How to refinance high interest rate student loans

By Corey Buhay | Published on October 21, 2025

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About 20% of Americans are currently paying off student loan debt, but the burden isn’t the same for everyone. That’s because not everyone has the same interest rate. Even if you only took on federal student loans — which offer the same fixed rates for all borrowers each year — you might find you have a different rate than others who graduated five, ten, or fifteen years before you.

Interest rates on federal loans reflect the economic climate during the year you took out your loans. Rates on private loans¹ reflect your creditworthiness. Regardless, your interest rate will determine how much more than the original debt you will have to repay. The good news? Lowering your interest rate by even a couple of points could mean serious savings over the years. That’s where student loan refinancing² comes in.

What is student loan refinancing?

Student loan refinancing is when you replace your federal or private existing loan (or loans) with a new private loan, preferably at a lower interest rate. You can use refinancing to replace all your loans at once, combining them into a single new loan with new terms. Or, you can choose to refinance just one or two loans at a time. That’s a great option if you only want to swap out your high-interest debts and keep all the others untouched.

When you refinance, your actual loan amount (i.e., your principal balance) won’t change, but how much you spend on interest payments may change. That can happen if you choose to change your loan term, or if you score a lower interest rate³.

Lenders may be willing to offer you a lower rate if they see that your credit profile has improved since you took out the original loan. With the lower interest rate, you may be able to pay off your loan sooner, which could result in paying less interest over the life of the loan. You may also be able to make lower monthly payments, freeing up cash flow for other uses.

Refinancing is especially useful if you got stuck with a high interest rate when you first took out your loans. Now that rates have dropped, it may be a good time to see if you qualify for a lower rate. After all, the bigger the difference between your original rate and your new rate, the more money you’ll save.

All refinancing is done through private lenders, rather than the federal government. This means you can pick the lender who offers you the lowest rate, the most flexible eligibility requirements, and the best repayment options.

What impacts interest rates for student loans?

Federal and private lenders choose their rates differently. Here are a few of the factors that can affect each.

Factors that affect federal interest rates

Federal student loan interest rates are always fixed interest rates, and they are reset annually. The current student loan interest rate for Direct Subsidized and Unsubsidized Loans for undergraduates is 6.53% for the 2024/2025 school year.

Factors that affect private student loan interest rates

For a number of reasons — including if you’ve maxed out your federal loan options — you might turn to private student loans to cover any funding gaps. Private loans come from non-government financial institutions like banks, credit unions, or online lenders. Unlike the federal government, private lenders offer interest rates based on the applicant’s credit profile. The market will determine the range of rates available from the lender, but your credit profile will impact the rate you personally receive. The best student loan rates are generally reserved for applicants with excellent credit.

Another factor that affects the interest rate of a loan is the type of loan chosen by a student. If you took on a variable-rate loan from a private lender, your interest rate may change over the life of your loan. While the variable interest rate may start out lower than the fixed rates available from the same lender, it may end up costing you more than the fixed-rate loan would over the long term.

How can I get a lower interest rate if I have poor credit?

One of the major components of your credit score is your credit history. It’s relatively rare for a college student to have good credit. That’s because few young adults have been using credit accounts long enough to have a long credit history, a sufficiently diverse credit mix, or a strong payment history. The student also may not have had any form of income when they took on the student loan. That can make it difficult to qualify for a private student loan, especially one at a reasonable interest rate.

If you have little or no credit, private lenders may offer borrowers the opportunity to add a cosigner to their application. Adding a cosigner may give the lender peace of mind and the ability to offer a lower rate than the student would qualify for on their own.

When to refinance student loans

The best time to refinance your loans is generally when you’re sure you can qualify for a rate that’s lower than your current rates. That could be because national interest rates have dropped, or because your financial situation has significantly improved.

One factor lenders will look at when you go to refinance your loan is your debt-to-income ratio. For this reason, a great time to consider refinancing is after you’ve reached a major financial milestone in your life, like a raise, promotion, or new job. If you just successfully paid off another debt, that could also lower your debt-to-income ratio. In turn, that will improve your credit score — and therefore your odds of qualifying for a lower student loan refinance rate.

It’s also important to remember that in order to refinance your student loan, lenders may require you to have graduated or within six months of graduation. Be sure to check their eligibility requirements before you apply.

