A young lady sits on her couch working on college loan paperwork.

Should you refinance student loans?

Student loan debt isn't uncommon, but there are ways to lighten your load. Here's what to know about student loan consolidation.

Student loans represent nearly 40% of the total debt load for recent graduates. And at a time when you're juggling paying rent and buying groceries with other savings goals — such as building up your emergency fund or saving for a down payment on a house — you may wonder if there's any way to minimize the impact of student debt on your budget. Refinancing your student loans may be a solution, but there are several factors to consider before you apply.


Student loan refinancing typically requires that you demonstrate stable income and good credit.

Interest rates

If interest rates have declined since you borrowed, you might be able to secure a lower rate through refinancing. In the long run, that could help you save a lot — so long as you've chosen a fixed interest rate, which is your safest option. While variable interest rates can start lower than fixed, there is no guarantee they won't increase over the duration of your loan term, so it's important to consider your needs carefully.

Monthly payments

Refinancing may give you a lower monthly payment either through a longer repayment term or a lower interest rate — in some cases you may even qualify for both. Trimming your monthly payment would create space in your budget for other savings goals, but it potentially means paying more over the life of your loan. If your budget has the room, you may also consider refinancing to a shorter repayment period. That would mean higher monthly payments, but it could potentially save a lot over the life of your loan.

Loan type

If you have federal student loans, you may lose certain benefits by switching to a private loan when you refinance. For example, you could lose the ability to participate in public service loan forgiveness, an income-driven repayment plan and other repayment options.

The end result

Ultimately, refinancing may be a good option if it is necessary to balance your budget or it helps you secure better terms that reduce the lifetime cost of your loan. But before you refinance, make sure you understand all the details of the refinanced loan and determine how it will impact your finances.

Neither State Farm nor its agents provide tax or legal advice.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

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