Refinancing Student Loans Can Save You $10,000+ in Total Interest

Kathryn Morstad

If you have been thinking about options when it comes to your student loan debt, you are not alone. People want to know how to lower student loan interest for the long-term, as well as how to calculate refinance savings to make solid financial choices.

By refinancing your student loans, you could take advantage of the low interest rates and save money over the life of your loan. Here we walk you through the refinancing process, how to calculate refinance savings, and what you can expect in terms of dollars saved, as well as highlight the new Student Loan Refinance Savings calculator.

How to get a lower rate with student loan refinancing

While there has been some relief from federal payments over the last year, that may be coming to an end. It makes sense that people are revisiting their student loans and considering their options in terms of saving money.

The key to saving money when refinancing your student loans is the interest rate. Depending on when you took out your loans, you could be paying anywhere from 4% to 8%. In fact, the average interest rate on student loans for an undergraduate degree in 2021 is 5.8% which translates to an average monthly payment of $393.

If you have a graduate degree and are carrying debt, like 56% of your fellow graduates, those numbers could be even higher.

When you refinance, your new lender provides you with a new loan that encapsulates your previous loan(s) and has a new interest rate and terms. The lower the interest rate, the more money you save each month.

Free eBook: How to Conquer Student Loans

Free eBook: How to Conquer Student Loans

How a lower student loan rate saves you money

Interest is the fee you pay to borrow money from a lender. High or low, it’s based on the Federal Funds Rate at the time you agree to a loan.

The Federal Funds Rate is determined by the Central Bank who meet nine times per year to discuss their mandate of managing inflation. At these meetings, they decide if the economy is running hot (they may raise rates to ‘cool’ it off), cold (lowering rates will heat things up), or is holding steady.

Since early 2020 (coinciding with the pandemic outbreak), the Federal Funds Rate has been at 0-0.25% which translates to the best interest rates for refinancing. Many private lenders are offering refinance rates starting at 2.5% for fixed rates and as low as 1.88% for a variable rate loan.

If you have an average rate on your current loans of 5% or 6%, the difference can be significant for both your monthly payment and total savings over the life of the loan.

Student loan refinance eligibility for the lowest rates

So how can you get the best rates on a refinance?

Well, there are several factors that lenders evaluate before making you an offer. Using actuarial information, lenders have developed profiles of their optimum borrowers.

They then compare people who are seeking loans and offer the rates that fit their borrower profile. The more desirable the borrower, the lower the interest rate.

Using these three criteria, see how you stack up:

  • Credit score — At a minimum, lenders are looking for a score of 670 or 680. However, if you want the best rates, your score should be higher than 760. Think of your credit score as your business card for future financial dealings. It demonstrates how you manage your life and is used by lenders, as well as prospective employers, creditors, and insurance companies.
  • Income — Lenders will want to verify your income including your annual gross amount and how long you’ve been employed at the current employer. If you’re self-employed or want to use non-traditional income, like alimony or trading proceeds, expect to submit tax returns as proof of income.
  • Debt-to-income ratio (DTI) — Your DTI is calculated by dividing your total gross monthly income into your monthly bills (including mortgage, rent, installment loans, and credit cards). That number as a percentage is your DTI and shows lenders how risky you are as a borrower – below 38% or better is the target. The lower the percentage, the less of a risk you bring.

See where you are in comparison to these three indicators. If you meet these eligibility goals, then it’s time to calculate refinance savings.

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How refinancing helps people with high student loan rates

When you refinance your student loan debt, you have an opportunity to customize your new loan to meet your lifestyle and manage your repayment options.

Not only can you lower the interest rate you are currently paying, but you can also make the following changes:

  • Decrease the term — You may decide that taking advantage of the lower interest rates allows you to pay your loans off sooner. By choosing a shorter term, you can pay your loan off more quickly and redeploy those funds to other life goals, like buying a home.
  • Increase the term — If your high debt payments are straining your financial resources, you can choose a longer repayment term (up to 20 years), which will lower your monthly payment and give you some breathing room. Be careful — the longer term could cost you more in interest over the life of the loan.
  • Consolidate multiple loans — Maybe you have taken out multiple loans with both federal and private lenders to fund your education. By refinancing, you can consolidate those loans into one single package. No more managing multiple due dates and payment amounts – just one simple payment.
  • Change servicing entity — You will have a new loan servicer and may gain better customer service, enhanced payment options, or more flexible opportunities for repayment or deferment (if needed).

