Greg Garrison at U.S. News asked whether now is a good time to refinance student loans. Rates have come down from their recent peaks, only about 10% of eligible borrowers ever refinance, and the answer depends heavily on what you are giving up.
I gave him the rate picture as I see it in practice. Private refinancing rates today are meaningfully higher than what borrowers could get in 2020 and 2021, when five-year fixed rates were touching 2% to 3% for well-qualified borrowers. Right now I am seeing competitive offers in the 5.5% to 7.5% range depending on credit profile and loan term, which is respectable compared to the 2023 peaks but still well above the lows.
Whether that is worth it comes down to two questions. First, what rate are you paying now? A borrower carrying older private loans or graduate PLUS loans at 8% or 9% with a strong income and credit score can save real money. Second, are the loans federal? Refinancing a federal loan into a private one permanently forfeits income-driven repayment, forgiveness programs and the hardship protections that come with federal debt. For most federal borrowers, a lower rate is not worth that trade.
Run the numbers on the actual loans, not the headline rate. For the right borrower, refinancing is an easy win. For the wrong one, it is an expensive way to save a point.
Read the full article at US News & World Report →
