Overview
Refinancing student loans while they’re in forbearance is sometimes possible, but it’s not automatic. Private lenders set their own underwriting rules: some will refinance while loans are in forbearance, others require loans to be in active repayment or in good standing. Federal consolidation (a Direct Consolidation Loan) is a different process with its own rules and generally requires you to apply through the federal student aid website (studentaid.gov).
In my work advising borrowers, I’ve seen three common outcomes: a) a private lender refinances the loans immediately, b) the lender requires you to exit forbearance and make a few on‑time payments, or c) the lender offers refinancing only after you reestablish creditworthiness or employment. Because of that variability, research and timing matter.
(Authoritative sources: Federal Student Aid and Consumer Financial Protection Bureau. See studentaid.gov and consumerfinance.gov for details.)
Why lenders treat forbearance differently
Lenders view forbearance as a signal of higher near‑term credit risk. When payments are paused, there’s less recent evidence of on‑time repayment — evidence private underwriters use to set price and eligibility. Some lenders will still underwrite using income, employment history, and credit score alone. Others want to see at least one or three months of resumed payments for reassurance.
Key lender considerations:
- Current payment status: “in forbearance” vs “active repayment” matters to some underwriters.
- Type of original loan: federal vs private. Refinancing federal loans to a private lender converts public protections into private contract terms.
- Borrower profile: credit score, debt‑to‑income ratio, employment stability, and cosigner presence.
CFPB guidance notes that lenders differ and encourages borrowers to compare offers and understand tradeoffs before refinancing (Consumer Financial Protection Bureau).
Federal loans vs private refinancing: the tradeoffs
A critical distinction: you can refinance federal student loans with a private lender, but doing so replaces federal loan benefits (income‑driven repayment plans, deferment and forbearance protections, borrower defense, and Public Service Loan Forgiveness eligibility) with whatever the private lender offers. Federal consolidation (Direct Consolidation Loan) is not the same as private refinancing — consolidation combines federal loans under federal terms and does not convert loans to private debt (see Federal Student Aid).
What you lose when you refinance federal loans into a private lender:
- Access to income‑driven repayment plans and payment caps
- Eligibility for PSLF and some federal forgiveness paths
- Federal deferment and forbearance provisions and certain discharge options
What you might gain:
- Lower interest rate (if you qualify)
- Simplified payments if you’re consolidating multiple private loans
- Potentially shorter or longer repayment term depending on your goal
Because the stakes can be high, the general rule I follow with clients: don’t refinance federal loans into private credit unless you have a stable income, an emergency fund, and you’re not pursuing federal forgiveness options.
Common scenarios and practical steps
Scenario A — Private loans in forbearance
- Many private loans started allowing forbearance during the pandemic; private lenders’ policies vary. If your loans are private and in lender‑approved forbearance, contact potential refinance lenders early. Some will refinance immediately if your credit and income satisfy their criteria.
Scenario B — Federal loans in administrative or economic hardship forbearance
- Administrative pauses like the COVID‑era payment pause have ended (payments resumed in 2023). If your federal loans are in borrower‑requested forbearance, private refinancing is still possible but you often must confirm the loan servicer’s status. Also remember the federal benefits you’ll forfeit by moving to private credit (studentaid.gov).
Scenario C — You want to keep federal benefits
- Consider waiting until forbearance ends and you’ve reestablished on‑time payments, or avoid private refinancing altogether. Alternatives include federal consolidation (if appropriate) or exploring income‑driven plans and borrower protections through your servicer.
Practical step‑by‑step checklist before applying:
- Confirm loan type and exact status with your servicer (federal or private; active, in forbearance, or delinquent).
- Get prequalification offers from multiple lenders to compare rates and terms without hard credit pulls when possible.
- Ask each lender explicitly whether they refinance loans still in forbearance and whether they require resumed payments or a waiting period.
- Calculate the break‑even point: how long until lower monthly payments or rate savings offset any fees, and whether you’ll lose federal program eligibility.
- If refinancing federal loans privately, confirm you understand lost federal protections and have alternatives for hardship protection.