How to calculate your new student loan interest after refinancing

This all sounds great, but how much money can you actually save?

Well, you can spend a lot of brainpower doing manual calculations or set up a spreadsheet where you can plug in different scenarios for changing circumstances.

Or you can take advantage of Purefy’s Student Loan Refinance Calculator. Let the savings engine do the work for you and save that brainpower for how you’re going to spend the extra cash!

With Purefy’s Student Loan Refinance Calculator, you can calculate refinance savings with this information:

  1. Loan Balance
  2. Current Interest Rate
  3. Current Monthly Payment

Then Add:

  1. New Interest Rate
  2. Terms in Years

That’s all there is to it. Press ‘Calculate’, and you immediately see your new student loan information, including:

  • Total Interest Savings
  • New Monthly Payment
  • Monthly Savings

How to determine your total savings on interest

When using the new calculator, let it do the work for you. Once you put in your information, the calculator instantly gives you the Lifetime Interest Savings. You can press ‘View More Details’ to see a line-item comparison where you can review your current loan details, projected details for a new loan, and the cost savings.

In fact, this is a great way to see the difference in savings between a fixed-rate loan and a variable-rate loan. Remember that variable rate loans can change annually and there’s no guarantee that your loan interest will stay the same, but it can give you an idea of your first-year savings at a minimum.

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.

Examples of how much money a lower rate can save you

Let’s take a look at three examples of how refinancing saves you money.

Example #1

Person A went to a private college and graduated with a bachelor’s degree and $68,000 in student debt. Their average interest rate is 6.9% and they have 9 years left on their loan terms. Their monthly payment is $847.

They have excellent credit and income and want to refinance with a lender offering a fixed rate of 2.8% for a term of 10 years.

Their new interest rate gives them a monthly payment of $649 – a monthly savings of $198. Their lifetime interest savings would be $13,615.

Example #2

Person B went to a public college and graduated with a bachelor’s degree and $31,000 in student debt. They used a mix of private and federal funding and have an average interest rate is 7.3% and they have 7 years left on their loan terms. Their monthly payment is $472.

With average credit and good income, they want to refinance with a lender offering a fixed rate of 3.7% for a term of 10 years.

Their new interest rate gives them a monthly payment of $309 – a monthly savings of $163. Their lifetime interest savings would be $3,099.

Let’s say that they are also contemplating a 15-year term – what would that look like?

With the longer term, their new loan gives them a monthly payment of $224 which is a monthly savings of $248. However, even with the lower interest, their lifetime interest savings would be $-196.

The lower interest gave them the ability to cut their monthly payment by over 50% while paying essentially the same interest over time.

Example #3

Person C went to a public college and graduated with a medical degree and $268,000 in student debt. Their average interest rate is 6.1% and they have 10 years left on their loan terms. Their loan payment is $2,989 each month.

They have great credit and outstanding income and want to refinance with a lender offering a fixed rate of 2.4% for a term of 20 years.

Their new interest rate gives them a monthly payment of $1,404 – a monthly savings of $1,585. Their lifetime interest savings would be $21,645.

As you can see, there are a lot of options available, and each is based on your set of circumstances. The good news is there is support through easy online calculators to make gathering research simple and easy.

Should I refinance student loans even if I only save 1%?

It can be worthwhile to refinance a student loan even if you only save 1%.

Using Example #1 above:  refinancing a $68,000 loan at 5.9% for 10 years gives you a new payment of $748, saving you $99 a month. That’s $1,734 savings over the life of the loan.

Unlike a mortgage, refinancing a student loan is far less expensive. When dealing with mortgage lenders, you often have application fees, origination fees, inspection costs, and brokerage fees. You can find yourself paying several thousands of dollars in out-of-pocket costs that will often get rolled into the total mortgage price further inflating your payments.

When you look at how to save money on student loans, refinancing is relatively straightforward. There are no application or origination fees, and most lenders have no pre-penalty costs if you choose to pay off your loan early.

Refinancing student loans only takes a few minutes from quote to application and can be done multiple times as interest rates change. The best part is even at 1%, you still save money.

Other ways to lower your student loan interest rate

There are some other ways to save on your student loan interest rate once you establish a relationship with a new lender. Be sure to ask prospective lenders if they honor these rate discounts which add up when considered over the entire life of your loan.

These noteworthy discounts could help sway your decision when you are comparing quotes or researching how to lower student loan rates.

