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    Calculates locally in your browser · refinance against the federal protections
    Student loans / refinancing

    Student loan refinance

    Refinancing is a pure arithmetic trade — a lower rate over a chosen term — with one cost that is not arithmetic: refinancing a federal loan into a private one permanently forfeits income-driven repayment, PSLF, and the death and disability discharges. This prices both sides.

    Balance$35,000Current rate5.86%New rate4.50%
    Interest saved
    $7,193
    over the life of the new loan
    New payment
    $653
    was $386
    Forgiveness at risk
    $0
    gone permanently on refinancing
    Net benefit
    $7,193
    interest saved less the forfeit
    Two schedules, one decision
    The arithmetic is the easy half; the forfeited federal protections are the other half.
    saves $7,193
    Two schedules, one decision
    MeasureCurrent loansRefinanced
    Balance$35,000$35,000
    Rate5.86% weighted4.50% fixed
    Term remaining120 months60 months
    Monthly payment$386$653
    Total interest$11,343$4,150
    Fee$0$0
    Interest saved—$7,193
    Forgiveness forfeited$0—
    Net benefit—$7,193

    A federal borrower working toward PSLF should almost never refinance: the forgiven balance is usually worth more than any rate reduction, and the forfeit is permanent — there is no way back into the federal programme once the loans are private.

    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    Interest saved against the new rate
    Falls linearly to the weighted average, then goes negative — above that rate there is nothing to gain.
    Interest saved against the new rate0.0002135.844271.696407.538543.371.068e+42%2%3%3%4%4%5%5%6%6%7%7%8%8%Saved
    Saved against forfeited
    The forfeit is a one-off; the saving is spread over the term.
    Saved against forfeited0.0001697.543395.085092.626790.168487.70Interest savedInterest saved0.000Forgiveness forfeitedForgiveness forfeitedNetNetDollars
    Canonical equations
    The exact relationships implemented by this engine.

    Σ level payment per loan · Each loan keeps its own rate and term.

    P = A·r/(1−(1+r)^−n) · One rate, one term.

    I_current − I_new · Over each loan’s own horizon.

    saved − forgiveness forfeited · The number that decides it.

    finance methodology

    A clear path from inputs to results.

    Refinancing is a pure arithmetic trade — a lower rate over a chosen term — with one cost that is not arithmetic: refinancing a federal loan into a private one permanently forfeits income-driven repayment, PSLF, and the death and disability discharges.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter the balance, rate and remaining term of each loan.
    2. Set the refinance rate, term and any origination fee.
    3. Say whether any of the loans are federal.
    4. Enter the forgiveness you would otherwise receive, and read the net benefit.

    The formula

    net=(Icurrent−Inew)−Fforfeited\text{net} = (I_{current} - I_{new}) - F_{forfeited}

    Reference: Level-payment amortisation; the federal protections forfeited are 34 CFR 685 (IDR) and 685.219 (PSLF).

    Worked example

    $35,000 across two loans refinanced at 4.5%

    Inputs
    • $20,000 at 6.5% with 120 months left; $15,000 at 5% with 120 months left.
    • Refinance at 4.5% over 60 months, no fee, private loans only.
    Calculation path
    1. 1

      The weighted rate is (20,000 × 6.5% + 15,000 × 5%) / 35,000 = 5.86%.

    2. 2

      The current payments total $386 a month, and the remaining interest is $11,334.

    3. 3

      The new loan costs $652 a month and $4,138 of interest.

    4. 4

      The interest saved is $7,196, but the payment rises because the term is half as long.

    5. 5

      If the loans were federal and $50,000 of PSLF forgiveness were expected, the net benefit would be −$42,804.

    Result

    $7,196 saved · $652 a month · −$42,804 net if PSLF is forfeited.

    Interpreting the result

    The payment going up is not a defect — it is the same trade as any shorter loan. What matters is the total interest against the forfeit. For a borrower on track for PSLF the forfeit almost always dominates, because the forgiven balance is usually larger than any interest saving a rate cut can produce.

    Assumptions & limitations

    • Both schedules run to their stated term with no prepayment.
    • The new loan is a fixed-rate instalment loan.
    • Federal protections are valued at the projected forgiveness only, not at the option value of forbearance.
    • No tax effect: forgiven student debt under PSLF is tax-free.

    Frequently asked questions

    Should I ever refinance a federal loan?

    Only if you are certain you will never use IDR, PSLF or the death and disability discharges — usually because your income is high and stable and the balance is small relative to it.

    Why did my payment go up?

    Because the new term is shorter. A refinance at the same term would lower the payment; the interest saving comes from the rate, the payment change from the term.

    What about the interest deduction?

    Student loan interest is deductible up to $2,500 subject to an income phase-out, and refinanced loans still qualify if they are student debt.

    Can I refinance only the private loans?

    Yes, and that is usually the right move: it captures the rate saving without forfeiting anything on the federal side.

    Does refinancing hurt my credit?

    There is a hard inquiry and the old accounts close, which can dip the score briefly. On-time payments on the new loan usually recover it within a year.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.