How to Refinance Student Loans to Save Money

 

How to Refinance Student Loans to Save Money (2026)

Student loans can be overwhelming, especially with high interest rates. Refinancing your student loans is one of the best ways to save money, lower your monthly payments, or pay off debt faster. In this guide, we explain how refinancing works, who can benefit, and the best strategies to maximize your savings in 2026.

What Is Student Loan Refinancing?

Refinancing means taking out a new loan to pay off one or more existing student loans. The new loan often comes with:

• Lower interest rates
• Improved repayment terms
• Consolidation of multiple loans into one payment

Refinancing is usually done through private lenders and is best for borrowers with good credit and stable income.

Benefits of Refinancing Student Loans

• Lower monthly payments if interest rates are reduced
• Save money over the life of the loan
• Switch from variable to fixed rates for stability
• Simplify multiple loans into a single payment

Who Should Consider Refinancing?

Refinancing is ideal for borrowers who:

• Have a good credit score (typically 650+)
• Have a stable income
• Don’t need federal loan benefits like deferment, forbearance, or income-driven repayment plans
• Want to pay off loans faster or save money on interest

Steps to Refinance Student Loans

1. Review Your Current Loans

Check your interest rates, balances, and repayment terms to determine potential savings.

2. Check Your Credit Score

A higher credit score will qualify you for lower interest rates. If needed, improve your credit before applying.

3. Compare Lenders

Shop around with banks, credit unions, and online lenders. Compare interest rates, fees, and repayment terms. Top lenders in 2026 include:

• SoFi
• Earnest
• CommonBond
• Laurel Road

4. Prequalify Without Affecting Credit

Many lenders allow you to prequalify to see potential rates without a hard credit check.

5. Apply and Close the Loan

Submit your application, provide required documents (income, ID, loan info), and let the lender pay off your old loans.

Tips to Maximize Savings

• Refinance multiple loans into one for simplicity
• Choose a shorter repayment term for lower interest total, if affordable
• Consider fixed rates to avoid variable rate fluctuations
• Make extra payments to pay off principal faster

Risks of Refinancing

• Loss of federal loan protections (forbearance, deferment, Public Service Loan Forgiveness)
• May extend repayment period, increasing total interest if not careful
• Potential fees from some private lenders

Frequently Asked Questions (FAQs)

Can I refinance federal student loans?

Yes, but once refinanced with a private lender, federal protections like income-driven repayment and forgiveness are lost.

Will refinancing affect my credit score?

Yes, there may be a small temporary dip due to a hard credit inquiry, but long-term benefits often outweigh this.

How much can I save by refinancing?

Savings depend on your interest rate and repayment term, but many borrowers save thousands over the life of the loan.

Final Thoughts

Refinancing student loans in the USA in 2026 can be a smart move to save money and simplify repayment. Carefully compare lenders, understand the risks, and choose terms that fit your financial situation. By refinancing strategically, you can reduce interest, pay off debt faster, and achieve financial freedom sooner.