Federal loans: what refinancing gives up
Refinancing replaces your loans with a new private loan. For federal student loans that is permanent: the new loan does not keep the federal loans' benefits and protections, and it cannot be turned back into a federal loan (CFPB: consolidating or refinancing student loans). Those protections include federal repayment plans tied to income, forgiveness programs and federal options to pause payments. A lower rate can still be worth it, especially if your income is secure and you do not expect to use them, but the calculator cannot put a price on them.
Before refinancing federal loans, compare your federal repayment options with the official Loan Simulator. Rules for federal plans change, so check the current options there rather than relying on older articles.
Separate the rate from the term
Refinancing $35,000.00 from 6.8% to 5.5% over the same 10 years lowers the payment by $22.94 and saves $2,752.70 in total. Take the same rate over 20 years and the payment falls to $240.76, but you would pay $9,448.80 more in total, because interest runs for 10 years longer. The results always show the new rate over the time you already have left, so you can see what the rate alone is worth.
Fees and small rate cuts
Check whether the offer charges a fee. A $700.00 fee on a cut from 6.8% to 6.4% leaves a total saving of $157.01 on the example loan. If you combine student loans with other debt in one loan, the new loan may no longer qualify for the student loan interest tax deduction (CFPB).
How the comparison is calculated
- Each payment is the fixed-rate payment
P × r × (1 + r)n ÷ ((1 + r)n − 1), where r is the annual rate ÷ 12 and n is the number of months: the same formula as our loan payment calculator. - Your current loans are treated as one fixed-rate loan with the balance, rate and time left you enter. For several loans, use the total balance and the balance-weighted average rate.
- Total cost is every payment until payoff, plus any fee. Total savings is the difference between the two.
Amounts are calculated at full precision and rounded to cents only for display.
What this calculator does not include
- Federal repayment plans based on income, forgiveness, deferment and forbearance. Use the Loan Simulator for those.
- Variable rates: an offer with a variable rate can cost more than shown if rates rise.
- Interest that builds up during deferment or grace periods, autopay discounts and tax effects.
- Whether you qualify. Private lenders set their own credit and income requirements. Results are estimates, not a loan offer or financial advice.
Methodology and testing
Both options use the same tested amortization engine as every loan calculator on this site. Automated tests check the payments, total interest and total savings against an independent month-by-month simulation for 300 random loans and offers, including longer terms and fees. How we build and test calculators.
Sources
- Should I consolidate or refinance my student loans?, Consumer Financial Protection Bureau. Consolidating or refinancing federal student loans into a private loan gives up the federal loans’ benefits and protections and cannot be reversed; combining them with non-student debt may affect the student loan interest deduction.
- Loan Simulator, Federal Student Aid, U.S. Department of Education. The official tool for comparing federal student loan repayment plans, estimated monthly payments and total amounts paid.
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