Relationship Discount

Private lenders will often give a discount on interest rates when you have a longer-term relationship with them. Since most lenders are banks or credit unions, they do more than just refinance loans. They want to encourage new customers to participate in their other services.

You might score as much as a 0.25% discount off your interest rate by using services such as checking or savings accounts, investment services, mortgage/home improvement loans, or auto loan services.

Auto Payment Rate Discount

Most lenders offer (and encourage) setting up auto payments for your student loans. In fact, many offer a discount of up to 0.25% off your interest rate when you sign up.

Obviously, this makes sound business sense for the lender. It ensures money will be received by a pre-determined date allowing them to forecast business into the future. It also ensures borrowers meet their obligations on time automatically with nothing left to chance.

There are definite pluses for the customer as well:

  • You can avoid late payment fees
  • It’s hassle-free — you no longer have to worry about logging in to pay your bill
  • Auto payments are encrypted so it’s safer than the mail 
  • It can also have the effect of improving your credit score since you always pay on time

However, be careful if you have a variable rate loan since your interest rate can change annually causing your payment amount to go up. You should receive notification ahead of time and will want to change your automatic payment amount before your regularly scheduled payment date.

How to get prequalified student loan refinance rates

If you are considering refinancing your student loans, then the first step in the process is to get quotes from leading private lenders with the best rates and options.

You could search for lenders individually and go to each site, fill out their quote request with your personal information, print their terms, and then gather them all together so that you could compare which company is offering the best package for your situation.

Or you could use Purefy’s highly rated rate comparison tool to obtain prequalified rates from industry leaders in about two minutes.

There are tons of lenders out there and they are all competing for your business. Each one wants to reward you if you have good credit and a solid income. Purefy developed their rate comparison tool as a way for you to have immediate access to the top lenders in the student loan refinance space so that you could get prequalified, accurate, and actionable finance information in minutes.

All quotes are based on your specific details like credit score and your borrower profile. And since this is considered a ‘soft pull’, there is no impact on your credit history.

So what do you get with this rate comparison tool?

Once you provide a few pieces of personal information (all handled through encryption and state-of-the-art security), you will receive quotes from up to four lenders in an easy-to-compare format detailing these items:

  • A fixed and variable (if available) rate quote for interest
  • Loan term options from 5 years to as long as 20 years
  • Any exclusive offers or programs, such as autopay discounts

From there, you can download and sort the information for easy comparison to help you make a decision on which lender would be a good fit for you.

Why shop around for the lowest student loan refinance rates

There are a lot of lenders out there in the marketplace today. You want to work with a company that has a proven track record in student loan refinance and has been thoroughly vetted to ensure it can follow through on offers.

The market is more transparent than ever and yet you still want to have the assurance that you are getting the best possible quotes with the lowest rates. Shopping around, or getting comparison quotes from a quote engine, is simply good business. The process itself provides an educational opportunity but also ensures that you are getting the best deal available for your circumstances.

Is student loan refinancing an effective way for me to save on interest

Unless you are expecting a major windfall of money, student loan refinancing may be the best option. It allows you to take your existing debt and shop around for the best interest rates and terms. You have access to top-tier lenders, both banks and credit unions, that want your business and are eager to review your personal information and provide you with a prequalified quote.

Can I talk to someone?

If you are still unsure of the process, consider talking with a student loan expert! Purefy has student loan specialists available for scheduled consultations or for answering immediate questions. These experts can guide you through getting a quote, comparing the results, and the entire application process, answering your questions along the way.

To Finish Up

As we’ve demonstrated, even if you have just a 1% reduction possible, refinancing can be a way to save money and restructure your student loan debt. It doesn’t cost anything in application or origination fees and can potentially save you a ton of money on your monthly budget, as well as over the long-term life of the loan.

Purefy offers tools to calculate your student loan refinancing options that can be used to determine your new monthly payment as well as your savings (both monthly and over the entire loan period). Just plug in your total loan debt, your current and future interest rate, future loan term, and current monthly payment and press ‘Calculate’.

The calculator provides you with instant details about your potential savings so that you know what’s possible. From there, if you want to compare student loan interest rates and loan terms, use the Purefy Comparison Rate Tool. It’s free and carries no obligations.

Once you have received your quotes, contact our student loan refinance experts to talk about options and get your questions answered. They can help you with your loan application and with comparing the offers and programs from each lender.

Contact us to learn more today or try our student loan calculator to find out more.

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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 4.72% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 4.39% 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.

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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.

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