If you’ve ever thought about refinancing your student loans but felt like you weren’t exactly sure what would change then this post is for you. Estimated read time ~3 min, estimated watch time at 1.5x ~ 2 minutes.

Eligibility for Federal Student Loan Benefits

Once you refinance your federal student loans they become private student loans and lose eligibility for all federal student loan benefits. The benefits you could lose include access to income-driven repayment plans, loan forgiveness in case of borrower death or permanent disability, and forbearance and deferment.

The ability to enter deferment can be particularly important for borrowers who may go back to school full-time, otherwise they would have to continue to make student loan payments during school.

Eligibility for Loan Forgiveness

The major Federal student loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF), Income-Driven Loan Forgiveness, and Teacher Loan Forgiveness, only work for Federal student loans. Many state-specific loan forgiveness programs also only apply for federal student loans.

Bottom line: if you want student loan forgiveness, don’t refinance.

Interest Rates Based on Your Financial Potential

One of the major benefits of refinanced student loans is that a borrower can save some serious money on interest. We’re talking tens of thousands of dollars for borrowers with the highest amounts of student loan debt.

That’s because refinancing companies base your interest rate on your ability to repay your debt by looking at your credit score, your income, your total debt, and your financial assets. The borrowers with the best finances are very likely to get an incredibly competitive fixed interest rate. In contrast, Federal student loans which have the same interest rate for each borrower.

Do you have Federal student loans or have you refinanced? Let me know in the comments below or on the Repayable Facebook page.