Refinancing Federal Student Loans

Jon O'Donnell Updated on May 7, 2019

Most people with student loans owe at least some of that money to the federal government. Government-backed loans are usually the first step for borrowers, and with good reason. They are widely accessible, have fixed interest rates, and carry many benefits. But there are some significant drawbacks, too. Among the biggest is that there is no way to renegotiate the interest rate through the federal government if economic conditions change.

Borrowers who are overwhelmed by multiple high-interest student loans often assume that consolidating them through the government’s Direct Loan Consolidation program will help them lower their interest rate. Unfortunately, that is not the case. Although Congress has considered bills that would allow college grads to refinance through the government at lower rates, none of the proposed legislation has passed.

Fortunately, there is another option. Private refinancing is an alternative that can streamline your student loans into a single payment and lower the interest rate. It’s not a decision to take lightly, because borrowers can lose income-based repayment or loan forgiveness benefits. But for people who don’t qualify for loan forgiveness, it can be a smart way to get out of debt faster and lower overall costs.

Here’s what you need to know about the pros and cons of both private refinancing and federal consolidation:

Refinancing with a private lender

A wave of innovation and increased competition in recent years has transformed the student lending industry and resulted in lower interest rates and more repayment options for borrowers. College graduates who refinance their student loans with a private lender can bundle both private and federal loans into a single payment, often with better terms.


  • If you have good credit, you might be able to get a lower interest rate by refinancing with a private lender. Our recent analysis found that borrowers who refinanced with private lenders saved an average of $259 a month and $19,231 over the life of the loan.
  • Private lenders offer both fixed and variable interest rates. Some lenders also have hybrid rates.
  • Both private and federal student loans can be consolidated through private refinancing.
  • Private lenders offer a greater variety of time frame options than the federal government.
  • Many private lenders offer networking events, career development resources, happy hours, and other customer service benefits.


  • Refinancing federal loans with a private company makes you ineligible for federal income-based repayment and loan forgiveness programs. If your income is low, or you work in the public service sector and could eventually qualify for loan forgiveness, it’s important to weigh the value of those benefits against potential savings from refinancing.
  • Variable interest rates are generally lower than fixed rates and can look very attractive, but they can go up significantly over time. Consider the length of your loan and assess your risk tolerance before choosing a variable rate.

Private student loan refinancing can make your life easier and save you money at the same time.  Some of the best lenders for refinancing are:

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Federal student loan consolidation

Because of the way federal student loans are disbursed, it’s common for people to graduate with a patchwork of loans from each year of school. The Department of Education’s Direct Consolidation Loan program is free and allows borrowers to consolidate multiple subsidized and unsubsidized federal loans into a single payment. But there are several important limitations.


  • You can remain eligible for most income-based repayment and loan forgiveness programs. However, you might lose progress toward loan forgiveness. Most loan forgiveness programs require at least 10 years of consistent payments to qualify. Consolidating student loans resets the clock to zero, so you would have to start the 10-year cycle over again.
  • You can select standard, graduated, or extended repayment plans.
  • Federal consolidation doesn’t require a credit check.
  • You may be able to consolidate your student loans, even if one or more of them is in default status. Federal consolidation is a way to rehabilitate loans and potentially remove the default from your credit report.


  • Federal consolidation doesn’t lower your interest rate, and might even increase it slightly. The consolidated loan would have a fixed interest rate based on a weighted average of your pre-existing loans. That rate would be rounded up to the nearest eighth of a percentage point.
  • You cannot consolidate any private loans through the federal program.
  • Federal consolidation does not save you any money on total repayment, and might cost more if you lengthen the time frame for paying off your debt.
  • Including parent PLUS loans in the consolidation can disqualify the entire sum from income-based repayment.

Which strategy is right for you?

If you’re earning a good income and have an above-average credit score (650 or higher), it makes sense to explore both federal and private consolidation options. Refinancing your student loans with a private lender could give you the ease of a single payment and also save you hundreds of dollars each month.

It’s easy to find out if refinancing could save you money, and there’s no risk to inquire. Most modern student loan refinancing companies have online applications that take less than 15 minutes to complete, with no impact on credit. Nitro regularly reviews student lenders. The following are the companies we consider the nation’s best banks for student loan refinancing, based on their interest rates, transparency, product offerings, track record, ease of applying, and customer service.

If you’re looking to consolidate your student loans and save money at the same time, we recommend that you start here!

Published in: Refinance

About the Author
Jon O'Donnell

Jon is a writer and marketer for Nitro who is passionate about bringing transparency to the student loan process along with providing families with the information needed to make smart financial decisions. He also just recently refinanced his student loans allowing him to pay them off 5 years faster all while saving an additional $152/month. As he continues to pay them off himself, he strives to help others do the same. Jon also has a long history of connecting people with educational opportunities to help them improve their careers and their overall personal finances. In his free time you can find him reading travel blogs and researching destinations around the world in search of his next adventure. Read more by Jon O'Donnell

Refinance and Save Today With These Lenders

#1 - Nitro Recommended View More Details

Special offers for medical resident and fellow refinance products

  • Fixed rates: 2.49% - 6.31% APR
  • Variable rates: 1.88% - 6.15% APR
  • Minimum credit: 650
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Visit Splash View Loan Disclosure

Splash Financial is a leader in student loan refinancing with new rates as low as 2.49% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

  • Low interest rates – especially for graduate students
  • No application or origination fees. No prepayment penalties.
  • Co-signer release program - you can apply for a cosigner release form your loan after 12 months of on-time payments
  • Specialty product for doctors in training with low monthly payment

Click here to see more of Splash's offerings and to see how you can save money.

