Should I Refinance My Student Loans?

There are many potential benefits to refinancing student loans. For example, with Citizens Bank you may be able to refinance both federal and private student loans with the Education Refinance Loan for a single, more manageable monthly payment. You may also be able to receive a lower interest rate and/or lower payment, but it is important to compare your current loans with the new loan to determine what's best for you.

Keep in mind that when you refinance your student loans, you replace your current and future benefits with the benefits of the new loan. Read through the tables below to learn about the many factors you should consider when refinancing student loans, especially with federal student loans which offer some repayment options not available through private lenders.

Potential benefitWhat to think about
Simplify your payments by consolidating all of your private and federal student loans into a single loanWhen you consolidate all of your student loans with us, you'll make a single monthly payment.

Depending on the interest rates you have on your current loans, as well as your credit (and the credit of any cosigner on your new loan), your new loan may have a higher interest rate or a higher monthly payment.
A lower interest rateIf you switch from a fixed rate to a variable rate, the variable rate may be lower right now. However, it is possible for that variable rate to go up or down each month. If the rate goes up, your monthly payments will go up, too.
A reduced monthly paymentThe two main ways to lower your monthly student loan payment when you refinance or consolidate are:
  1. If your new loan has a lower interest rate or,
  2. If your new loan gives you a longer time to pay it off.

If your refinance loan extends your time to repay (but your interest rate is not lower), you'll probably pay more interest over the life of the loan.

However, if you are able to prepay all or any part of your loan it can help you ultimately save over the life of the loan. This can provide the best of both worlds by improving your monthly cash flow and giving you the freedom to prepay your loans when possible. Check with the lender if there is a prepayment penalty for paying ahead of schedule.

A longer time to repay your loanGenerally, a loan with a longer term carries a higher interest rate. So, if your new refinance loan has a longer term than your existing student loans, you'll probably pay a greater amount of interest over the life of the loan.
Repay your loans fasterWhen you repay your loans via prepayment (paying more than the minimum payment each month), you may reduce the total interest. However, refinancing may cause your total monthly payment to be higher than on your existing student loans.
Lock in a fixed rateIf your current student loans have a variable interest rate, your monthly payment can change as the rate changes. If you refinance into a fixed rate loan, you'll have the certainty of a constant monthly payment.

However, the fixed rate you get today will likely be higher than the variable rate you have right now. Your new monthly payment may be more than your current monthly payment, but your payment will never increase.

Gain financial independence by refinancing without your current cosignerIf you currently have student loans with a cosigner who has better credit than you do, and you choose to apply for a student loan refinance without a cosigner, your new loan may have a higher interest rate and higher monthly payments.

Consider how you'll make your monthly payments if you lose your job or source of income, or choose to refinance your student loans with a cosigner.

Special considerations for refinancing federal student loans

When you refinance, you waive any current and potential future benefits of your Federal loans and replace those with the benefits of the new refinance loan. For this reason, before refinancing your federal student loans, it's important to make sure you're aware of any benefits unique to federal student loans that you may lose.

Remember that you can choose to refinance your federal and private student loans separately. To keep your federal loan benefits, you may prefer to refinance your federal student loans through the federal government. Then, you could refinance your private student loans with us. However when you consolidate both types of loans together you have the benefit of a more manageable monthly payment.

Potential federal loan benefitWhat to think about
Repayment options based on your incomeWith some federal student loans, a low income may entitle you to a lower monthly payment. If income-based repayment is important to you, you should strongly consider consolidating your federal student loans through the federal government. When you refinance your student loans with a private lender, the monthly payment is based on the interest rate that you receive and there is no opportunity to lower that rate based on limited income.
Loan forgiveness for borrowers in certain public service jobsBorrowers in certain types of public service jobs (government jobs, teaching, the military, AmeriCorps, Peace Corps and many other nonprofit jobs) may be entitled to have significant portions of their federal loans forgiven.

Most private lenders do not offer loan forgiveness for borrowers with public service jobs. If you have federal loans and intend to stay in your public service job, you should determine if your loans would be eligible for forgiveness. If so, consider consolidating those loans through the federal loan consolidation program.

Certain military benefits if you or your spouse currently serve, or plan to serve, in the military.Active duty military personnel are eligible for several federal loan benefits. We offer military deferment and an interest rate cap even if you are on active duty at the time you refinance. If you or your spouse are currently serving or plan to serve in the military, you should compare the military benefits of a federal loan with those of the new refinance loan.
Medical and economic forbearance plans that may excuse payments for up to 24 monthsThe Education Refinance Loan, for example, offers up to 12 months of forbearance, including for medical or economic hardship, over the life of your loan with no more than two months of forbearance at a time. If you don't have an emergency fund to cover short-term financial issues, you may want to refinance only your private loans.

Both federal loans and our loan are forgiven in the event of the student borrower's death or permanent disability.

The option to refinance your federal student loans at your existing interest ratesIf your interest rates are currently lower than what a private lender offers, you would benefit from consolidating your federal loans through the Federal Direct Consolidation Program where your rate is an average of your current rates.
Defaulted federal loans can be rehabilitated to clear up a borrower's credit reportIf you have already defaulted on your student loans, those loans are not eligible for refinancing with the Education Refinance Loan. If you default on a new Education Refinance Loan, we don't have a program to formally cure that default and eliminate the record of those defaults in your credit report, which is the same for many private lenders.
Some employers, including certain public agencies and the military, will make payments on federal student loans as an employee benefit.If you currently have student loans with a cosigner who has better credit than you do, and you choose to apply for a student loan refinance without a cosigner, your new loan may have a higher interest rate and higher monthly payments.

Consider how you'll make your monthly payments if you lose your job or source of income, or choose to refinance your student loans with a cosigner.

Loan forgiveness if your school closed or committed fraud related to your loans or educational services.In rare circumstances, federal loans may be forgiven by the Department of Education if your school has closed or if you were defrauded by your school. More information may be obtained from the Department of Education at By refinancing federal loans into a private refinance loan, you waive any right and benefits you have to have those loans forgiven by the federal government.

Refinancing or consolidating student loans is an important decision and we're here to help throughout the entire process. For more information on evaluating whether refinancing is right for you speak to one of our Student Loan Specialists at 855-247-5557.

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