Compare your current student loan to a refinance offer. Most savings come from rate drops of 1.5%+.
Total interest savings
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Current monthly
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Refi monthly
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What refinancing actually changes
Refinancing replaces your existing student loan with a brand new private loan, ideally at a lower interest rate. Your old balance is paid off and a new lender takes over, which means a new rate, a new term, and a new monthly payment. The savings come from the rate drop, because a lower rate means less of each payment goes to interest and more goes to knocking down principal. This tool holds your balance fixed and compares the lifetime interest you would pay on your current loan against the refinanced offer, then shows the monthly payment for each.
The calculation uses a standard amortizing loan formula, the same math behind any fixed-rate mortgage or auto loan, so both the current and refinanced payments assume level monthly payments that fully retire the balance over the chosen term. That is exactly how private student loan refinances work, which makes the comparison apples to apples.
Running a $50,000 balance from 7.5 to 5.5 percent
Take the default: a $50,000 balance with 10 years remaining at 7.5 percent, refinanced into a new 10-year loan at 5.5 percent. Keeping the term the same isolates the effect of the rate alone. The current loan costs about $594 a month and racks up roughly $21,221 in interest over its life. The refinanced loan drops the payment to about $543 and the lifetime interest to roughly $15,116. The difference in interest, around $6,105, is your savings, and it shows up as a lower payment every single month rather than as a lump sum.
| Measure | Current 7.5% | Refi 5.5% |
|---|---|---|
| Monthly payment | $594 | $543 |
| Lifetime interest | $21,221 | $15,116 |
| Total interest saved | $6,105 | |
The federal protections you give up
This is the part the savings number does not show, and it is the most important judgment in the whole decision. If your loans are federal, refinancing converts them to private debt and permanently forfeits a long list of borrower protections: income-driven repayment plans that cap your payment at a share of income, Public Service Loan Forgiveness for those working in government or nonprofits, generous deferment and forbearance during hardship, and any future broad forgiveness Congress might enact. Once those loans go private, none of that comes back. There is no path to convert a private loan back to a federal one.
So the right candidate for refinancing is usually someone with a stable, comfortable income who is not pursuing forgiveness and does not expect to need income-driven repayment. For that person, a rate cut of one and a half to two points or more is real money. Refinancing private loans, on the other hand, carries no such tradeoff because there are no federal protections to lose, so the decision there is purely about the rate and the lender.
Watch the term, not just the rate
A common trap: lenders advertise a lower monthly payment that comes from stretching the term, not from a better rate. Refinancing a loan with 8 years left into a fresh 15-year loan will slash the payment even at the same rate, but you will pay far more interest over those extra years. To compare honestly, keep the term roughly equal to the time you have left, which is what the example above does, so the payment change reflects the rate and nothing else. If your goal is to be debt-free faster, refinance to a shorter term and accept the higher payment.
Will refinancing hurt my credit score?
Applying triggers a hard inquiry, which can dip your score by a few points temporarily. Most reputable lenders let you check your rate with a soft pull first, so you can shop several offers without any credit impact and only submit a hard application once you have chosen. Closing the old loan and opening a new one can also shorten your average account age slightly, but the effect is minor and short-lived compared with the interest savings of a good refinance.
Is the student loan interest I pay still deductible after I refinance?
Yes, the student loan interest deduction follows the purpose of the loan, not the lender. As long as the refinanced loan was used to pay qualified education expenses, the interest stays deductible up to the annual limit, currently $2,500, and it is an above-the-line deduction you can claim without itemizing. The deduction phases out at higher incomes, so high earners may get a reduced amount or none. One catch: if you refinance student debt together with other debt into a single consolidated loan, the student loan portion can lose its deductible character.