What happens when you refinance a student loan?

With student loan refinancing, a private lender pays off your existing debt to offer you a new loan with new terms. Refinancing generally doesn’t cost anything. 

Borrowers opt for refinancing when they may be able to get more favorable terms and save more money than under the previous loan terms. Usually, they can get the loan for lower interest rates than the original loan. Not all borrowers can refinance student loans as companies first check your eligibility – a good credit score and stable income – to consider granting you a refinanced loan. 

Borrowers should consider the length of their loan term before refinancing. If the refinanced loan takes longer, then it may not benefit you much. Moreover, refinancing a federal loan may also mean you may not be able to benefit from federal protections like income-driven repayments or loan forgiveness. Before choosing a refinance plan, make sure to do your research and compare interest rates. The better your credit score, the lower your interest rates will be.