Why so few people refinance their student loans—and what it’s costing them | Earnest

Why so few people refinance their student loans—and what it’s costing them

By Corey Buhay | Published on March 2, 2026

)

TL;DR:

According to a 2025 Earnest study, only 1 in 10 borrowers who could save money by refinancing actually do refinance.

The psychology of sticking with what you know

It’s normal to feel uncertain, overwhelmed, or skeptical about any kind of big financial move, including refinancing. But one of the biggest factors that keeps people from making healthy changes is a phenomenon called status quo bias.

Status quo bias is the human brain’s natural tendency to cling to the familiar, even if it’s costly. It’s the reason we’re often hesitant to switch jobs, try a new cell phone carrier, or move to a new city. We can know on a surface level that a change could be really good for us, but deep down we wonder: What if I make things worse by changing? What if I regret it?

Here’s a closer look at how status quo bias manifests for many of us—plus some of the other common reasons people hesitate to refinance.

Common reasons people put off refinancing

People provide a number of reasons for not refinancing, even when, intellectually, they know it could save them money. These reasons include emotional, logistical, and behavioral hurdles.

Emotional blockages around personal finance

Status quo bias usually rears its ugly head in the form of anxiety around change. Here are a few common things our anxious brains like to tell us—and how to work through them.

“It feels like a lot of work.”

Refinancing can feel mysterious or overwhelming, especially if you don’t already consider yourself a super-saver or finance wiz. The good news is that refinancing is fairly straightforward, even if you’re new to personal finance.

All you have to do is fill out an online application with a lender you like, review the terms of the offer, and then let them do the heavy lifting. Within a couple of weeks, your old loans will be paid off, and you’ll just have a single monthly bill to worry about.

“It sounds too good to be true.”

Many borrowers worry that the results they see online just won’t pan out for them personally. While it’s true that not everyone who refinances qualifies for a dramatically lower interest rate, the data shows that it’s extremely common for even average borrowers to save a few hundred to a few thousand dollars by refinancing. For example, one study reported average monthly savings of over $330/month, with projected lifetime savings around $20,000. (ELFI survey, May 2025) “Fortunately, you can get a realistic estimate of your savings pretty quickly online: First, get a free rate check. Then plug that number into a refinance calculator to see how much you could save.

“There are too many options—I feel overwhelmed and don’t know where to start.”

There are tons of refinance lenders out there. Fortunately, you don’t have to research every single one to find yourself a pretty good deal. If you already have a bank or credit union you like working with, ask them if they offer student loan refinancing. Many financial institutions offer discounts or other perks to existing customers, which makes them a great place to start.

If you want a new lender, do a quick Google search. Pick three lenders that seem promising and check them out on an independent ranking website like Trustpilot or Better Business Bureau. Then, get a free rate check with each one to see which can offer you the better deal.

Logistical reasons for not refinancing

Logistical considerations can also keep people from refinancing. Here are a few of the most common concerns.

“What if I lose federal protections?”

If you currently have federal student loans, you might worry about losing access to student loan forgiveness, federal deferment and forbearance, and other perks. There’s some foundation to this concern: Once you refinance federal debt, it will become private debt. Once you’ve done this, you can’t switch back.

If you’re a teacher, government worker, or military member—or belong to another category of borrower eligible for student loan forgiveness—it might be worth keeping your loans within the federal system. If you want a lower monthly payment, you can always change your payment plan via student loan consolidation, which will keep your loans federal. Caveat: consolidation cannot help you get a lower interest rate, and cannot help you save money on your student loans over the long run unless you qualify for forgiveness.

“What if my rate isn’t actually better?”

Many borrowers are understandably hesitant to go through the rigamarole of a refinance if it’s not going to save them a significant amount of money. Fortunately, there are ways to check before choosing to refinance. Find a couple of top lenders that (like Earnest) offer a free rate check with zero credit impact. Then, plug those numbers into a refinance calculator to see what your lifetime savings could be.

“If interest rates could change, should I refinance student loans later?”

Many borrowers assume they have to wait for the exact perfect time to pull the trigger on a refinance. But the truth is that interest rate trends can be hard to predict, and waiting months or years for the perfect moment could rob you of serious savings. Even if you can just drop your rate by one to two percent, you can save thousands on your student loans. And if you refinance today and discover that interest rates drop later down the line? You can always refinance again later to save even more.

Behavioral obstacles to refinancing

If you’re not exactly the most financially organized person on the planet, refinancing might seem extra intimidating. Here’s how to overcome that intimidation and make refinancing work for you.

“I barely have a grip on my loans as they are.”

If you’re struggling to make your current loan payments, do some soul-searching and figure out where the hangups are stemming from. Then, make some small changes to take back control.

If you can’t afford your current loans, reach out to your loan servicer to see what your options are for lowering your monthly payment. If you’re having a hard time keeping track of all your bills and deadlines, sit down and make a list of all your loans, interest rates, servicers, minimum payment amounts, and due dates. Then either pin the list to your refrigerator or make a series of calendar alerts. You can also sign up for automatic payments with each lender, which will ensure you never miss a bill.

Fortunately, refinancing can help with both of these issues. You can refinance to a longer loan term, which can reduce your monthly payment amount. You can also use refinancing to lump multiple bills into a single monthly payment with a single servicer.

“I don’t have time—I’ll deal with it later”

It can be tempting to put off a big change until you feel like you have the time and bandwidth to manage it. But when it comes to paying high interest rates, that time will cost you. The longer you wait, the more interest your loans will accrue, and the more you’ll end up paying over time.

Use a refinance calculator to see how much you could save each month by refinancing. If it’s significant, then consider acting quickly. Take a deep breath, set aside a few hours one evening to do a little research, and fill out a refinance application before life gets in the way.

What it really costs to not act

If you choose not to refinance student loans, savings can slip through your fingers. Let’s say you have $50,000 in outstanding student debt with 10 years left on your term, and you’re paying a relatively high 7% fixed interest rate. If you refinance now and secure a modest 5% fixed interest rate, you could save about $50 per month—or about $6,000 over your 10-year term. That’s several months of rent, a down payment on a car, or a solid chunk of retirement savings.

So, why should you not procrastinate if you’re going to refinance student loans? Because the monthly savings you could be missing out on will add up fast. If the borrower in the above example put off their refinance by a year, they’d lose out on nearly $1,000 in potential savings. In personal finance, doing nothing often feels safer—but it usually costs more.

What changes when you do refinance

When it comes to personal finance, the fear of doing the thing is often a much bigger stress than the thing itself. Once you pull the trigger and make the change you’ve been putting off, you’ll likely feel a massive sense of relief. That sense of confidence and control is one of the biggest student refinancing benefits that people don’t always talk about.

A number of borrowers who’ve been through the refinancing process describe a sense of clarity and empowerment after it’s done. Taking a concrete step to organize your finances can help you feel like you’re back in the driver’s seat. Other folks find that using refinancing to streamline their bills removes the massive, hidden burden of having to keep track of multiple payments each month. That can free up a ton of mental bandwidth and momentum to make other positive changes in your financial life.

How to take the first step with confidence

Most borrowers could save money by refinancing—but fear, confusion, and inertia keep 9 out of 10 from acting. It’s normal to hesitate. The key is to get clarity on your specific situation and the things that could be holding you back.

Once you’ve had an honest conversation with yourself about your motivations and hangups, do a little research to see what kind of financial impact refinancing could have for you. Most modern lenders let you check your rate for free with zero credit impact, and an online rate check only takes minutes.

Curious to see how your new rate could affect your loan cost? Plug a few basic numbers into a refinance calculator 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.