If you refinance student loans, you can consolidate all your existing student loans into a new student loan with a lower interest rate. This means that if you have one or more student loans with different interest rates or different payment schedules, student loan refinancing can combine all these student loans into a single student loan.
In addition to the convenience factor, you have the opportunity to get a lower interest rate. Why can you receive a lower interest rate? If you borrowed your student loans from the federal government, everyone receives – as a matter of law – the same student loan interest rate regardless of your credit profile. This is because Congress sets the interest rates for federal student loans.
When you borrowed your student loans either from the federal government or a private student lender, you also probably did not have an established credit history or work history. The federal government also does not refinance student loans.
Now that you are graduating or working, you have a stronger credit profile and work experience. Private lenders are willing to refinance student loans at a lower interest rate than your current interest rate, which can help you save significant money throughout the life of your student loan.