Jan 10, 2020 Jodi Anderson

Can Refinancing Your Student Loans Save You Money?

While some borrowers refinance their loans just to simplify their monthly repayment, remove a parent from their existing loans, combine their loans with a spouse, and/or change their loan servicer, refinancing student loans can also save you money.  Several factors can make refinancing great for some folks and not the best solution for others.  Refinancing student loans can accomplish different goals for different people and in some cases, more than one goal can be achieved depending on the individual circumstances.  We have outlined three common goals our customers have conveyed.

Refinancing Student Loans

#1 Goal – SAVE MONEY $$$

If you are trying to save money by reducing the overall interest you will be repaying over the course of your current loan or loans, the below example illustrates how this particular goal can be achieved.

Interest Rates:

Interest rates can vary widely from loan to loan, and whether or not a refinance loan is right for you financially will often depend on the interest rate(s) you currently pay and the interest rate on your new refinance loan.  Depending on your individual situation, refinancing higher-rate loans into a new lower-rate loan can save you thousands of dollars over the life of the loan.  You may also be able to avoid costly interest rate increases in the 

How will you get the best interest rate to maximize savings? 

  • Good credit rating, a higher FICO score, and other factors will likely result in lower rates
  • Having a cosigner with good credit
  • Being current on all existing accounts
  • Some programs offer residency discounts
  • Ask for the Auto-pay option, which can also reduce your interest rate

Loan Term:

Another key factor to determine whether refinancing is right for you is the amount of time to pay back your loans.  Generally speaking, the longer the term, the higher the total loan cost will be, but the lower the required monthly payment.

If you extend the term of your loan beyond the length of your current repayment schedule, you may still save as a result of the lower interest rate, but savings will be decreased as you will be paying interest for a longer period of time.   

On the other hand, if you are in a position to shorten your repayment term and lower your interest rate from a 10-year to a 5-year term, then your interest savings can be significantly more.


Upon entering repayment, the accumulation of multiple loans at varying rates can result in a higher than comfortably affordable monthly payment, and refinancing can help you reduce your monthly expenses.

In some cases, just a decrease in interest rate and selecting an equal or shorter repayment term length can reduce your monthly payment as well as reduce the total interest paid throughout the course of the loan.  This scenario is a Win/Win.

However, for those needing to extend their payment term in order to lower their monthly payment amount to meet their monthly budgetary needs, total interest savings over the term of the loan can decrease or even increase depending on the number of additional payments required to pay off the loan with the extended term length.


Similar to the scenario above, after leaving school and beginning repayment, you may have multiple loans with multiple lenders or servicers and monthly due dates.  Some borrowers prefer to combine all the loans (hopefully with the benefit of reducing interest rates overall) and make just one monthly payment to one servicer to simplify their monthly bill payment and have a clearer view of paying down their student debt.  In many cases, this is the primary goal for parents with multiple federal PLUS loans.


Refinancing student loans does not have to be an all-or-nothing solution.  Some may choose to refinance private loans only and keep their federal loans as is and not forfeit any unique benefits offered as a part of the federal program that may work in your favor in the future.  It is important to do your research before refinancing to make sure you are getting the best deal for you.

If you have similar goals to those listed above and are considering refinancing, below are some additional resources to begin your research process.

For more information on refinancing, download our free guide or model the numbers yourself with our refinancing calculator.

Published by Jodi Anderson January 10, 2020