Student Loan Refinancing Rates are Rising – Should You Jump Now?

Interest rates are rising across the board, which could be good news for your savings but might have a negative impact on any debt you hold. While the past two years have seen record low rates for mortgage and student loan refinancing, rates for refinancing have already begun to rise for both mortgages and student loans.

Does that mean you should jump at the chance of refinancing high-interest student loans? That depends on your personal finances, as much as larger economic trends. Here’s how to tell if you should act now.

Consider a refi if…

You have a great credit score: If your credit score has improved since you first took out student loans or last refinanced, you could be in a good position to score a low interest rate.

You have a consistent income or higher income: If you’ve had consistent employment (at least 2 years at the same job), and/or have increased your income significantly you may qualify for a lower refi rate. And if you’re earning enough that you might be able to pay down your loans with a shorter loan term, you can increase the benefits of a refi even further and get out of debt faster — while scoring still-record-low interest rates.

You have private student loans: If you took out private student loans, those loans don’t have the same benefits and protections that federal student loans have — such as the mandatory student loan payment pause that continues to be extended. That means no matter when the federal pause ends, refinancing may be almost all upside for you, if you can qualify for a lower rate or shorter term. If you have private, variable-rate loans, you might have even more motivation to refi to help you save and avoid potentially steep interest rate rises in the next couple of years.

You have more than $50k in loans: Even for those who planning to wait and see what happens with potential federal student loan forgiveness, refinancing part of their loans may be the right solution. The most aspirational figures for federal student loan forgiveness do not expect more than $50k to be forgiven (and some don’t expect that much either). Which means if you’re carrying more than $50K of student loan debt, it may make sense to leave $50k of federal loans while refinancing the remainder of your debt to lock in more favorable rates.

Don’t refi yet if…

You have trouble making your current payments: If you struggle to make your current student loan payments, a refinance may not be the right choice. While you may potentially get lower payments, federal loans have more options for challenging economic times including forbearance, deferment, and income-driven repayment schedules.

You might not qualify: If your credit score has a few dings and your employment history hasn’t been consistent over the past two years, a refinance may not be able to offer rates that would make a real difference.
You’re on track for forgiveness: If you’re working towards a federal forgiveness program such as Public Service Loan Forgiveness (PSLF), you may not want to refinance and lose that option. Historically, Public Service Loan Forgiveness has denied the vast majority of applicants, but it’s become easier to qualify after a program overhaul towards the end of 2021.