What is student loan refinancing?
When you refinance student loans, a private lender (bank, credit union, or online lender) pays off your existing loans and gives you a new loan with a new interest rate and repayment term. The goal is to get a lower interest rate, which reduces your monthly payment and the total interest you pay over the life of the loan.
You can refinance both federal and private student loans. But here is the critical thing: when you refinance federal loans, they become private loans. You lose all federal benefits and protections—permanently.
What you give up when you refinance federal loans
- PSLF eligibility. Private loans are never eligible for Public Service Loan Forgiveness. If you work at a nonprofit hospital and might qualify for PSLF, refinancing is almost always a mistake.
- Income-driven repayment (IDR) plans. Federal loans offer SAVE, IBR, PAYE, and ICR plans that cap your monthly payment at a percentage of your income. Private lenders do not offer these.
- Forbearance and deferment. Federal loans offer generous forbearance and deferment options for financial hardship, returning to school, or unemployment. Private lenders may offer some forbearance, but it is usually shorter and less generous.
- Death and disability discharge. Federal loans are discharged if the borrower dies or becomes permanently disabled. Most private loans are not—your cosigner or estate may still be on the hook.
- Interest subsidies. The SAVE plan pays all unpaid interest that accrues between payments, so your balance does not grow even if your payment does not cover the interest. Private loans have no such subsidy.
When refinancing makes sense for nurses
Refinancing is a good idea when ALL of the following are true:
- You are not pursuing PSLF (you work at a for-profit hospital, or you do not plan to stay in public service for 10 years).
- You have a good credit score (typically 650+, but the best rates require 720+) and a stable income.
- You can qualify for an interest rate that is at least 1% lower than your current rate.
- You have an emergency fund of at least 3–6 months of expenses, so you will not need to rely on federal forbearance options.
- You do not need IDR plans to afford your monthly payment.
How much can refinancing save?
Let us use a realistic example. A nurse has $80,000 in student loans at 6.5% interest on a 10-year term. She has good credit and qualifies for a 4.5% refinance rate.
| Metric | Original Loan | Refinanced Loan |
|---|---|---|
| Interest rate | 6.5% | 4.5% |
| Monthly payment | $910 | $829 |
| Total interest paid | $29,196 | $19,475 |
| Total paid | $109,196 | $99,475 |
In this example, refinancing saves $9,721 over the life of the loan. The savings are larger if you have a higher balance, a higher original rate, or qualify for a much lower refinance rate. Use our Loan Amortization Calculator to see your exact numbers.
Fixed vs variable rates: which to choose
Private lenders offer both fixed and variable interest rates. Variable rates usually start lower, but they can increase over time if market rates rise. Fixed rates stay the same for the life of the loan.
- Choose fixed if you plan to pay off the loan over 7+ years, or if you value predictability and peace of mind.
- Choose variable if you plan to pay off the loan quickly (3–5 years), and you are comfortable with some interest rate risk. Variable rates are usually capped, but the cap can be high (12–18%).
The refinancing process, step by step
- Check your credit score. Get a free copy of your credit report from annualcreditreport.com. Dispute any errors.
- Shop around. Apply with multiple lenders to compare rates. Most lenders offer a soft credit check for pre-qualification that does not affect your credit score.
- Compare offers. Look at the interest rate, monthly payment, total interest, repayment term, and any fees (origination fees, late fees). Also consider the lender's customer service reputation and forbearance options.
- Choose a lender and submit a full application. This will trigger a hard credit check, which may temporarily lower your credit score by a few points.
- Sign the loan agreement. Read the fine print. Make sure you understand the rate, term, payment amount, and any fees.
- The lender pays off your old loans. This usually takes 2–4 weeks. Keep making payments on your old loans until the payoff is confirmed—missing a payment during this period can hurt your credit.
- Start making payments on the new loan. Set up autopay to get the 0.25% autopay discount that most lenders offer.