Can I refinance my student loans?


No, you can’t refinance student loans. However, if you have multiple federal student loans, federal consolidation of your loans may make your debt more manageable.

To be eligible for federal loan consolidation, you must have at least one federal student loan in grace, repayment, deferment, or default status. Once you consolidate your loans, you will have a single lender–the U.S. Department of Education–and a single monthly payment. The interest rate on a federal consolidation loan is fixed for the life of the loan. The rate is based on the weighted average interest rate of the loans being consolidated, rounded to the next highest one-eighth of 1% and can’t exceed 8.25%.

Borrowers who opt for federal loan consolidation can choose from various repayment plans to repay their new consolidation loan, including income-driven repayment plans, extended repayment, and graduated repayment. With income-driven repayment, a borrower’s monthly payment is tied to his or her discretionary income and family size, with all debt being forgiven after a certain period of years. An extended repayment option allows the term for repayment to be as long as 30 years. Although this can dramatically lower your monthly payment, it can also dramatically increase the total cost of the loan. A graduated repayment option starts off with lower monthly payments but then over time, payments increase as your income hopefully increases and you are better able to afford the higher payments.

Of course, you are always free to explore other refinancing options, such as a home equity loan or a loan against a retirement plan. However, you should explore carefully the advantages and disadvantages of these options before pursuing any one of them.