Student loan refinancing, explained

Refinancing vs federal consolidation

These sound alike but work differently. Federal loans can be combined into a Direct Consolidation Loan, which is still a federal loan. Refinancing pays off your loans with a new loan from a private lender, so federal loans become private debt (Federal Student Aid, CFPB).

The CFPB notes that consolidating federal loans into a private loan cannot be reversed (CFPB).

What to compare in an offer

• Fixed or variable rate. A variable rate can rise after you sign, and so can your payment (CFPB).
• The term. A shorter term usually means a higher monthly payment. A longer term means smaller payments but more interest over the life of the loan (CFPB). Our calculator shows both.
• The APR, not just the payment. A lower payment can come with a higher rate if the term is longer (CFPB). Also check whether the advertised rate already includes an autopay discount, and what happens if you stop autopay.
• Hardship options. Moving federal loans to a private lender ends federal deferment, forbearance and income-driven repayment, though some private lenders offer their own forbearance (CFPB). Ask each lender what it offers if you lose your job or get sick.

Next steps

Read when refinancing makes sense and when it does not, then run your numbers.