Documentation and underwriting expectations
Expect lenders to request:
- Proof of income (pay stubs, tax returns)
- Employment verification
- Full credit check (affects score)
- Information about the loans being refinanced (statements, payoff amounts)
Some lenders will require an affidavit that the borrower is not in default and that loans are not in disputed status. If you’re in forbearance because of delinquency or default, many refinancers will decline until you rehabilitate the loan or bring it current.
Timing: when to refinance and when to wait
When refinancing during forbearance can make sense:
- You can qualify for a rate materially lower than your current rate, even after accounting for potential costs and lost federal protections.
- Your financial situation is stable and you don’t plan to use federal forgiveness programs.
- A private lender explicitly allows refinancing while loans are in forbearance and offers a competitive product.
Reasons to wait:
- You’re pursuing Public Service Loan Forgiveness or other federal forgiveness paths.
- You need federal borrower protections for potential future hardship.
- Lenders require you to exit forbearance and make a set of on‑time payments before refinancing.
In my practice, borrowers who treated forbearance as a short pause and used the time to improve credit and income often secured better rates after exiting forbearance. That approach minimizes the risk of losing federal benefits without a clear plan.
Examples from practice (anonymized)
-
Sarah: paused payments during a pandemic downturn and wanted to refinance immediately. After shopping, she found one private lender willing to refinance while she was in forbearance because her income had recovered and her credit score was strong. She accepted the offer after confirming she did not rely on federal forgiveness.
-
James: refinanced to get a lower rate but only after the lender required three months of on‑time payments post‑forbearance. That short delay cost him time but improved his pricing.
These examples highlight why borrower diligence—asking lenders specific questions—is essential.
What to ask lenders (exact questions to use)
- “Do you refinance loans that are currently in forbearance? If yes, do you require borrowers to resume payments first, or to make a set number of on‑time payments?”
- “If I refinance federal loans with you, what protections will I lose?”
- “Do you offer rate discounts for autopay or cosigner release policies?”
- “Are there origination or prepayment fees?”
Getting clear, written answers will reduce surprises during closing.
Alternatives to refinancing while in forbearance
- Federal consolidation (Direct Consolidation Loan) — combines federal loans under federal terms; it’s not private refinancing and does not eliminate federal protections (studentaid.gov).
- Income‑driven repayment plans or Public Service Loan Forgiveness — if eligible, these may be more valuable than a moderate interest‑rate reduction.
- Improving credit and waiting a short period after forbearance ends to apply for refinancing — this can yield better offers.
See our deeper guides on refinancings and repayment strategies: “Refinancing Student Loans: Benefits, Pitfalls, and Next Steps” and “Loan Refinancing and Modification: Refinancing Student Loans After Forbearance.” You can also review differences between federal and private loans in “Student Loans: Federal vs Private Options.”
- Refinancing Student Loans: Benefits, Pitfalls, and Next Steps: https://finhelp.io/glossary/refinancing-student-loans-benefits-pitfalls-and-next-steps/
- Loan Refinancing and Modification: Refinancing Student Loans After Forbearance: https://finhelp.io/glossary/loan-refinancing-and-modification-refinancing-student-loans-after-forbearance/
- Student Loans: Federal vs Private Options: https://finhelp.io/glossary/student-loans-federal-vs-private-options/
Risks and red flags
Watch for:
- Offers that require you to sign away dispute or discharge rights without clear explanation.
- Lenders that avoid answering whether federal protections are lost after refinancing.
- High fees that negate interest savings.
If an offer looks too good to be true, get the terms in writing and consult a financial professional.
Bottom line
Yes — refinancing while in forbearance is sometimes possible, but it depends on lender policies and the type of loans you have. Carefully weigh the benefits of a lower rate against the value of federal protections you may lose. Shop multiple lenders, ask specific underwriting questions, and consider waiting until you’ve reestablished on‑time payments if federal benefits are important.
This article is educational and not personalized financial advice. For your unique situation, consult a licensed financial advisor or contact your loan servicer. Authoritative resources: Federal Student Aid (studentaid.gov) and the Consumer Financial Protection Bureau (consumerfinance.gov).
