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Home Ask Student Aid FAQ Will I Save Money if I Refinance my Student Loans

Will I Save Money if I Refinance my Student Loans

The answer to this question is “it depends.” We’ll explain.

If you’re looking at saving money each month on the amount of your student loan payment, you will likely be able to reduce your monthly obligation. This is because both federal consolidation and refinancing allow you to extend the repayment period from a standard 10 year window to up to 20 years, or in some cases, even 30 years. Longer repayment timeframes mean lower monthly payments. However, extending your repayment term may cost you more overall in interest paid over time, but can help to reduce your monthly expenditures. (i.e., you can free up cash to help with other expenses).

Private refinancing lenders often have a cap of 20 years which is typically reserved for those with professional degrees (i.e., medical school graduates) and extremely high loan balances.

If you choose to refinance your loan, you can shop around for a lower APR (annual percentage rate) which helps you save on the overall amount of interest to be repaid IF you stay close to your original repayment timeframe. If you extend your loan repayment through either consolidation or refinancing, you will increase the total amount of interest paid over the life of the loan.

You can also make larger payments on your loan as you become more financially established, and potentially pay your loan off early. Bonus: There is no prepayment penalty for paying your loan off early.


  • Only federal student loans can be consolidated with the Federal Direct Consolidation program.
  • If you want to combine federal and private student loans together, you will have to work with a private lender.
  • Extending your repayment term can free up cash
  • If you want to lower your interest rate, you will need to consider refinancing.
  • There are no penalties for paying your loan off early.