Picking the right time to refinance your student loans

By Sasha Bulatskaya | Published on October 21, 2025

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In 2024, interest rates dropped three times, finally coming down from their record 2022 high and making loans more affordable for millions of borrowers. But the rate drop isn’t just a boon for brand-new borrowers; it also makes now an ideal time to refinance.

Student loan refinancing comes with significant benefits. For example, if you have $40,000 in student loans with an 8.94% fixed interest rate and a five-year term, your monthly payment will be $829 and you’ll pay almost $10,000 in interest over the life of your loan. But, if you were to take that same loan amount and refinance for a 5.72% fixed interest rate, you’d pay $768 per month and a little over $6,000 in interest. That’s almost $4,000 in savings.*

That said, refinancing doesn’t necessarily make sense for everyone. And just because rates are ripe right now doesn’t mean you should throw caution to the winds and jump at the first opportunity. Here’s how to decide when to refinance student loans — and when to wait.

*Refinance example listed above is for illustrative purposes only and may not be representative of rates or terms offered by Earnest. Savings are not guaranteed and may vary.

What to consider before refinancing

A number of factors will impact whether you’ll qualify for refinancing — and what kinds of rates you’ll be offered if you do. Here are a few things to consider before you start filling out applications.

Your interest rates vs. market interest rates

Market interest rates are much lower now than they have been for years. But with refinancing, the only thing that matters is if those rates are lower than your rates. Compare current market rates with the interest rates on your student loans. If the current rates are significantly lower than your current loan rates, it’s a sign that refinancing may be worth it.

Whether you have federal or private student loans

Consider whether you have federal student loans, private student loans, or both. Federal student loans come with federal hardship protections, including access to income-driven repayment plans*, deferment, forbearance, and loan cancellation options. If you refinance, your federal loans will become private loans, and you’ll lose out on these federal benefits. If your goal is just to simplify your monthly payment and extend your loan term, you might want to consider a student loan consolidation. Unlike a student loan refinance, consolidation is a federal program you can use to streamline your repayments. However, the only way to get a lower rate is through student loan refinancing. For that reason, some people still choose to refinance their federal loans because, for them, the benefits outweigh the risks. Refinancing private student loans is considered less risky because you’re switching from one private lender to another (ideally, at a lower interest rate).

*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.

Whether you qualify for loan forgiveness

If you qualify for student loan forgiveness, it might be prudent to hold off on refinancing. That’s because private lenders don’t offer student loan forgiveness programs. And once you turn your federal loan into a private refinance loan, you can’t turn it back into a federal loan. That means your student debt will become permanently ineligible for loan forgiveness and other federal protections. So, if you think you might qualify for Public Service Loan Forgiveness (PSLF), military forgiveness, teacher forgiveness, or other programs, it’s best to keep your federal loans federal.

Your eligibility

Your credit history plays a big role in approval and getting a low interest rate. Usually, you’ll need a good credit score to qualify, but your score isn’t the only thing lenders take into account. Different lenders will have different eligibility and credit requirements. We recommend visiting each lender’s eligibility page for more information. To view Earnest’s, visit our eligibility page. If you don’t meet the requirements for refinancing on your own, you may need to refinance with a cosigner. A creditworthy cosigner can help you secure lower rates. However, you’ll need to make sure you have an adult in your life who doesn’t mind tying their finances to yours for years to come.

Your type of rate

If you currently have variable interest rates, you don’t necessarily have to refinance now to take advantage of the rate drop; your rates will drop automatically in sync with market trends. If you have a fixed rate, however, refinancing is the only way to take advantage of lower rates. If you refinance to a new fixed-rate loan, you’ll be able to lock them in for the foreseeable future.

Your financial situation

Look at how much money you have coming in every month. Many lenders want to see that you’re on firm financial footing before they’ll offer you a new loan. Make sure you have some savings to cover your expenses if you lose your job. Although you don’t need a traditional nine-to-five to get approved, showing that you have an income stream is essential.

Many lenders also rely on your debt-to-income ratio, or DTI, to approve your loan or give you a better rate. You can use our Debt to Income Ratio calculator to calculate your DTI.

Your repayment term

Refinancing usually comes with fees that are lumped into your future student loan payments. So, if you’re close to paying off your existing loans, it may be cheaper to ride out your current loan term than to pay for a refinance. (Use our student loan refinance calculator to find out.)

Life stages to consider before refinancing

Now that you’ve considered your personal finance variables, it’s important to consider where you are in life.

Fresh grad

Most college grads don’t start with a high salary. If your income is pretty meager and you don’t qualify for a significantly lower interest rate, it might make sense to wait a few years until your salary improves. If you do qualify for a lower rate, though, refinancing now could benefit you long-term. A lower rate will keep your loan balance from growing at a rapid pace. And remember: You can refinance multiple times if your credit score goes up and you qualify for better terms at a later time².

Keep in mind that it can be tempting refinance to a longer term, which will give you a lower monthly payment. However, doing so will cost you more in interest over the life of the loan.

Getting married or moving in with a partner

Though it’s not very romantic to think of it this way, a partnership is also a financial agreement. Some couples cite student debt as a reason they won’t make a more serious commitment, so if you’re moving in with a partner or getting married, refinancing your student loans could be a way to help you get your debt under control before you move into a new phase of life.

Buying a home or another financial investment

When making a big purchase, such as buying a home or investing your money, it’s always a good idea to check the rest of your finances. Using a refinance to get a lower interest rate on your student loans could help free up more room in your monthly budget. That could help you feel more secure before you start juggling both student loans and a mortgage.

How to refinance if you decide it’s time

No matter where you are in life, knowing your options for refinancing can help you feel empowered to take control of your student loans. The first step is to start looking around for lenders. Banks, credit unions, and online lenders all offer refinance loans. Do some research on a few financial institutions and read some reviews. When you find one you like, see if they offer a free rate check. Checking your rate — i.e., getting prequalified — will give you a ballpark estimate of the rate a lender can offer you personally. That can help you more accurately assess what kinds of savings you stand to gain.

If you’re ready to start checking rates, consider getting prequalified with Earnest. We let borrowers choose from a range of custom loan terms so they can select a repayment option that fits their schedule. We also never charge origination fees, prepayment penalties, or any other fees. Ready to take control of your loans? You can check your rate with Earnest in just minutes, and it won’t impact your credit score.

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About the Author

Sasha Bulatskaya

Sasha is the Senior Manager of Brand and Content at Earnest. She has been writing for ten years and has been focused on educational finance and financial aid for over three. Her passion for mission-driven companies brought her to Earnest in 2020, and she's been helping make student finance more accessible ever since. She strives to demystify personal finance and student loans to help borrowers make the best decisions for their financial situation.

Disclaimer

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.