should you refinance your student loans? 

by Alison Green on February 8, 2022

And now a word from a sponsor…

If you have a student loan, you might be painfully aware that the CARES Act is expected to expire on May 1, which means millions of student loan borrowers will need to start paying their loans (and interest) then. A Credit Karma study found that 63% of people with outstanding student loan debt are concerned about their ability to make payments once CARES ends.

And of course, student loan debt prevents or delays millions of people from accomplishing things like buying a home, starting a family, or simply becoming debt-free. Student loan debt can have a stifling effect on nearly every facet of borrowers’ lives.

Whether you have private or federal student loans, one way you could save money and/or make your payments more affordable is by refinancing. Refinancing down even a percentage point could save borrowers thousands of dollars.*

If you want to find out what refinancing could do for your loan payments, I’m here to recommend that you check out Splash Financial. Splash is a leading digital lending marketplace that makes refinancing student loans easy and approachable. It’s a one-stop-shop for finding low rates, including ones you can’t get anywhere else. What I like about Splash is that they’re democratizing access to incredible student loan offers, enabling customers to potentially save thousands of dollars in interest when they refinance through their exclusive network of leading lenders* … and they have a five star rating from NerdWallet, who I trust.

Please do note that financing a federal student loan into a private loan means you will not have all the protections of a federal student loan. You could lose access to income-driven plans, loan forgiveness, and discharge options, among other benefits.

Splash has a quick and easy process to check rates online, compare offers from multiple lenders if you qualify, and get pre-approved within a few minutes. And they’re serious about saving borrowers money: In 2021, student loans refinanced through Splash had an average fixed rate of 3.51% APR including a 0.25% autopay discount.

Since the Federal Reserve has predicted rates will rise this year, it’s a good time to try to lock in your best rate.

If you want to check whether you could be saving on your student loans through Splash, visit Splashfinancial.com to check their refinancing rates.

Disclosure: This post is sponsored by Splash Financial. All thoughts and opinions are my own.

* Savings over the life of your loan assumes same or shorter loan terms and/or interest rates on your refinance, and may not be representative of your situations.  Actual savings, if any, may vary based on interest rate, balances, remaining repayment of terms and other factors.

{ 60 comments }

{ 60 comments… read them below }

  1. Eric*

    People with federal student loans should be really careful doing something like this. Refinancing turns them into private loans which do not have the same protections. Many/most private loans were not paused for the last 24 months like the federal loans were. So if you refinance through a company like this, you would lose that, and other potential benefits.

    1. Kia*

      Yeah, this is a huge thing.

      I have $60k in student loans. I wasn’t able to work for a few years due to illness. My federal loan payments were $0 during that time.

      If they had been private, I would have still owed the payments during that time. I have literally no idea what I would have done.

      Even though I now earn a good income, I always know that if the worst happens and I can’t work, I will be protected fr0m financial ruin by income payment plans.

    2. Belle*

      I wish there was a thumbs up button for comments. So true! May be good for some but something to be aware of before refinancing.

    4. Nana*

      Oh my goodness, thumbs up on this! Federal student loans have tons of benefits, and even loan forgiveness options, all of which would be lost with refinancing. If you are having trouble paying, then you need to contact your servicer (NOT a third part debt relief company, but your actual servicer) and they will help you get your payment to a manageable amount. This is coming from someone who has works in the industry for nearly a decade.

    5. Sunflower*

      100%. Federal loans provide tons of repayment plan options including income based repayment plans and the opportunity to defer payment all together. If you lose your job or have to take a pay cut/reduced hours, you are stuck with the same monthly payment.

      And yea- if Biden does end up forgiving loans, you aren’t eligible anymore.

    6. JemZ*

      If you have only federal student loans, it would be worth looking into the federal Direct Consolidation Loan. It preserves a lot of the federal benefits (like deferments and cancellations for death or disability). You can find info about it on studentaid.gov.

    8. Red 5*

      This also is -very likely- to mess up anyone that is currently or might in the future look at public student loan forgiveness. Many of these loan refinancing or consolidation companies are not going to be qualifying loans for those programs and they are not going to waste any of their time making sure you know that. Several of my friends have found out after ten years of public service that they were never eligible in the first place.

      Some of that is being fixed, piece meal, but if you’re going to refinance ANY student loan you need to be very careful and fully read EVERYTHING.

      Generally, over the decades of paying off my student loans, I’ve found that very few refinancing options or consolidation options actually would improve my situation in the long run. A few times I found out after I’d already done it, so you know, learn from Gen X’s mistakes and read all the fine print.

