As a result, tens of millions of people stand to potentially save some money by refinancing their loans at lower interest rates—particularly with student loan payments resuming in February after a two-year freeze. Here’s what to keep in mind before shopping around for a new rate.

Important things to consider before refinancing your student loans in 2022

The first thing to know about refinancing your student loans in 2022 is that the timing is perfect in terms of interest rates. “Variable rates have nowhere to go but up,” says Mark Kantrowitz, a student loan expert who has written five books about scholarships and financial aid. “Borrowers may want to refinance because the interest rates are at or near historic lows. You can potentially get a lower rate, especially if your rates are much higher from a few years ago.”

Second, borrowers who were enjoying a brief holiday from making loan payments due to the pandemic should prepare to start paying once again. That’s because the Biden administration has confirmed that the pause will end at the end of January.

The third ball in the air is the prospect of some sort of student loan forgiveness action coming down from on high. The idea has been batted around by the Biden administration for some time, and it’s hard to say if any concrete legislation or executive actions are seriously on the table. From Kantrowitz’s perspective, any program that addresses loan forgiveness is likely to be limited in eligibility, and private student loans probably won’t be included in any potential measure. However, he adds, “if it does happen, it’ll happen sooner rather than later.”

Federal borrowers could give up some benefits and protections by refinancing their federal loans into private loans, and, potentially, any prospect for loan forgiveness. In short, federal loans have better benefits, but private loans tend to offer lower rates—so that presents borrowers with a choice.

Of course, if borrowers wait too long to potentially capitalize on lower rates, they could miss out, as the Federal Reserve has already signaled that interest rates are going up in 2022. If you plan to go ahead with a student loan refinance during 2022, here are the steps to take:

1. Research your options and shop around

The first thing to do if you plan on refinancing, or at least exploring your options, is to shop around for a new lender. While a new, lower interest rate may be top-of-mind for many people, it’s also smart to look at the fine print too.

“We recommend not just the interest rate, but compare all terms and conditions during any potential refinance—including fees,” says Barry Coleman, vice president of counseling and education programs at the National Foundation for Credit Counseling. “There may be pre-repayment penalties, too, when you refinance.”

There are plenty of websites and services that will compare rates and loan terms—Coleman cites SoFi, Credible, and CommonBond as some of the more popular ones—and says that shopping around is “the wise thing to do” as a first step.

2. Crunch the numbers, and make a decision

It’s important to note that refinance offers, and corresponding effective interest rates, will be based in large part on your credit. “Any loan offers to refinance will be based upon a borrower’s credit profile,” says Coleman. “Borrowers with the best credit scores will get the best refinance offers.”

Once you have a few attractive offers for refinancing, consider the interest rates and applicable fees, and then decide which one works best for you. And if you’re also wondering payday loans in Arkansas online how refinancing your student loans may affect your taxes, there isn’t going to be much effect.

“A student loan is a personal loan and doesn’t qualify to be deducted,” says David Beck, a New York–based CPA. “There isn’t a tax benefit to refinancing a student loan.”

3. Submit the application and sign the dotted line

Once you decide to go through with the refinance, it’s all a matter of filling out the application and submitting it. When doing so, remember that you’ll probably need a swath of documents and information: A government-issued ID, your Social Security number, bank statements, and statements from your current student loan servicer.

Finally, double back to make sure you’re comfortable with all of the loan’s terms—interest rates, the repayment time frame, and any applicable fees. It never hurts to give everything a second look.

4. Wait for the process to complete, and start making payments to your new lender

The most important thing to do, Coleman says, following the submission of your application, is to sign the loan documents from your new lender—assuming you’re approved, of course. And secondly, you need to keep making payments to your old lender while everything is processed.

Assuming that everything is going to happen immediately can cause you to miss payments, potentially hurting your credit and resulting in late fees. You’ll eventually get the green light from your new lender, and then you can switch up your payments.

In practice, the process of refinancing your student loans isn’t overly cumbersome. The critical aspect is that you do some initial homework, and take into consideration that refinancing may have repercussions depending on the specifics of your loans.

However, if getting a lower rate and lowering your monthly payments is all that matters to you, now is probably the time to pull the trigger, says Kantrowitz.

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There is one federal loan that does not qualify for the Direct Consolidation Loan program—the Direct payday loans Arkansas PLUS Loan for parents. This cannot be combined with federal loans taken out by the student to be included in a consolidated loan.

Your federal loans are eligible for consolidation after graduation, after you leave school, or once you drop below half-time enrollment. In order to be considered for participation in the federal loan consolidation program, your loans must be in repayment or still be under the six-month grace period.

Your Direct Consolidation Loan will have a fixed interest rate for the entire life of the loan. The fixed rate is calculated as the average of the interest rates on your current loans being included in the consolidation, rounded up to the nearest one-eighth of a percent. There is no limit on the interest rate of your Direct Consolidation Loan.

Once you have signed up for a Direct Consolidation Loan, you will have 60 days after your loans are paid before your first monthly payment is due. If any of your federal loans are still in their grace period, you are able to indicate on your loan application that they should delay the processing of your application until the grace period is complete. This option will allow you until the grace period is officially over to pay your new Direct Consolidation Loan.

What if one or more of my federal loans are in default?

If one or more of your loans are in default, you must make a minimum of three consecutive monthly payments on those loans before you will be allowed to consolidate.

You can also opt to repay the new Direct Consolidation Loan under the Income-Based Repayment Plan, Pay as You Earn Repayment Plan, Revised Pay as You Earn Repayment Plan, or the Income-Contingent Repayment Plan. These are special repayment plans that adjust your payment based on your income and cost of living.

If you are currently paying a defaulted loan through garnished wages at your place of employment, or via a court order, you are not eligible for federal loan consolidation until the order for wage garnishment or judgment has been lifted.

How do I apply for a Direct Consolidation Loan?

1. Apply online at .
2. Download and print a paper application on and send via mail

Once you have submitted the application, your consolidation servicer will begin the process to consolidate your eligible loans. Remember that you must continue to make payments on your loans until you have been notified by your consolidation servicer that your existing loans have been paid off by your new Direct Consolidation Loan.

What’s the difference between loan consolidation and loan refinancing?

Refinancing allows the borrower to get a new loan with a new interest rate that is hopefully better than what they had before. Private lenders use your credit score and income to determine the new interest rate. Private lenders are also able to consolidate both federal and private loans, while the Direct Consolidation Loan program only allows federal loans to be considered.

How can I use student loan consolidation to increase my credit score?

We’ve all heard that making on-time monthly payments on your student loans can help to improve your credit score. However, student loan borrowers may not know how consolidating your loans can contribute to the process.

Having several student loan bills to pay every month has the potential to lead to missed payments since there’s so much to keep organized. Pulling all those loans into one, with one monthly payment, will make it easier to make your payments on time.