Background

Refinancing federal student loans into private loans has grown more common as private lenders compete on rate and borrower experience. Borrowers typically refinance to reduce interest costs, lower monthly payments, or change the loan term. In my practice advising borrowers for more than a decade, the decision usually comes down to three factors: average rate reduction, job security, and the need for federal programs such as forgiveness or income-driven repayment (IDR). For federal program details, see the U.S. Department of Education’s guidance at studentaid.gov and the Consumer Financial Protection Bureau’s consumer guide at consumerfinance.gov.

How refinancing works

You apply to a private lender and, if approved, the lender issues a new loan that pays off your federal loans. The new loan is a private obligation governed by the lender’s terms.
Approval depends on credit score, income, debt-to-income ratio, and in many cases a creditworthy co-signer.
Rates can be fixed or variable; private lenders may offer lower interest but less flexibility.

Key trade-offs (Pros and Cons)

Pros

Potentially lower interest rate and total interest paid.
Better borrower service, faster payoff options, and flexible repayment terms from some private lenders.
May simplify repayment by combining multiple loans into one private loan.

Cons

You permanently lose federal benefits: income-driven repayment (IDR) plans, Public Service Loan Forgiveness (PSLF), federal deferment and forbearance protections, and certain discharge options. Once refinanced, you cannot return those loans to the federal system. (U.S. Dept. of Education)
Private lenders rarely offer generous hardship programs equivalent to federal relief.
Variable-rate loans can raise monthly payments if interest rises.

Who should consider refinancing

Borrowers with strong credit, stable income, and high-interest federal loans may benefit.
Those not pursuing federal forgiveness or who already exhausted IDR/PSLF options are better candidates.
Parents who hold Parent PLUS loans sometimes refinance to lower rates, but they lose federal protections; see our guide on refinancing Parent PLUS loans.

Who should avoid refinancing

Borrowers who qualify for or expect to need IDR plans, PSLF, or frequent deferment for health, family, or military service.
Those with unstable income, low credit scores, or without a co-signer (if required).

How to evaluate an offer (simple checklist)

Compare the after-refinance monthly payment, total interest, and loan term.
Confirm whether any federal forgiveness or repayment credit (e.g., PSLF or qualifying payments under IDR) would be lost.
Check for prepayment penalties, origination fees, or variable-rate exposure.
Run stress scenarios: job loss, income drop, or temporary hardship—would private options cover you?

Real-world examples

Case A: Borrower lowered interest from 6.8% to 3.5% and saved thousands over 10 years. She had a stable job and no need for IDR or PSLF.
Case B: Borrower refinanced to cut his monthly payment but later needed an IDR plan and found no federal safety net after refinancing. He could not re-enroll in federal protections.

Professional tips

If you are pursuing or may qualify for PSLF, keep federal loans until you certify employment and complete required payments. See our piece on preserving federal protections when refinancing.
Consider partial refinancing if your lender allows it — this lets you move high-rate loans while keeping others in the federal system.
Ask prospective private lenders for a full payoff quote and a breakdown of fees before signing.

Common mistakes

Focusing only on the advertised APR without calculating total interest over your expected repayment horizon.
Assuming you can return to federal loans after refinancing — you generally cannot.
Neglecting future-life events; private loans often lack the same hardship protections as federal loans.

Short FAQs

Can I refinance only some federal loans? Yes; some private lenders permit partial refinancing, which can preserve federal protections on the remaining loans.
Will refinancing affect my credit? Yes. Applying triggers a hard inquiry and paying off federal loans and opening a new loan can change your credit mix and balances.
Can I get federal loan forgiveness after refinancing into private loans? No — once federal loans are refinanced into private loans you lose eligibility for federal forgiveness programs.

Should You Refinance Federal Student Loans into Private Loans?