The latest student loan refinance rates – and what to consider before refi

Is refinancing your student loans the right option for you?

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For 10-year fixed-rate loans, the average student loan refinance rate reached 4.45%, up from the previous week, although average 5-year variable-rate loan rates fell slightly to 3.19% (the lowest since February), according to Credible’s latest rates for the week ending April 4. That said, for those with credit scores of 780 and above, average 10-year fixed rates are just 4.19% and 3.08% for 5-year variable loans. You can see the lowest student loan refinance rates you could qualify for here.

When a borrower refinances a student loan, they use a private lender to pay off their existing loan in exchange for a new loan, ideally with lower rates and preferred terms. But even if refinancing your student loan means you could save money, it’s worth making sure you’re saving enough to refinance and that you understand the pros and cons of refinancing.

Consider: If you have a federal loan and are considering refinancing it, the only way to do so is to convert the loan to a private loan. However, experts urge caution, as federal loans generally offer greater protection than private loans, with options such as income-based repayment options and loan forgiveness and forbearance.

Another reason why it is frowned upon to turn a federal loan into a private loan through refinancing is that once a federal loan becomes private, there is no way to make it federal again. Note that if your income is stable and you can shorten the term of your loan or lower your interest rate to realize significant savings through refinancing, foregoing certain federal protections may be worth it.

If you have high-interest private student loans, refinancing often makes sense because you won’t be giving up those kinds of federal protections. (You can see the lowest student loan refinance rates you could qualify for here.) If there have been changes in your finances, such as an improved credit score or stronger credit application, refinancing can save you much lower interest rate. Another thing to consider when refinancing is adjusting the terms to include a shorter repayment term, which might increase your monthly payment, but in the long run you’ll end up saving more over the life of the loan.

You’re not alone if you’re considering refinancing, which is why Marketwatch Picks has put together a guide with 5 questions you should ask yourself before getting started. Of course, many people save thousands of dollars when refinancing student loans, you just need to make sure the benefits of a federal loan are worth discarding in the process.

*Prices correct at time of publication.

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