2021 NerdWallet Best-of Awards Winner for Best Student Loan Refinancing Overall Read More
2021 NerdWallet Best-of Awards Winner for Best Student Loan Refinancing Overall Read More


Do You Refinance Student Loans If You Only Save 1%?

Kat Tretina
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Anyone with student loan debt knows how costly interest charges can be.

Even federal student loans can have sky-high interest rates. For example, as of 2020, Grad PLUS Loans have an interest rate of 7.08% — which can cause thousands in interest charges to accrue on your loan.

Student loan refinancing can be an effective method for paying off your debt faster while saving money. But not everyone can qualify for a dramatic interest rate reduction.

However — if you’re eligible for a rate reduction of just 1%, should you refinance student loans? For most people, the answer is a profound yes.

Here’s why refinancing your debt makes financial sense with a 1% lower interest rate offer.

If you only save 1%, is it a good idea to refinance student loans?

With refinancing, you take out a loan from a private lender for the amount of your existing debt. If you have federal and private loans, they are combined together so you have just one loan, one loan servicer, and one simple monthly payment.

When you refinance your federal or private student loans, the lender will review your credit and income to determine whether or not to approve you for a loan. They’ll also use this information to decide which new interest rates to offer you, based on the current rates.

Depending on your creditworthiness, you may only qualify for a modest rate reduction rather than the lender’s lowest advertised rates.

If your rate decreases by just one percentage point, student loan refinancing can still be a smart, effective strategy for managing your debt for several reasons:

1. Refinancing your student loans takes just a few minutes

Unlike applying for other financial products like a home mortgage, applying for a refinancing loan is a quick and easy process. In most cases, you can finish your student loan refinancing application in as little as 15 minutes, so it doesn’t take much time to get big results.

To speed up the process, use Purefy’s Compare Rates tool to get rate quotes from multiple top lenders — all in one place — without affecting your credit score. Once you find your best rate option and a loan that works for you, you can move forward with the loan application.

When you’re ready to apply, the lender will ask for basic information about yourself. Be prepared to enter your name, address, Social Security number, employer name, income, current student loan balance, and lender information.

Make sure you have some documentation on hand, such as a government-issued ID, a recent pay stub or tax return, and a loan statement from your lender.

Is Student Loan Refinancing Right for You?

Find out how much you can save with these top lenders

Precision Pricing: Pick Any Term Between 5—20 Years

Fixed Rate:

2.98% - 5.79% APR

Variable Rate:

1.99% - 5.64% APR


5 - 20 years

Minimum Income:

No minimum

Loan Limits:

$5,000 - $500,000

Refinance Student Loans With Your Spouse

Fixed Rate:

2.99% - 5.15% APR​

Variable Rate:

2.16% - 4.46% APR​


5, 8, 12, or 15 years

Minimum Income:

No minimum

Loan Limits:

$7,500 - $300,000

Loans Available Nationwide — Not Just for Iowans

Fixed Rate:

2.55% - 6.42% APR​

Variable Rate:

Not offered


5, 7, 10, 15, or 20 years

Minimum Income:

No minimum

Loan Limits:

$5,000 - $300,000

2. Student loan refinancing doesn’t cost you anything

If you don’t have a significant decrease in interest rate, is refinancing student loans worth it?

The answer is still yes.

That’s because there is no cost to refinancing your student loans. With Purefy’s partner lenders, there are no application fees, origination fees, or prepayment penalties, so you won’t pay anything to refinance your debt.

The only time you’ll pay a fee is if you miss a payment and get charged a late fee. If you always make your payments on time — a great reason to sign up for automatic payments — you won’t pay any extra fees.

3. You’ll still save money

Lowering your interest rate by a single percentage point may not sound like a big deal. But when it comes to student loan refinance interest rates, 1% can make a real impact on your overall savings.

To put that rate in perspective, let’s say you had $35,000 in student loans at 7% interest and a 10-year repayment term. With a $406 minimum monthly payment, you’d repay a total of $48,766 over the length of your loan. You’d pay $13,766 in interest charges alone.

If you refinanced your loans and qualified for a 10-year loan at 6% interest, your monthly payment would drop to $389. But over your repayment term, you’d pay just $46,629.

By taking 15 minutes to refinance your loans, you’d save $2,137. Not bad, right?

 Original LoanRefinanced Loan
Loan Amount$35,000$35,000
Loan Term10 Years10 Years
Interest Rate7%6%
Minimum Monthly Payment$406$389
Total Interest$13,766$11,629
Total Repaid$48,766$46,629

4. You could lower your monthly payment

Sometimes you may only get a small rate reduction because you opt for a longer loan term. While you could get a lower rate with a shorter term, selecting a longer term can be a smart idea if your budget is tight.

With a longer loan term — some lenders offer loan terms of 12, 15, or even 20 years — you could dramatically lower your monthly payment, making it much more affordable.

With a longer loan term, you’ll pay more in interest over time. But you’ll have more cash flow right now, which can be helpful as you start your career.

As you get more established and make more money, you can make extra payments or even pay off your debt early. None of Purefy’s partner lenders have prepayment penalties, so there’s no downside to paying off your debt ahead of schedule.

Should you refinance student loans?

If you only qualify for a modest rate reduction, you may be wondering: should you refinance student loans? Except in certain circumstances, refinancing can be a smart way to manage your debt even if you only lower your interest rate by one percent.

Need more help to make a decision? Schedule a free student loan refinance consultation with Purefy’s award-winning team. Whether you don’t know where to start or want step-by-step guidance on your options, your personal student loan expert can help you navigate through the refinancing process and make a decision that’s right for you.

Find savings from the best lenders with Purefy

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