Updated June 20, 2025
For millions of student loan borrowers, the idea of paying off your loans years early — or for them to disappear altogether — sounds like a pipe dream. But, there are ways to accelerate your repayment or even have your loans forgiven.
Student loan refinancing and Public Service Loan Forgiveness are two ways to manage your loans. However, who is eligible for these programs and their requirements are very different, so it’s important to understand how these options work.
What Is Public Service Loan Forgiveness (PSLF)?
PSLF is a program for federal student loan borrowers. It grants loan forgiveness to employees of non-profit organizations or government agencies after 10 years of full-time employment. If you meet the program’s employment and payment requirements, 100% of your remaining balance will be forgiven, tax-free.
Eligibility
The eligibility requirements for PSLF are strict:
- Qualifying Loans: Only federal loan borrowers with Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loans are eligible.
- Qualifying Employment: Borrowers must work for a qualifying non-profit or government agency full-time for at least 10 years.
- Qualifying Payments: While an employee of an eligible employer, the borrower must make at least 120 qualifying monthly payments toward their loans. Payments made under an income-driven repayment (IDR) plan qualify.
Pros and Cons
Although PSLF can be immensely helpful, there are some drawbacks to keep in mind, too:
Pros
- Eliminates remaining balance: After meeting the requirements for PSLF, your total balance is discharged.
- IDR plans qualify: Federal loan borrowers can enroll in an IDR plan to drastically reduce their monthly payment amount, so you can qualify for PSLF while making smaller monthly loan payments.
- Tax-free forgiveness: Unlike other forms of loan forgiveness or discharge, loans forgiven under PSLF are not subject to federal taxes.
Cons
- It takes a long time: With PSLF, your loans can only be forgiven after your loans have entered repayment and you work for a qualifying employer for 10 years; there’s no way to speed the process up.
- Not all loans qualify: Only federal Direct loans are eligible; other loans, including private student loans, do not qualify for PSLF.
- You may have to take lower-paying work: PSLF was created to make it easier for college graduates to pursue work in public service — a field which typically pays lower salaries than for-profit corporations. To qualify for PSLF, you may have to take on a lower-paying job with an eligible employer for a significant chunk of your career.
What Is Student Loan Refinancing?
Student loan refinancing is a strategy where you take out a new loan and use it to pay off your existing education debt. Borrowers with reliable sources of income and good credit can refinance their student loans and qualify for lower rates than they have now. With a lower rate, you could potentially pay off your loans faster, reduce your monthly payments, and cut down on interest.
Eligibility
The eligibility requirements for student loan refinancing aren’t as stringent as the requirements for PSLF, but there are some key criteria borrowers have to meet:
- Loan types: Student loan refinancing is for both federal and private student loans, including parent student loans.
- Income: Although specific income requirements vary by lender, lenders typically require borrowers to have a full-time job or another source of income.
- Credit: Generally, borrowers must have a credit score in the “good to excellent” range, meaning a credit score of 670 or higher.
If you don’t meet the income or credit requirements, you may still qualify for a loan — or get a lower rate — by adding a credit-worthy co-signer to your loan application.
Pros and Cons
Refinancing your student loans can be an effective way to pay off your debt faster and save money. But, there are some disadvantages to keep in mind:
Pros
- Potential savings: If you refinance student loans to a loan with a lower rate, you could reduce how much interest accrues, allowing you to save hundreds or even thousands over the life of your loan.
- Accelerated debt repayment: With a lower interest rate, more of your payments go toward the loan principal. As a result, you can pay off your loans sooner.
- Lowered monthly payments: When you refinance, you may qualify for a lower rate, and you can adjust your loan term. You can opt for a longer term to reduce your monthly payment amount and free up some room in your budget.
Cons
- Not everyone qualifies: Student loan refinancing typically requires good to excellent credit and a steady income. If you’re unemployed, working part-time, or have poor to fair credit, you’ll likely need a co-signer to qualify.
- Rates may be higher than you currently have: Depending on when you took out your loans, you may have very low rates already. For example, some student loans were under 3% just a few years ago. With such a low rate, you’re unlikely to qualify for a significant reduction through refinancing.
- You lose federal loan benefits: Although you can refinance both federal and private student loans, refinancing federal loans is risky. When you refinance federal loans, they are transferred to a private lender, and you’ll no longer qualify for benefits like IDR plans.
Managing Your Education Debt
Whether student loan refinancing or PSLF is better depends on your unique situation. PSLF makes the most sense if you have federal student loans and you’re interested in a career working for a non-profit or government office, and intend to stick with that career for a decade or more.
By contrast, student loan refinancing is a good option if you have private student loans or are pursuing a career in the for-profit sector since it could help you save money and pay off your loans faster.
If you decide to refinance your loans, you can use ELFI’s Check Your Rate tool to view your loan options without affecting your credit score.
