The ad showed up between two cooking videos while I was eating cereal at my tiny kitchen counter: refinance your student loans, rates as low as some number with a lot of fine print after it. I've seen a version of it about twice a week since I started paying off loans. This time, instead of scrolling past, I wrote it down and spent a Saturday morning figuring out whether it made sense for me.
It doesn't. Here's how I got there.
When you refinance federal student loans, a private lender pays off your federal loans and gives you a new private loan in their place. If your credit is good and rates are favorable, the new loan can have a lower interest rate. Sometimes you can also combine several loans into one payment.
The part the ads don't say loudly: once your federal loans are paid off by a private lender, they're not federal anymore. You can't switch back. Every protection that came with the federal loans is gone.
What I'd be giving up
I work in medical billing, so I spend all day reading coverage details that only matter when something goes wrong. That's how I read this. Here's what my federal loans come with that a private loan generally wouldn't:
- Income-driven repayment plans, where the payment is based on your income and family size instead of the balance. I'm on the standard plan and don't need one now. But if I lost my job or my income dropped, the option is there.
- Deferment and forbearance for things like unemployment or financial hardship, which pause or reduce payments for a while.
- Discharge if the borrower dies or becomes totally and permanently disabled, so nobody else ends up with the debt.
- Fixed rates set by law, which means my rates will never change.
Some private lenders offer their own hardship programs, but they're up to the lender and usually more limited. I don't want to bet on a company's policy staying generous.
What I'd actually save
This is where the decision got easy. My balance right now is about $8,700. All of my remaining rates are under 5%, because I've been paying the most expensive loans off first. At a credit score in the mid-700s, the rates I saw posted for refinancing weren't dramatically lower than what I already have, and the lowest advertised numbers usually come with conditions.
Say I somehow got a rate one percentage point lower on everything. One point on $8,700 is $87 a year, and less every year after as the balance shrinks. With my payoff planned for late 2027, the total savings would be somewhere around $100 to $120. If the real offer were half a point lower, it'd be closer to $60.
So the question became: would I trade income-driven plans, deferment, forbearance and disability discharge for about a hundred dollars? No. Not even close.
I can see why people refinance. If you have a big balance, especially at high rates, and very stable income, the savings can be thousands of dollars instead of a hundred. Private student loans are also a different story, since they don't have the federal protections in the first place. I'm not saying refinancing is a bad idea for everyone. I'm saying it's a bad trade for me, with this balance, at these rates.
The other thing I thought about is that I just moved into my own studio in June. My rent is $1,295 and my margins are thinner than they've been in two years. This is exactly the moment when I want flexibility, not a slightly smaller interest bill.
What I did instead
Nothing, which felt strange for a post on a money blog. I kept my loans where they are, kept my $550 monthly payment on autopay and wrote one line in the club sheet: "Refinance: no, keep federal." I put a reminder in my planner to look again only if my situation changes a lot, like a much bigger balance or a big jump in rates.
I asked my dad what he thought, since he reads every contract twice. He read the ad on my phone, handed it back and said, "They're not offering to help you. They're offering to help themselves." Then he asked if I had any more of the iced coffee. I did.
