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Student Loan Payments Are Resuming: Is Now a Good Time to Refinance?

Now that the pause on federal student loans has ended and interest rates have been on the rise, you may be wondering if now is a good time to refinance your student loans.

In this article, we’ll explore the pros and cons of refinancing in the current market. We’ll also discuss why refinancing your student loans with a credit union can help you secure the best loan terms. 

The Basics of Student Loan Refinancing

Student loan refinancing is the process of replacing your current student loans with a new student loan. Depending on your current financial situation and the economic conditions, refinancing could help you:

  • Lower your interest rate
  • Switch from a variable interest rate to a fixed interest rate (or vice versa)
  • Reduce your monthly payments
  • Shorten or extend your repayment term
  • Obtain one monthly payment (if you have several student loans)
  • Release a cosigner

Since the goal of student loan refinancing is to obtain better terms, it’s often best to refinance with a credit union. The reason? Credit unions often offer lower interest rates and more flexible repayment options than other types of lenders.

Student Loan Refinancing: Is Now a Good Time?

While student loan refinancing can be beneficial under the right circumstances, it’s all about timing. So, is now the right time to refinance your student loans? 

To help you decide, let’s break down what led up to today’s lending conditions:

  • In the face of COVID-19’s far-reaching economic impacts, payments and interest on federal student loans were paused as of March 13, 2020. This pause was ultimately extended up until September 1, 2023.
  • In June 2023, Congress passed a law that prevented any additional extensions to the pause on federal student loan payments, resulting in their resumption on October 1, 2023.
  • From October 1, 2023, to September 20, 2024, a 12-month on-ramp transition is scheduled to take place. During this transitionary period, financially vulnerable borrowers who miss their monthly federal student loan payments won’t be considered delinquent, placed in default, reported to credit bureaus, or sent to debt collection agencies.
  • In the face of rapid inflation, the Federal Reserve has increased the federal funds rate 11 times over the past year and a half, pushing it up to 5.5%. Since many lenders set their interest rates around the federal funds rate, private student loan rates (and other loan rates) are currently quite high. 

Based on these factors, now may or may not be the right time to refinance. How could it be either case? Let’s break down the pros and cons to help you decide.

Pros of Refinancing Your Student Loans Now

Here are some potential benefits of refinancing your student loans:

  • Lower interest rate – If your credit score has improved since you took out your student loans, you may be able to qualify for a lower interest rate now. Additionally, if your original loan had a variable rate that has increased in the past couple of years, you could find a lower fixed interest rate. Securing a lower interest rate can save you a lot of money over your repayment period.
  • One monthly payment – If you have several student loans with different payment due dates, keeping up with them can be a challenge. Refinancing bundles your loans into one so you enjoy a single monthly payment.
  • Improved financial stability – If your current student loan payments are too high for your monthly budget, refinancing can help you reduce them (though extending a repayment period will result in paying more interest over time).
  • Release of cosigner – If you applied for your student loans with a cosigner, refinancing can release them of their financial responsibility in certain instances.

Cons of Refinancing Your Student Loans Now

When considering whether to refinance, you also want to take into account these potential downsides:

  • Loss of federal loan benefits – If you have federal student loans, refinancing them will remove their federal student loan protections, including income-driven repayment plan eligibility and the potential for loan forgiveness.
  • Temporary credit impact – Any time you formally apply for new financing, your credit score can drop by up to five points for a few months.
  • Potential increase in your interest rate – Since interest rates are high right now, you may not be able to qualify for a lower interest rate.

The only way to know if refinancing is right for you is to weigh these pros and cons in the context of your personal financial goals and financial situation. If you have specific questions, our experts can help answer them.

Student Loan Refinancing vs. Student Loan Consolidation

Refinancing isn’t the only way to lower your monthly student loan payments or achieve one monthly payment—federal student loan consolidation can also provide these benefits while keeping your federal student loan protections intact.  

Federal student loan consolidation lets you bundle multiple monthly payments into one. This process is also a prerequisite for enrolling in an income-driven repayment plan.

Unlike refinancing, federal student loan consolidation can’t lower your interest rate. Instead, your new rate will be the weighted average of your old student loans’ interest rates, rounded up to the nearest one-eighth percent.

How to Refinance Student Loans with a Credit Union

If you decide to refinance your student loans, doing so with a credit union is an easy process. Here are the typical steps involved:

  • Review your current student loan’s interest rates
  • Check your credit score
  • Compare various credit unions’ loan eligibility requirements and loan terms
  • Become a member of your preferred credit union if you aren’t already
  • Gather your personal information, student loan details, and proof of income
  • Fill out an application with your credit union online or in person
  • Wait for your loan approval
  • Sign your loan agreement to finalize the process
  • Allow your credit union to pay off your previous student loans

As you go through the credit union refinancing process, you’ll experience the benefits of credit unions first-hand, from their flexible loan terms to their superior customer service. 

Make an Informed Decision

By refinancing your student loans, you can switch up your loan terms and potentially score a lower interest rate. Now that you know how to determine the right time to refinance, the choice is up to you.  We can help you make an informed decision by comparing available options from leading credit unionsAfter sharing your school and location, we can match you with the best loan options from credit unions near you. 

*Federal student loans may qualify for payment and interest rate benefits that private student loans do not. Carefully consider your options before refinancing federal student loans, as they will no longer qualify for current and future federal benefits once refinanced with a private lender. For more information, visit or contact your federal student loan servicer.