What refinancing federal loans trades away
Refinancing moves your student loans to a private lender at a new rate, and if any of them are federal, it’s permanent. It can save real money for someone with high, steady income, a for-profit employer and a rate offer well below their federal rate. If you’re near PSLF or your income-driven payment is low, it usually costs more than it saves.
What you give up on federal loans
The CFPB’s plain summary: if you refinance with a private lender, “you will lose your rights under the federal student loan program.” Specifically:
| Federal protection | After refinancing |
|---|---|
| RAP and IBR, payments tied to income, forgiveness after 20 to 30 years | Gone. Your payment is fixed by the contract, whatever you earn |
| Public Service Loan Forgiveness | Gone. Private loans never qualify |
| Federal deferment and forbearance | Replaced by whatever the lender offers, if anything |
| Discharge if you die or become totally and permanently disabled | Many private lenders offer it; not all. Read the contract |
| Rehabilitation and consolidation if you ever default | Gone |
| Any future relief for federal borrowers | Doesn’t reach you |
| The 6% cap for pre-service loans under the Servicemembers Civil Relief Act (50 U.S.C. 3937) | Lost if you refinance while serving, because the new loan isn’t a pre-service debt |
If the private loan has a variable rate, the payment can rise above what your fixed federal rate would have cost.
When it can make sense
All of these, not just one:
- You don’t work for a government or 501(c)(3) employer and don’t expect to.
- Your income is high enough that an income-driven plan wouldn’t lower your payment much, so the income-based protection is worth less to you.
- Your job is stable and you have savings, because the safety net is gone.
- The APR you’re offered is well below your current rate, and you’d take a term you can actually afford.
Private student loans are the easier case. They have no federal protections to lose, so refinancing them is a straight comparison of the old terms against the new APR.
A worked example
Say you owe $90,000 in federal graduate loans at 7.05% (the fixed rate on Direct Unsubsidized graduate loans first paid out from July 1, 2023 to June 30, 2024, per 88 FR 82863). You earn $140,000, work at a for-profit company and have no loan made on or after July 1, 2026.
| Federal option | Monthly payment | Total paid |
|---|---|---|
| 10-year Standard | about $1,047 | about $125,700 |
| RAP at $140,000 AGI (10% of AGI) | about $1,167 to start, rising with income | about $117,700, paid off in 7 years 8 months (assuming 3% raises) |
Rather than guess what a lender would offer you, work out the rate you’d need. A 10-year private loan of $90,000 costs less in total than staying on RAP only if its APR is below about 5.6%, and less than the Standard plan only below 7.05%, your current rate. Between those two numbers, refinancing beats Standard but loses to RAP. Part of RAP’s showing comes from its higher payment clearing the loan in under 8 years, so compare an offer at the payment you’d actually make. Whatever the rate, the borrower gives up income-driven repayment and federal hardship options for it. Change one fact, a 501(c)(3) job, and PSLF makes the federal route far cheaper.
That is why the calculator asks for an APR you have actually been offered, rather than showing a sample rate, and compares it with your cheapest federal plan on your own numbers. If you could reach PSLF, it says so instead of suggesting a refinance. All of these figures are estimates from the calculator’s formulas, not offers.
If you’re going to shop
- Get rates from several lenders at once, and ask whether checking rates uses a soft or a hard credit inquiry.
- Compare APRs, not “rates.” The APR includes fees.
- Ask about death and disability discharge, forbearance if you lose your job, and whether a cosigner can be released.
- Keep any federal loans you might want income-driven repayment for out of the refinance. You can refinance only private loans, or only some federal ones.
- Don’t refinance federal loans while you’re still deciding about PSLF.
If you have a question about your own numbers, send it to us and a person will reply by email. We don’t pass it to lenders or refinance companies.
Sources (read October 24, 2026)
- CFPB, Should I consolidate or refinance my student loans? (reviewed December 3, 2024).
- studentaid.gov, Federal Versus Private Loans and Public Service Loan Forgiveness.
- Public Law 119-21 (July 4, 2025), sections 82001 and 82002, govinfo.gov; 34 CFR 685.212.
- Federal Student Aid, Annual Notice of Interest Rates for loans first disbursed July 1, 2023 to June 30, 2024, 88 FR 82863 (November 27, 2023).
- 50 U.S.C. 3937 (Servicemembers Civil Relief Act, interest rate cap), uscode.house.gov.
Questions people ask
Can I undo a student loan refinance?
No. Once a private lender pays off your federal loans, they are gone. There is no way to turn the private loan back into a federal one.
Does refinancing hurt my credit?
Many marketplaces check rates with a soft credit inquiry, which doesn't affect your score; ask before you apply. A full application uses a hard inquiry, which can lower your score slightly for a while.
Should I refinance if I work for a nonprofit or the government?
Almost never, if it's a 501(c)(3) or a government employer and you work full time. Private loans don't qualify for PSLF, so you would give up forgiveness of whatever remains after 120 payments.
What about refinancing private student loans?
That's a different decision. Private loans have no federal protections to lose, so refinancing them is mostly a question of whether the new APR and terms beat the old ones.