After years of rising rates, interest on new student loans is finally coming down. Borrowers taking out new student loans for the 2025-2026 academic year will enjoy marginally lower rates than they did last year, a first since 2020-2021. Private student loan rates, too, continue their trend downward, dropping by almost 1% since May of last year. While the new federal rate only impacts new student loans—except for new consolidation loans, which are based on the borrowers’ older rates—borrowers with private loans may be able to refinance their old loans to take advantage of new rates and lower their monthly payments.
A key difference between federal and private student loans is the ability to refinance, in which your old loans are essentially traded in for new ones, hopefully with better terms. Federal loans are only issued by—you guessed it—the federal government, whereas private loans are offered by any number of private lenders. Many banks, and even credit unions, partner with private student loan lenders that cater to their clients and many offer private loans themselves. You can even refinance your federal student loans through a private lender, at which point they become a private loan. Don’t forget, however, that it’s a one-way street: federal loans can become private, but private loans cannot become federal loans, and any progress towards IDR forgiveness or PSLF will be lost.
There are two primary factors to consider for private student loans, and they’re the same as most every type of loan: term of repayment and interest rate. If you only have 18 months left on your loan, you probably don’t want to refinance it into a 10 year loan, but sometimes you can get a term as short as 5 years. In most cases, borrowers refinance to take advantage of a lower interest rate, which lowers their monthly payment amount and, ultimately, how much they’ll pay over the life of their loan. Also, most private student loan lenders do not charge origination fees, so you don’t have to worry about any up-front fees eating into your potential savings.
For example, if you have a $100k private loans with a 10 year fixed-rate loan at 7.66% (the lowest average rate recorded by student loan marketplace Credible for May 2024):
By contrast, if you had the same loan, but with 6.81% (the lowest average rate recorded for May 2025):
If you’re considering refinancing your student loans, give us a call. We’ve helped many physicians through the refinancing process and can make sure you’re getting the best deal for your situation. We’re here to help you save money and worry less, wherever your student loan journey takes you!
