Why lower interest rates are good for student loan refinancing

By Anna Baluch | Published on March 30, 2026

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By refinancing¹ your student loans, you could save on interest, reduce your monthly payments, and enjoy more wiggle room in your budget². Since interest rates are currently low, you may want to take advantage of the situation and lock in a better rate through a refinance now.

Below, we’ll explore the answer to the common question, “do interest rates affect student loan refinancing?” We’ll also dive deeper into why lower interest rates are ideal for a student loan refi and how you can determine whether refinancing is right for you.

How lower rates benefit student loan refinancing

The higher your interest rate, the more you’ll pay in interest over the life of your student loans. That’s why a lower rate on a refinance is essential if your goal is to save money. If you’re able to lock in a better rate than the rates you’re currently paying, you may spend significantly less on interest.

While a higher credit score and more stable financial situation might lead to a lower interest rate. Depending on your circumstances, refinancing with a private student loan lender may be worthwhile when rates go down.

Factors to consider before refinancing

Before you go ahead and refinance your student loans, it’s important to think about your unique situation and determine whether this strategy is actually worth it. Here are several factors to consider:

Your goals

So, can student loans be refinanced at a lower rate? The answer depends on your situation. However, even if you’re able to land a better rate, think about your financial goals and personal motivations to determine whether this strategy makes sense. You might benefit from a student loan refi if:

• You want to save money on interest: Refinancing could be a smart move if you want to lower your interest charges and reduce the overall cost of your student loans. You might be able to save.
• You’d like more repayment flexibility: When you refinance your student loans, some lenders, including Earnest will let you choose between a variable or fixed interest rate. If you currently have a variable interest rate, for example, switching to a fixed rate loan could leave you with more predictable payments.
• You’re unhappy with your current loan provider: Fortunately, there are many lenders who offer student loan refinancing. If you’re displeased with your existing lender, refinancing to a different lender may be a good idea.

Types of loans you have

If you have federal loans, you have access to hardship protections, such as income-based repayment plans³ and forgiveness options. Once you refinance, your federal loans will turn into private loans and you’ll miss out on these federal perks. It’s up to you to determine whether a potentially lower rate and interest savings are more important than federal protections.

Your qualifications

A lower rate environment doesn’t automatically mean you’ll get approved for a better interest rate. Student loan lenders will look at your credit score, income, and other requirements to determine your interest rate. Note that if you don’t have the best credit, a trustworthy cosignermay be able to help you land a lower rate. Check out Earnest’s eligibility requirements to get an idea of what you need to get approved for a refi.

Potential fees

Some lenders charge fees to refinance your student loans. Unless you opt for a no-fee lender like Earnest, it may be more cost-effective to stick with your existing loan term than to pay for refinancing. Our refinance calculator could help you do the math and determine whether a refinance can actually save you money.

What to do if you decide to refinance

As you can see in the example below the benefit of fee-free refinancing with Earnest could reduce your monthly payments and free up your budget. It might also save you:

Before refinancing

Student loan balance: $38,290
Repayment term: 10 years
Fixed Interest rate: 6.53%
Monthly payments: $435.36
Total interest paid: $13,951.19
Total loan amount: $52,243.19

After refinancing with Earnest⁴

Student loan balance: $38,290
Repayment term: 10 years
Fixed Interest rate: 3.95%
Monthly payments: $386.76
Total interest paid: $8,121.01
Total loan amount: $46,411.01

If you choose to refinance, do some research and compare the rates and fees of several lenders. Many lenders, including Earnest, let you check your rate for free. Once you zero in on the right lender, you may go ahead and apply online.

Ready to reap the benefits of lower market rates and potentially save some serious money on your student loans? Check your rate with Earnest in minutes, with no impact to your credit score.

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About the Author

Anna Baluch

Anna Baluch is a freelance finance writer from Cleveland, OH. She enjoys writing content that helps people from all walks of life make good financial decisions. Her areas of expertise include student loans, refinancing, mortgages, personal loans, budgeting, and debt management.

Disclaimer

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