFI Rate Disclosure

4 ELFI Rate Disclosure:

Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 01/01/2023. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

SoFi Rate Disclosure

3 SoFi Rate Disclosure:

Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

Earnest Rate Disclosure

2 Earnest Rate Disclosure:

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.64% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 4.64% APR to 9.19% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

Advertiser Disclosure:


ISL Rate Disclosure

5 Iowa Student Loan Rate Disclosure:

Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 6.94% to 11.58% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

Want To Find Out When Student Loan Refinance Rates Drop?

Join our email list to get instantly notified when rates change.

I am a(Required)