    10. Jen*

      Please please please please don’t refinance if you’re trying to do PSLF, you will.lose eligibility.

      You will also lose thr balance forgiveness at 25 years for regular IBR. They fixed the tax cliff recently.

  2. Student Loan Truther*

    For some borrowers, refinancing is a fantastic option, particularly if they are young and in highly-paid professions (like a recent MBA or law grad). But for borrowers with federal student loans, it’s critical to note that refinancing with a private company takes away all of the other protections that came with your loan, including income-driven repayment (where payments are set every year as a percentage of income) and discharges if you die or become permanently disabled. If those are situations you may be concerned about—for example, if your annual salary is likely to be lower than your student loan balance—refinance with caution because it can’t be undone. People who refinanced also lost out on the pandemic pause in payments and interest that started March, 2020 and is slated to end May 1.

    There are lots of times when it makes sense—but it’s key to know the risks and make an individual choice.

    1. Respectfully, Pumat Sol*

      They’d also lose out if any kind of federal student loan forgiveness goes through. That won’t apply to private loans.

    2. Velociraptor Attack*

      Thank you for this, it feels really irresponsible to me to start the article by referencing the CARES Act when it’s something that in all likelihood would not have applied to someone who had refinanced their student loans.

  3. gsa*

    3.51% APR a good rate? That’s about the same as our mortgage rate is right now.

    ps: excellent note about the difference in protections between a federal loan and a private loan.

    1. Wants Green Things*

      I mean, it’s lower than the interest rate on my federal loans right now – those average out to 4.2% APR. But, since mine *are* federal, all of it’s been paused for 2 years. I’ve still made payments, but being able to skip 2 months after I got in a wreck was nice. Can’t do that with a private loan.

    2. Xenia*

      According to the FSA, their current loan rates are 3.7% for subsidized undergraduate, 5.28% for graduate, and 6.28% for PLUS loans. Those are, I’m assuming, the best case scenarios. Mortgage rates are some of the lowest loan rates in general because they’re collateralized by real property, which is about the most stable asset class there is, and unlike many other types of asset is more likely to appreciate over time rather than depreciate.

      1. Zephy*

        Federal loan rates are flat for a given award year, so all loans of those types disbursed during the 2021-2022 academic year (7/1/2021-6/30/2022) will have those exact, specific interest rates. They are also fixed rates, so that’s what the rate will be forever and ever, amen, unless you consolidate or refinance. Consolidating, IIRC, averages together your interest rates; I’m not sure what refinancing does but it’s probably similar.

    3. Llellayena*

      I would LOVE to have 3.51% on my student loans. My rates average out to about 6.7% for federally backed graduate student loans. But if I refinance, I lose out on the 10 years of income based repayment leading to forgiveness after 25 years. So…no?

      I really think student loan reform needs to do three things: Start everyone automatically in income based repayment, if you want standard 10yr you need to ask for it rather than the other way around. Tie interest rates to the income based repayments so the loan never grows (on IBR you are often only paying interest and not even as much interest as accrues in a year so it all gets added onto the principle). And make the forgiveness amount at the end of the repayment period tax free. Blanket loan forgiveness is great…for the people with loans right now. It doesn’t help down the road at all.

      Alison, if this is too political, please remove.

      1. Paige*

        Great ideas! I recently learned I’ve been on a standard plan for the last 7 years. It’s NOT something I would have volunteered for based on how much money I made at the time. I bet Navient/Sallie Mae *thought* they were helping me out. Not cool, dudes.

        Thanks to the pandemic pause, PSLF is finally a meaningful and viable option. Take that, Navient!

    4. Anon Supervisor*

      Some loans start out at 6% when your grace period ends (my fed loan did) and other private loans have a variable APR with no max – terrifying when they’re tied to the credit market. My private student loan was like this. I had an extremely good rate until the last half of the Trump admit when my rate would creep up every other month. I ended up taking advantage of my good credit rating and refied with another lender for a fixed rate that was less than 1% above what I had been paying.

  4. Why did I get another degree*

    Refinancing your loans also means 0% will be forgiven if Biden ever follows through/other future presidents introduce legislation. Tread carefully – i havent given up hope yet (though I probably should)

    1. Loaner*

      Seriously. This REALLY needs to be highlighted in any student loan discussion.

      Someone with a large loan on the Income Based Repayment (IBR) scheme should pay the required minimum until the balance is forgiven (with no tax implications thanks to the 2021 covid relief package) at 20 years. Refinancing into a private loan without these terms would eliminate that path forever and be financially ruinous, even if the rate is lower.

