What is student loan refinancing, exactly?

By Sasha Bulatskaya | Published on October 21, 2025

)

To put it simply – refinancing is the process of taking out a new loan to pay off your old loans. You can refinance any kind of loan, including a mortgage, a personal loan, or a student loan. While it sounds like you’re trading one loan for another, it comes with some serious benefits, which we’ll explore below.

What Is Student Loan Refinancing?

)

What Are The Benefits?

The goal is to get a lower interest rate so that you can become debt-free faster or save on monthly payments¹. Choosing a lower payment can result in a longer loan term, but some people can take advantage of both².

It’s also helpful if you have multiple student loans and want to simplify your bills. With refinancing, you can combine your loans into one payment, making it easier to manage your money.

What Happens When You Refinance A Student Loan?

Before you refinance, you want to research different lenders. This first step is looking at their interest rates and getting a rate check. Most companies, including Earnest, offer a free rate check without a hard credit pull.

)

Application

Once you’ve found a lender you like, you’ll fill out their application. This involves a hard credit check and a review of your financial habits, including income and payment history.

When you apply, you should be able to choose which student loans you’d like to refinance. At Earnest, you have the option to refinance some or all of your student loans.

Pick Your Terms

Once you’re approved to refinance your loans with the new lender, you will select which loans you’d like to refinance and your terms. Other lenders may approach this part differently, but at Earnest, you can select some or all of your loans.

You’ll also be invited to select your rate, payment, and loan term. You can choose manually, or use our payment tool to see which combination saves you more money. Then you’ll sign the loan agreement, and move to the next step.

Your New Lender Pays Off Your Old Loans

After the loan agreement is signed, your new lender will send money to your old lender to pay off your loans. At Earnest, this part takes about 10 days to complete.

Payment With A New Lender Begins

You’ll start to pay off your loans with a new lender. If you refinance with Earnest, you can choose between paying once a month or every two weeks. You can also sign up for automatic payments to get a 0.25% interest rate discount with Auto Pay³.

Should I Apply For Refinancing?

Refinancing works best for those with a steady job and good credit. Companies want to see a history of on-time payments to show you’re financially responsible. If your credit score isn’t as great as you’d like it to be, you can use credit-building services like Experian Boost and find other ways to up your chances for approval.

We recommend checking their eligibility requirements to get a better idea of what they want to see. To find out what we look for in a refinancing application, you can check our eligibility guide.

Are There Any Downsides?

If you rely on federal benefits like income-driven repayment plans or loan forgiveness, refinancing might not be for you. Once you refinance federal student loans, they will become private, and you’ll lose access to all federal benefits.

Also, not everyone qualifies for the low interest rates advertised by private loan companies. Your credit score, income, and other factors play a role in the rates you’ll be able to get.

What Do I Need To Apply?

If you’re ready to refinance your student loans, you’ll want to gather these docs:

1. Information about your existing loans, including interest rates and balances.
2. Bank statements, income information, and employment history.
3. Personal information, such as your Social Security number and ID.

Be sure to check with your lender for any specific docs you’ll need.

Build A Rich Future

Refinancing is a powerful tool you can use to get out of student debt, but it’s not the only option. An income-driven repayment plan might be a better fit if you have federal student loans. If you think refinancing is right for you, you run a quick rate check in 3 minutes. Everyone’s financial situation is different. Knowing your options is the key to getting out of debt and building a better financial future.

)

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

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

1 You may lose benefits associated with your underlying federal and/or private loans if you refinance such as federal Income-driven Repayment Plans, Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options. If you file for bankruptcy, you may still be required to pay back this loan.

2 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.

3 You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.