Student loan refinance or a federal plan?
A student loan refinance means trading your federal loans for a new private one. The lowest advertised fixed rates begin near 4.45% APR. The catch is that private loans don't qualify for federal programs such as RAP or PSLF forgiveness.
- $10lowest RAP bill, gone if you refinance
- 120PSLF payments, gone if you refinance
- 4lenders compared
What do you give up when you refinance?
When you refinance, a private lender takes over your old loans and issues you a single new loan with its own interest rate. Federal repayment options no longer cover those loans once they become private.
RAP is a federal program that bases your monthly payment on income rather than what you owe. Your yearly RAP amount is 1% to 10% of your adjusted gross income, split into 12 monthly payments, and each payment drops by $50 for every dependent you have, according to Federal Student Aid. Your adjusted gross income is the figure shown on your tax return after specific deductions.
PSLF stands for Public Service Loan Forgiveness. Once you've made 120 qualifying monthly payments, it wipes out any remaining balance. Loans that you refinance don't qualify for this program.
Student loan refinance vs a federal plan
| RAP or IBR | Private refinance | |
|---|---|---|
| Payment set by | Your income | Your balance, rate and term |
| Lowest bill | $10 a month on RAP | Set by the loan |
| Forgiveness | After 20 to 30 years, or 120 payments with PSLF | No forgiveness |
| Unpaid interest | Waived on RAP when you pay on time | No federal waiver |
| Can you go back? | Yes, between federal plans | No, the loan is private for good |
Is it worth it for you?
The key question is whether the savings from a lower rate beat what federal options offer. Take Sam: he has $90,000 in graduate school loans at 7.5%, and he earns $140,000 working in the private sector.
Sam works outside public service, so PSLF doesn't apply to him. Because he doesn't work in public service, Sam is mainly weighing a lower private rate against RAP's flexible, income-based payment. He can get a few rate quotes and set them beside his RAP estimate to see which he'd rather live with.
Federal programs may serve you better if you work in public service, or if your income is small compared with your debt.
Refinance rates from lenders
Here are the rates each lender lists. What you actually get offered comes down to your credit and the loan you pick.
| Lender | Who it lends to | Fixed APR | Variable APR | Loan terms | Fees and limits |
|---|---|---|---|---|---|
 SoFi | Borrowers refinancing private and federal student loans; a cosigner can be added | 4.49% to 10.99% | 5.74% to 10.99% | 5 to 20 years | No fees |
| Laurel Road | Working professionals with four-year or graduate degrees, plus associate degrees in set health professions | 4.74% to 9.75% | 5.04% to 10.05% | 5 to 20 years | Minimum $5,000 |
 Earnest | Borrowers refinancing federal and private student loans; a cosigner can be added | From 4.45% | From 5.88% | No fees | |
 Panacea Financial | Physicians, dentists and veterinarians | Shown after a soft credit check | No cosigner needed |
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Questions people ask
Does refinancing your student loans make sense?
This choice often makes more sense when you have steady income and don't plan to seek forgiveness. It helps to feel confident you can keep up the payments, because a private loan won't shrink your payment if your income drops the way a federal plan can.
Do I need to pay someone to help with my federal loans?
No. Your servicer supports federal plans free of charge, as Federal Student Aid explains, so paying an outside firm makes little sense.
Sources: Federal Student Aid, RAP definitions, Federal Student Aid, PSLF.