Student loan refinancing vs. federal programs: What’s the difference​?

Refinancing a federal student loan is a great option for those looking to change their loan terms to benefit their current situation.  

However, it is important to know when the right time to refinance your federal student loans is. 

If now is the right time to refinance your federal student loan, use our marketplace to connect with a lender and start a refinance application today. 

Can I refinance federal student loans?

Yes, you can refinance federal student loans to a private student loan. Refinancing federal student loans into private student loans could get you lower rates and flexible repayment options, as well as allow you to consolidate multiple loans.  

What are the differences between federal and private student loans?

The biggest difference between federal and private student loans is how they are funded and issued.  

Federal student loans are funded and issued by the U.S. government, while private student loans are funded and issued by private lenders such as banks, credit unions or online lenders. 

Some other ways they differ are: 

• Requirements: Federal student loan requirements can be more lenient than private options.
• Interest rates: With a private student loan, you could qualify for lower interest rates.
• Protection: Federal student loans can come with protection and forgiveness programs.
• Loan limits: Private student loans can allow you to qualify for a larger loan limit.

Do federal student loans have benefits?

Yes, there are benefits you could get with a federal student loan, such as lower requirements and loan forgiveness. 

Most federal student loans do not require a credit history, credit check or cosigner. This could be helpful for students who might not meet these requirements with a private lender. 

With a federal loan, you could qualify for loan forgiveness, meaning you aren’t required to repay the loan. Forgiveness programs are only available in specific situations and with strict eligibility criteria that are subject to change. 

When should I refinance federal student loans?

The best time to refinance your federal student loans depends on current market rates and your own financial situation. 

When student loan rates drop, refinancing could secure you a lower interest rate, which could mean paying less each month toward your student loan. Your financial situation could also lead to lower interest rates on your student loan. Gaining steady income, building up your credit score or growing your credit history are all things that improve your financial situation and may mean that it is time to consider a refinance of your federal student loans. 

If you have multiple student loans that you pay individually, you could consolidate them under one payment with a refinance.  

When should I avoid refinancing federal student loans?

While there are many times when refinancing your federal student loans is a good idea, there are a few instances when it may be beneficial to hold off on refinancing. 

Some of the times you may want to wait on refinancing federal student loans are: 

• You are about to receive a loan forgiveness
• You are in a grace period after graduation and before starting your career
• You have yet to gain steady employment 
• Your credit score is low or you are working on building it up
• Your current interest rate is lower than market rates

How to refinance federal student loans

If you are looking to refinance federal student loans, the first thing you will want to do is make sure that it is the right time for you to refinance. 

You can make sure that now is the right time for your federal student loan refinance by reviewing your current student loan. When you do this, check your current interest rate against the current market interest rate.  

After that, look at your current financial situation. Ask yourself: Do I have steady employment and income? Is my credit score in a good place? Do I have several student loans that I would like to just make one payment on instead? 

If you answered yes to any of these questions, it may be time to look at refinancing federal student loans. 

Ready to start a refinance of your federal student loans? Use our marketplace to connect with a lender and start your online refinance application. 

_{Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact the student loan lender you choose to get their current rates. Restrictions apply.} 

_{Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.} 

_{All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate. Rate its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.} 

_{This student loan refinance marketplace is presented by Rate for marketing purposes only. When you click the button to “Continue” you are leaving Rate and entering the marketplace. The marketplace is operated by FitBux, Inc., which facilitates connections to third-party Platform Partners (such as LendKey and Splash Financial) and their lending institutions, and may receive compensation when you complete a loan transaction. Rate and Fitbux are affiliated companies under common ownership. Clicking the “Continue” button you will be sharing your information with third party Platform Partners LendKey and Splash Financial, and agree to be subject to the terms of use and privacy policies posted by these third parties. Rate is not a lender, does not participate in credit decisions, and does not receive compensation in connection with any loan transaction. Prequalified rates are informational only, do not constitute offers of credit, and are subject to change. Final rates may differ based on your credit profile and other factors. Lowest rates require highly creditworthy applicants and may require a cosigner. All credit decisions are made solely by lending institutions in their discretion. This platform does not represent all available loan options. Product availability varies by state. Not financial advice — consult a qualified advisor before refinancing.}