      [politics..] I’ve given up hope of Biden canceling any debt and/or lowering college costs. One thing the government could do that would make a massive difference is to make every borrower eligible for IBR. This would make the US system more like the UK: it looks more like a tax than a loan. You make repayments for x years, then you stop. That’s it. No life long repayments or social security checks being garnished. #IBR4All

      1. Big Sigh*

        The “no tax implications” is misleading. That’s only true if your IBR is expected to be completed in the next 3ish years. I have 15 years left so I will be hit with the expected tax bomb of about 30k when my loans are “forgiven.”

      2. Cmdrshpard*

        My understanding is that all federal loan borrowers are eligible for some type of income tied repayment plan, that is why there are 5/6 different income based plans with forgiveness after x years. The specific details vary based on the loan type and repayment plan, 10%/15% of income, and 20/25 year repayment schedule.

        Private loans are a different matter, but I think even in the UK you take out a private loan the terms are different.

      3. Kell*

        Oh wow, I somehow missed that the 2021 relief package included getting rid of the tax implications of the 20 year balance forgiveness. So the balance of loans forgiven after 20 years will no longer be considered taxable income? I’m currently on a public service forgiveness track, but it’s good to know that if I change jobs (or my PSLF gets denied, as I know so many have) the 20 year option is no longer going to lead to a really rough tax year.

  5. Dawn*

    If you are going into a profession like teaching where loan forgiveness may be an option down the road, be VERY careful about consolidating or refinancing, as this often makes you ineligible for forgiveness programs. I have a lot of colleagues who have put in the work in some very challenging schools but are ineligible for forgiveness because they refinanced/consolidated their loans.

    1. NeedRain47*

      It’s already happening… I’m watching many colleagues get their loans dismissed through the currently temporarily expanded programs…. I consolidated years ago and only have a few thousand left anyway. It is heartbreaking to think about how much better my life would have been without that 25 year debt burden.

    2. Maria*

      Yup. Public Service Loan Forgiveness (PSLF) does not apply to any loans other than Federal subsidized and unsubsidized loans which have been consolidated and entered into an Income Based Repayment Plan. And PSLF applies to ANYONE working in the public sector, which seems to be widely unknown. I have massive loans from getting 2 graduate degrees from a top university and have been paying them back under PSLF while working for the state government and now for a non-profit, and I am now 2 years away from total forgiveness. None of that would be possible if I had refinanced.

      So yes, consider refinancing your private loans, but please do not touch any federal loans, for all the reasons others have noted as well as for eligibility for PSLF, if you are considering a career in public service.

      1. Elizabeth*

        I appreciate these comments so much, because I get refinance offers all the time, but PSLF is always in the back of my mind. Sometimes it’s tempting, but I’ll hold off.

      2. The Original K.*

        Yes – I have a friend who works in a staff role at a public university and she’s close (two years, I think) to forgiveness.

    3. Becky*

      Be sure to look at federal student loan consolidation before looking to any private company! When I consolidated my student loans I ended up with a lower payment and lower interest rate that I had before when paying loans individually and because it was federal consolidation I still qualified for the different payment plans, the interest freeze at the beginning of covid, could potentially qualify for loan forgiveness if/when it happened etc.

      (When they stopped charging interest and suspended payment, I actually started paying off my loans aggressively, so I finished paying them off in early 2021)

      https://studentaid.gov/manage-loans/consolidation

  6. laowai_gaijin*

    Thank you. I was just considering refinancing mine but wasn’t sure how to proceed. I trust your judgment and will be looking into this.

    1. Another Professor*

      Be really careful if you have federal loans. There are a lot of reasons to not refinance to private loans (such as the reality that you would have been paying those loans for the last two years when no one with federal loans was required to).

      1. Becky*

        Ditto–look into federal consolidation if you haven’t before looking into private refinancing/consolidation. And even if you do decide to go with private consolidation, wait until the federal loans are back in repayment before doing so.

  7. Sad Desk Salad*

    I went through this last year. After several years of spinning my wheels paying what I could on federal loans with rates between 6.8 and 8.6% and getting nowhere, I finally decided to do the math and give it a real think. Three things that influenced my decision were: I’m in a highly paid field and my earning capacity will likely grow, I’m in an industry that will likely never be eligible for forgiveness, and even with the slight increase in payments, I’m still able to support the family even if my spouse loses her job for a period of time. If *I* lose my job, it’s a different story, but I figure the new payor wants to be repaid and will be willing to negotiate a forbearance if needed. That’s a risk, but given the market, my experience, and my projected earning capacity, it was the right choice for me.