#2 View More Details

For every loan they fund, they contribute to the education of a child in need

  • Fixed rates: 2.83% - 6.74% APR
  • Variable rates: 1.99% - 6.84% APR
  • Minimum credit: 660
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Visit CommonBond View Loan Disclosure

CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.

Of all the companies we reviewed, CommonBond has some of the best customer service. The company prides itself on being easy to reach by email, phone, or live chat. It offers networking events, expert panels, insider newsletters, and even has a program help borrowers who lose their jobs to find new ones. CommonBond also makes you feel good about choosing to refinance with them by donating money to an education nonprofit for each loan they write.

CommonBond Student Loan Refinance review

  • Unemployment protections - If you lose your job or decide to go back to school, you can delay your payments for up to 24 months.
  • Social promise - For every loan they fund, they also contribute to the education of a child in need.
  • Hybrid loan option - Offerings include a 10-year hybrid loan with fixed interest for the first five years, and variable interest for the final five.
  • Referral bonus - For every friend you refer who refinances their loans with CommonBond, you’ll earn a $200 cash bonus.
  • Qualification - Borrowers must have graduated at least 2 years prior if they want to apply without a co-signer. And borrowers in 6 states – Idaho, Louisiana, Mississippi, Nevada, South Dakota, and Vermont – cannot currently refinance through CommonBond.

Get a personalized review of your refinancing options with CommonBond today.

#3 View More Details

SoFi is the leading student loan refinancing provider. 

  • Fixed rates: 2.49% - 6.94% APR
  • Variable rates: 2.25% - 6.59% APR
  • Minimum credit: 650
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Visit SoFi View Loan Disclosure

$30 billion+ in refinanced student loans. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, there's no maximum on the amount you can finance. Some state restrictions may apply.

  • Serious savings: Save thousands of dollars thanks to flexible terms and low fixed or variable rates.
  • No hidden fees, no catch: No application or origination fees. No pre-payment penalties.
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  • 98% of surveyed members would recommend SoFi to a friend

Save thousands on your student loans and pay off your loans sooner. Find your rate.

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Ability to apply for cosigner release after 24 consecutive payments. 

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Visit NelNetBank View Loan Disclosure

Give Your Life’s Journey a Jump-Start.

If you’re ready to put student loans in your rearview mirror, Nelnet Bank student loan refinancing offers low rates and flexible terms to help you start getting ahead.

  • VARIABLE RATES: 1.95% - 5.62% APR See Disclaimer
  • FIXED RATES: 2.48% - 6.62% APR See Disclaimer
  • AUTO DEBIT SAVINGS: We’ll knock .25% off of your interest rate when you enroll in auto debit. See Disclaimer
  • NO ORIGINATION FEES: No application, origination, or prepayment fees on Nelnet Bank loans.
  • HARDSHIP PROTECTION: Hardship forbearance helps protect against unexpected loss of income. See Disclaimer

See How Much You Can Save: Estimate your savings with a student loan refinance from Nelnet Bank.

#5 View More Details

Works with 300+ community lenders for higher approval chances

  • Fixed rates: 2.95% - 7.63% APR
  • Variable rates: 1.90% - 5.25% APR
  • Minimum credit: 660
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Visit LendKey View Loan Disclosure

Connecting student borrowers to a network of over 300 community lenders with low interest rates. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

LendKey Student Loan Refinance review

  • Lightning fast rate check - 2-minute rate check with no impact on your credit score
  • More lenders, more options - see the best offers from over 300+ community lenders for higher approval chances
  • Life of loan relationship - With LendKey, your personal information will never be sent or passed on to third parties. Their customer service team is with you from the moment you land on their website until you've completely repaid your loan.
  • Unmatched benefits- Community lenders put people over profits and offer unique benefits like cosigner release after 12 on-time payments, interest only repayment options to keep monthly payments low, the largest unemployment protection period in the market, and more.

Get a personalized quote from LendKey now.

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Best for borrowers who want to customize their repayment schedule to pay off debt fast.

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Visit Earnest View Loan Disclosure

Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.

  • Commitment-free 2 minute rate check
  • Client Happiness can be reached via in app messaging, email, and phone 
  • No fees for origination, prepayment, or loan disbursement
  • Flexible terms let you pick your exact monthly payment or switch between fixed and variable rates
  • Skip a payment and make it up later
  • Online dashboard is designed to make it easy to apply for and manage your loan

Click here to apply with Earnest and to see how much you can save.

#7 View More Details

16 different loan term options – more flexibility to pay down your loan faster

  • Fixed rates: 3.24% - 5.54% APR
  • Variable rates: 3.34% - 5.69% APR
  • Minimum credit: 680
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Visit CollegeAve View Loan Disclosure

College Ave Student Loans offers major help and minor stress. We’ll help guide you through the process to find the right loan term and interest rate for you and the family budget.

  • Fast rate check: Get your new rate in 60 seconds 
  • Instant credit decision
  • Super flexible terms: 16 loan terms available from 5 to 20 years
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I reduced my student loan payment by $152 per month, by refinancing thru Nitro:

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