Student loan refinancing is a popular strategy to help simplify your payments, pay off your debt faster, and save money. In fact, ELFI recently surveyed borrowers who refinanced their student loans in 2024, and our customers reported saving an average of $334 per month.
When you refinance, you take out a new loan to replace your existing loans, and you could qualify for a lower rate or different repayment term. But only some borrowers qualify for refinancing, and it’s not a solution that fits every situation.
Should you refinance you student loans? It can feel like a complicated question, but whether it makes sense to refinance depends on the type of loans you have, your current interest rates, and your financial goals.
Refinancing Can Create Breathing Room for Your Budget
Student loan debt is a growing problem, and many people are struggling to get a handle on their debt.
As of 2024, the average student loan balance per borrower was $37,797. But in some professions, higher levels of debt are common because of the amount of education they require. For example, law school students take on substantially more debt than other borrowers. According to LawHub, law school graduates had an average balance of $119,292 per borrower.
How much you can save through refinancing depends on your existing balance, your rates and what loan options you can qualify for when you apply. However, ELFI customers reported seeing an average of $21,921 in total savings after refinancing their student loans with Education Loan Finance. That wasn’t the only benefit, either; 37.44% of customers reported that they were able to save for retirement after refinancing, while 14.87% said refinancing improved their quality of life by allowing them to buy a new car or truck.
When Is the Right Time to Refinance My Student Loans?
Refinancing can be a smart way to manage your debt in the following scenarios:
- Refinancing is a smart way to manage your debt in the following scenarios:
- You have high-interest loans: Depending on the type of loans you have, when you took them out, and your credit at the time of origination, you could have high interest rates. If current rates are lower than you have on your existing loans, refinancing could save you a substantial amount of money.
- You have better credit than you had when you took out the loan: If you had poor to fair credit when you took out the original student loan, you may have a higher interest rate. If your credit has improved since then, you could qualify for lower rates and more favorable terms through student loan refinancing.
- You want to remove a co-signer: If you had a relative or friend co-sign a student loan, refinancing allows you to take out a loan solely in your own name and remove the co-signers responsibility for the debt. According to a 2025 Enterval Analytics report, 95.4% of undergraduate loans were co-signed.
- You want to streamline and reduce your payments: You likely had to borrow several student loans over your college career, so you may have several accounts and payment due dates to manage after graduation. Refinancing allows you to combine your loans into one, with one easy monthly payment.
Learn More: How Soon Can You Refinance a Student Loan?
When Not to Refinance Student Loans
Although refinancing can be beneficial for some borrowers, it’s not a good idea for everyone. If you are in the following scenarios, think twice about refinancing your debt:
- You work for a non-profit organization or government agency: If you have federal student loans and work for a non-profit organization or government agency, you could qualify for loan forgiveness through Public Service Loan Forgiveness (PSLF). But if you refinance your loans, your loans will no longer be eligible for PSLF.
- Your field is volatile: Federal loan borrowers can use programs like income-driven repayment plans if they can’t afford their payments or forbearance if they need to postpone their payments. But once you refinance, your federal loans are transferred to private lenders, and you’ll no longer qualify.
- You have low-interest loans: Interest rates reached record lows in 2020 and 2021. If you have low-interest loans — rates on some federal loans were as low as 2.75% in 2021 — you’re unlikely to qualify for a lower rate than you have now, so refinancing may not help you save money.
Learn More: Applying for PSLF? Here’s How the OBBB May Impact You
Who Qualifies for Student Loan Refinancing
Although borrower requirements vary by lender, you generally need to meet the following criteria to qualify for student loan refinancing:
- Good to excellent credit (If you don’t have good credit, you may need a co-signer to refinance your loans.)
- A stable source of income
- A degree from an accredited college or university
- An established credit history
- At least $10,000 in outstanding student loans
Risks of Student Loan Refinancing
Before refinancing your loans, make sure you fully understand the risks:
- You may not qualify for a lower rate: Not everyone will qualify for a lower rate through refinancing; you generally need very good to excellent credit to qualify for the lowest advertised rates.
- You may have a higher overall repayment cost: When you refinance, you can choose a longer loan term to reduce your monthly payment. But extending your term means your loans will be in repayment longer, and more interest charges will accrue. Over time, the longer term can cause you to pay substantially more.
- Refinancing can affect your credit: When you apply for a loan, you have to consent to a hard credit check. Every hard credit inquiry can cause your credit score to drop.
- You may lose federal loan protections: If you have federal loans and refinance your debt with private student loan refinancing, you’ll no longer be eligible for federal income-driven repayment, forbearance, and loan forgiveness programs.
Alternatives to Student Loan Refinancing
Although refinancing is one way to manage your debt, other strategies may be a better fit for you:
- Debt consolidation: Federal loan borrowers can use a Direct Consolidation Loan to combine their loans into one. You won’t qualify or a lower rate, but you can extend your repayment term and simplify your payments through consolidation.
- Income-driven repayment: If you can’t afford your current payments on your federal loans, an income-driven repayment plan can significantly reduce your payments since it bases your payment amount on your discretionary income.
- Employer repayment: Some employers will help you repay your loans, which can help you get out of debt faster and save money.
- Loan forgiveness programs: There are many loan forgiveness programs besides PSLF; depending on your employment type and location, you could qualify for full or partial loan forgiveness.
Still have questions about if refinancing is right for you? ELFI’s personal Student Loan Advisors are ready to help answer them!