    I went from owing the same amount for years despite paying hefty installments (and I even paid the same payment during administrative deferral under CARES), to now having a ten-year plan in which I can actually see my principal reduced every month. My highest loan interest went from 8.6% to 2.89% fixed. I wouldn’t recommend this approach if you’re a teacher, public servant, or work in nonprofits. You will lose federal protection, including forgiveness if that is a possibility in the future. For me it’s a shallower grave to dig out of; for others, it might be taking away your shovel.

  8. automaticdoor*

    So, I am here to agree with the above comments. I did refinance/consolidate my loans with SoFi/Mohela a few years ago, but I have a high-paying job (as does my husband) and actually will be paying less over the life of the loan (I think I have like 15 years left now?) than I would have with my federal loans because of the significantly lower interest rate (3.5% vs. 7%+). I don’t work for a non-profit nor was I planning to, so public service loan forgiveness was not going to be an option for me.

    HOWEVER. I have also taken out life insurance on myself, because if I died, the loans would not be dischargeable. If Biden and/or Congress get their act together (though highly doubtful in my opinion any time soon anyway), the loans would almost certainly not be forgivable. I have still had to pay on my loans over the course of the pandemic. These are all things I can afford to deal with, but not things that many people likely can.

    tl;dr please think carefully about all the implications and ramifications of consolidating prior to doing so!

    1. Kiko*

      +1 — My SO is a law grad and consolidated his loans with SoFi from 7.5% down to 4.3%. It’s been long and painful (especially during the pandemic), but he’s looking to finish his loan payment off at the end of 2023 (7 year repayment total). We’re saving thousands upon thousands of dollars by refinancing and choosing the most aggressive timeline. But that’s not without other stressors — we pretty much locked ourselves into a tight budget until then. That also meant any life changes were felt extra hard, like surprise bills or accidents.

      It’s been completely worth it for us though. We’re entering our 30s now, and knowing we’re almost free of student debt has been a great feeling.

      1. automaticdoor*

        Ugh, so jealous! My debt is mostly from law school as well. My husband in public accounting who went to a state school for his BS/MS five-year program has already paid off his loan debt. My balance was just way higher to start with and we didn’t want to lock ourselves into payments we might have trouble meeting in the future. (Good decision for us – we’re about to start paying for infant daycare in a few months…) We might refi again in a few years though or make additional payments to see if we can get it to zero sooner.

        1. Sad Desk Salad*

          Another lawyer here. Refinancing to private helped me a lot for reasons I detailed elsewhere, and now there’s a light at the end of the tunnel instead of a vicious cycle of paying high installments and only touching the interest. I don’t like to think about how much I owe versus how much I originally took out. It’s definitely not for everyone but the numbers couldn’t lie for me. Best of luck to you!

  9. Liz*

    Reiterating the above advice to tread carefully if you have federal loans that may be eligible for forgiveness (public service or otherwise). I received PSLF about 2 years ago. Happy to answer any questions anyone has about the process.

    1. So long and thanks for all the fish*

      Do you know if there’s an income cap to PSLF? Did you have to apply for forgiveness after making all the qualifying payments? If you lost your eligible job and then took another one with a gap, do the payments in between count?

    2. Unemployed in Greenland*

      I seem to remember reading that eligible part-time jobs (if you have ever held multiple) count as a “full-time” job, if you can prove you worked at least 30 hours per week at all of them combined. And if they count as a full-time job, then one could count payments made when one had said part-time jobs towards forgiveness!

      My question is: do you know if this is the case? Do you know anyone who has proved this amount of hours, from multiple part-time jobs? And how did they do it?

      I ask b/c I adjuncted (and had other eligible gigs at the same time) for two years after graduate school, and I’d love to have 16 more payments towards PSLF (I figure 4 per semester), since I consolidated upon graduation.

      I know this is a very specific question, so no worries if it falls outside what you wish to answer.

  10. bluephone*

    I’m not a financial expert but I’ve dealt with enough financial drama (especially related to student loans) to say that before doing anything with your students loans, please talk to actual financial experts. And maybe stay away from private lenders if possible for all the reasons previously mentioned. As long as you can’t discharge student loans in bankruptcy, it is too risky to try anything with them.

  11. Minerva*

    My husband works in college financial aid on a regional & national level. Community colleges throughout the Southeast followed his guidance on the CARES act. This is not a brag, this is to establish his street cred. I asked him what his feelings were on Splash Financial, and he said he has never heard of them (which is good and bad in that they don’t have any reputation in his circles).

    He echoed the concerns with turning Federal loans into private loans, and advised extreme caution and reading the fine print.

