Student loan refinancing rates drop to dramatic new lows

As student loan refinancing rates drop, now may be a good time to compare borrowing options.

In an effort to ease some of the economic strain caused by the coronavirus pandemic, the Federal Reserve opted to slash interest rates to historic lows early in 2020. The decision to cut the Fed Funds Rate could have a direct impact on your bottom line if you owe private student loans.

Student loan refinancing rates have dropped dramatically according to Credible, with rates on 10-year fixed-rate loans down 31% from their April 17 peak. Rates on variable rate loans are down 63% from their February 2018 high. If you have private student loans, refinancing now could help you save money and potentially lower your monthly payments. 

Are student loan refinance rates going down?

Fixed interest rates and variable interest rates for private student loans are down across the board, largely due to the Federal Reserve actions taken earlier this year. If you want to take advantage of low student loan refinance rates to save money, use Credible to compare rates from multiple lenders to see which offers make the most financial sense for you.


During times of economic stress, cutting the Fed Funds Rate can help to encourage consumer spending and borrowing. For instance, you may be more likely to take out a car loan or a personal loan when interest rates drop since a lower rate can save you money. 

When the Fed Funds Rate drops, student loan refinancing rates can follow suit. That's because private student loan lenders set fixed interest rates and variable interest rates for loans based on a benchmark rate. When the benchmark rate goes down, the rates on student loans adjust accordingly. Again, use Credible to see what kind of rates you qualify for today.

Is it a good time to refinance private student loans?

Refinancing private student loans can make sense for multiple reasons. For example, you may want to refinance private student loans if:

You're interested in switching from a fixed interest rate to a variable interest rate or vice versa

You're hoping to lower the interest rate on your loans to save money

You think student loan refinancing may help to reduce your monthly payment so your loans are more manageable

Your original loans were borrowed with a cosigner and your current lender doesn't offer cosigner release to remove them from the loan

Refinancing student loans could be a good option in any of those scenarios, though it's important to consider how much you could actually save. 


How much can I save by refinancing my student loans? 

With student loan refinancing rates so low, the potential to save is there. But how much you can save by refinancing depends on several factors, including:

The new interest rate you qualify for, based on creditworthiness

How much you're borrowing and how much you've already paid off your existing loans

Whether you're refinancing with or without a cosigner

Any fees a refinance lender may charge

According to Credible, their average borrower saves $17,344 by refinancing over the life of their loans. That's a nice chunk of money but before applying for student loan refinancing, it's helpful to look at the numbers. 

Doing the math with an online student loan refinance calculator, for example, can give you a sense of what your new monthly payment may be if you decide to go ahead with refinancing. Keep in mind that your credit score and credit history typically play a big part in determining the rates and loan terms you qualify for. If you have a thin credit file or poor credit, you may need a cosigner to get a refinance loan. 

If you're confident in your credit score and history, then use Credible's free online tools to see what rates are available to you. Credible makes it easy to check rates from different lenders without affecting your credit score. Consider taking a look at your score and credit history as well so you can get a sense of what interest rates you're most likely to qualify for. 


Should I refinance my federal student loans? 

Federal student loans are receiving special treatment as part of the federal government's effort to minimize the financial impact associated with COVID-19. For example, borrowers can take advantage of a temporary forbearance period through the end of 2020. 

Federal student loans have fixed interest rates that are already low but it's possible that you could find an even lower rate now by refinancing with a private student loan lender. That could save you money but keep in mind that by refinancing federal student loans into private student loans you lose certain protections, such as forbearance and deferment benefits.

Aside from that, refinancing federal student loans might not make sense if you're on an income-driven repayment plan or you're pursuing student loan forgiveness. Neither one is an option with private student loan lenders so you may be better off keeping your federal student loans where they are if you're trying to qualify for forgiveness or if you want to keep your payments low based on your income.