Investor Alert

July 26, 2022, 4:27 p.m. EDT

These student loan refi rates dipped slightly. Here’s who should, and should not, refinance their student loans

Alisa Wolfson

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For 10-year fixed rate loans, the average student loan refinancing rate leveled off at 5.79%, down from 5.80% the week prior, according to the latest rates from personal finance company Credible of those who prequalified on their student loan marketplace for the week ending July 4. However, average rates on 5-year variable-rate loans increased to 3.37%, up from 3.29% the week prior.

More than 40 million Americans are on the hook for student loan debt totaling more than $1.7 trillion dollars — so it’s not surprising that many people are looking to refinance their student loans. And, indeed, the rates are tempting. ( See the lowest rates you may qualify for here. )But there are a few things to know before refinancing a student loan. When refinancing a federal student loan, the borrower effectively takes out a new private loan to pay off their existing public loan. In doing so, they lose any federal protections that accompanied their federal loans. This means that the borrower forfeits any government-issued loan forgiveness, as well as income-driven repayment options. What’s more, all federal student loan payments are paused through August 31, 2022, and you’d lose that perk if you refinanced. Even if a borrower isn’t currently making use of the programs and protections offered, they should consider whether or not the need for repayment plans or loan forgiveness will arise in the future.

That said, refinancing can make sense, especially if you’re in a solid financial position and can get lower rates. If you’re planning to refinance a private student loan because your credit score has improved or your finances have changed and/or you’re able to get a more attractive interest rate or shorten your loan term, you’re likely to benefit from a refinance. 

Rates accurate at the time of publication.

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