Why refinancing student loans can benefit established professionals

It’s no secret that many Americans are struggling to repay their student debt. According to the U.S. Department of Education, in March 2023, about 44 million U.S. borrowers collectively owed more than $1.6 trillion in federal student loans. If you’re among those millions, you may be wondering if you ought to refinance your student debt. Doing this can often result in better loan terms, which can help you repay your debts and better leverage income from your professional career. Keep reading to learn how student debt refinancing works, and how to begin the process.

What is student loan refinancing?

Student loan refinancing is offered by financial institutions such as credit unions and other specialized lenders as a way to help borrowers pay off their debts more quickly, or to consolidate loans to simplify repayment. Essentially, the process allows the borrower to take out a new loan to pay off their existing debt, replacing the original loan terms with an updated agreement. This often enables borrowers to get a lower monthly payment, a different term length, lower interest rates, or a more convenient payment structure.

Though student loan refinancing is sometimes referred to as student debt consolidation, they are not the same thing. Consolidation refers to combining your federal student loans into one new federal loan, with a new term. Unlike refinancing, though, it does not necessarily provide a lower interest rate, as the new rate will be the weighted average of the interest on the loans being consolidated. Though consolidation may make you eligible for some income-driven repayment plans and loan forgiveness programs, it is not typically regarded as a money-saving option.


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