If you are unsure whether or not you could get a lower interest rate, many lenders — including Earnest — offer prospective borrowers a rate estimate without performing a hard credit pull. With many options available, you can (and should) shop around for rates with different lenders before signing on with anyone.

Refinancing Parent Plus Loans

Not everyone knows that it’s possible to refinance Parent PLUS Loans as well. Since parents with adult children often have a much longer credit history and established credit score, lenders will have more information to work with and may be able to offer lower rates. If you’re a parent thinking about retirement, refinancing could help you pay off the loans you took on to help your student cover the cost of college.

Refinancing vs consolidating your student loans

Refinancing isn’t the only option for combining your existing loans or changing your loan term. If you have federal student loans, you’re also eligible for student loan consolidation. This federal service lets you lump all your federal loans together into a single new loan, called a Direct Consolidation Loan. Consolidation can simplify repayment and, in some cases, lower your monthly payment amount. Consolidation is also the first step to signing up for an income-driven repayment plan*, which can make your loans even more affordable.

*As a result of ongoing court actions, the terms of some Income-Driven Repayment (IDR) plans, including the SAVE plan, may be subject to change. Please refer to studentaid.gov for the current status of these plans.

Not sure if you should be consolidating your federal loans or refinancing? The main difference is how the interest rate for your new loan will be calculated. When you consolidate federal loans, your new interest rate will be the weighted average of all your existing interest rates. You cannot lower your interest through federal consolidation. When refinancing, however, your new interest rate reflects your current financial life. That means you have the opportunity to lower your rate, sometimes dramatically.

Federal consolidation can be great if you are happy with your current interest rates and repayment terms but want to bundle all of your loans into one payment. Consolidation is also a good way to make sure your loans remain eligible for federal protections, like income-driven repayment, student loan forgiveness, deferment, and forbearance. If you refinance with a private lender, you lose access to these protections.

It’s also important to note that you can pick and choose which loans you would like to include in your Direct Consolidation Loan or private refinancing. If you want to consolidate just a few of your loans, that’s certainly an option. You can also choose to refinance only your highest-interest loans with a private lender and leave the rest of your federal loans as they are.

Refinancing with a cosigner

If you’re struggling to pay your high interest rate student loans but don’t have a strong enough credit score to qualify for a lower rate, you may be able to circumvent that hurdle by applying with a cosigner. A cosigner is a creditworthy adult who agrees to be responsible for your loan balance should you find yourself unable to pay. That kind of backup gives a lender extra reassurance. Basically, refinancing with a cosigner offers the best of both worlds: It gives you access to lower interest rates while keeping your education debt in your name.

When not to refinance your federal student loans

Refinancing for a lower rate may not be the right decision for everyone. By refinancing, you will be taking on a new loan with a private lender. If you currently have federal loans, switching to a private lender will turn your federal debt into private debt. That means you’ll lose access to federal benefits, like loan forgiveness programs, flexible repayment plans, deferment, or interest subsidies associated with your current loan. If you are happy with your current loan terms and repayment options, you may not want to make a change.

If you are currently attending school, you might not want to refinance your student loans, which could result in you forfeiting your post-graduation grace period. Some federal loans don’t accrue interest while you’re in school, and that’s a great benefit to hold on to, too.

Lastly, lenders who refinance student loans will also look for a strong history of making monthly payments. If you’ve had some trouble making payments, or have been in default on your student loans, you might not see an interest rate that reflects the potential you know you have. Instead, work toward making complete and on-time loan payments, review your credit report to see how you can make improvements, and take steps to boost your credit score and show a lender that you are a strong candidate for refinancing in the future.

How to start shopping for refinance lenders

If your priority is getting a lower rate on your high-interest student loans, refinancing could be the right choice for you. Scoring a lower rate could help you reduce your monthly payment and save some serious cash over the life of your loan.

Ready to start shopping for lenders? Consider checking your rate with Earnest. We never charge origination fees or prepayment penalties, and we give all borrowers an interest rate discount just for signing up for Auto Pay⁴. With Earnest, you can pick the monthly payment amount and loan term that fits your needs. Use our refinance calculator today to see how much you could save.

About the Author

Corey Buhay

Corey Buhay is a writer and editor based in Boulder, Colorado. She’s passionate about literature, the outdoors, and doing her taxes by hand. She has been writing about student loans and personal finance for Earnest since 2019. You’ll find her work in Outside Magazine, Backpacker Magazine, Smithsonian, and The Denver Post.