  12. bananas-n-chocolate*

    If you are in public service and are enrolled in the Public Service Loan Forgiveness Program (PSLF) — DO NOT DO THIS!! As the first comment pointed out, refinancing a federal/federal consolidated loan will convert it into a private loan that does not qualify for forgiveness.

    That being said, I have massive loans – both private and federal. I did refinance my private loans about five years ago so that I could get out from under Navient, and since then, I’ve seen the balance go down by about $30,000. Before that, the balance it was only growing.

  13. animaniactoo*

    Please do note that financing a federal student loan into a private loan means you will not have all the protections of a federal student loan. You could lose access to income-driven plans, loan forgiveness, and discharge options, among other benefits.

    Question – is it that you could lose access to these things, or that you will lose access to them? I think that’s an important distinction.

    2. Sad Desk Salad*

      I guess “could” is sort of an umbrella term, as there is some sliver, however small, of possibility that a corporation could suddenly become very generous (lol) and engage in some form of forgiveness, or that the government could somehow compel them to do so. “Could” in sort of an “anything is possible” sort of way. But in all likelihood, and I’d say a very HIGH likelihood, is that you will.

  14. Brandon*

    I think the odds of some president imposing some form of forgiveness is far greater than zero. The precedent has been set, both payments and interest can be suspended, from hear on out, every president, of either party, will face pressures on the issue. Recall, Trump started the process by suspending payments and interest. Student Loan borrowers have all the traits of a powerful constituency (in a political science sense) you are talking about a large, geographically diverse cohort who are educated and easily organizable. Far smaller constituencies get succor from the government (see farmers). The Overton window has shifted on this.

  15. Schuyler*

    These posts really make me uncomfortable. But I get it, people need to make a living.

    As someone who works as a financial aid administrator, and knows that a LOT of people don’t realize this is happening, check to see if you’re eligible or for Public Service Loan Forgiveness. They’ve loosened the eligibility requirements, are allowing payments that have already been made to count, and are allowing the older type of loans (called FFELP loans) to count, in many cases. The Department of Education has a PSLF help tool on their site, and it won’t hurt to apply. But it expires October 31 and they’ve given no indication they’ll extend the ability to get into PSLF, so it’s best to get on it now.

  16. Anonymity for the win*

    I am absolutely appalled at all the predatory lending around student loans in this nation. I fell prey to a federal government recommended refinance because I had variable rates. I did NOT qualify for the pause because I signed up for AES. Apparently it’s still a federal loan servicer but they are exempt from the pause because they are not actually part of the government. I *think* I can consolidate into a federal government loan through student aid but I’m not entirely sure. Does anyone have any suggestions? Or any directions for people to talk to? I do NOT want private loans.

    1. Becky*

      This information might be incorrect for your situation, but I hope that it is helpful.

      I don’t know of any federal loan servicers who ARE actually part of the government, they’re all private companies-my loans for example were serviced by UHEAA (Utah Higher Education Assistance Authority) when I graduated I used the federal consolidation option and the loan then came under Navient (used to be part of Sallie Mae). With Navient I qualified for the no interest/no payments under the CARES act. But looking at UHEAA website, if my loans had still be held by them I would not have qualified. So even though neither UHEAA nor Navient are government run, only one of them qualifies under the CARES act. I don’t understand the difference or why.

      But according to AES’ own web site doing federal loan consolidation would qualify you for the 0% interest/payment forbearance. https://www.aessuccess.org/manage/trouble_making_payments/consolidate.shtml

      I don’t know about your particular loans though, so you may want to call AES directly.

      And if they try to tell you there is a fee for consolidation then they are lying.
      https://studentaid.gov/manage-loans/consolidation
      “You may be contacted by private companies that offer to help you apply for a Direct Consolidation Loan, for a fee. These companies have no affiliation with the U.S. Department of Education (ED) or ED’s consolidation loan servicers. There’s no need to pay anyone for assistance in getting a Direct Consolidation Loan. The application process is easy and free.”

  17. Dragonfly7*

    If I had private loans that needed to be consolidated or worked in an industry that wasn’t PSLF eligible, I would definitely consider this. My rate is 6.8 percent!

  18. Miss Pantalones En Fuego*

    If you have federal loans I’d check out income based repayment plans first. My payments are very low and my balance will be forgiven eventually. It’s potentially a better plan.

  19. Candi*

    (Bookmarks for when I graduate)

    I started needing actual loans when I moved from community college to university -and the loans kicked inafter the first interest freeze. Thanks to freezing, I have minimal interest on my loans. But that doesn’t need I might want to use this in the future at some point.

    But all things considered, I’d rather have no covid and that interest.

Comments are closed.