Every student loan refinance ad leads with the rate. SoFi’s refinance page opens with fixed rates from 4.49% APR (as of October 4, 2026). For a borrower with federal loans, the rate is the wrong number to compare, and the lenders say so themselves, in the fine print.
For most borrowers with federal loans, refinancing them is a mistake. Here is why, and the short list of people for whom it can make sense.
What the lenders’ own disclosures say
Refinancing turns a federal loan into a private loan, permanently. SoFi’s disclosure, at the bottom of its refinance page and in capital letters, reads: “YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS.” It goes on to name Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, extended repayment, PAYE and SAVE. ELFI’s page on refinancing federal loans says the same thing in plain terms: you lose eligibility for forgiveness programs, you can’t use income-driven repayment, and you aren’t eligible for federal deferment or forbearance.
That is the trade. The ad shows you the rate. The footnote shows you what the rate costs.
What you give up
- Income-driven plans. RAP and IBR set your payment from your income, not your balance. A private loan has a fixed payment whatever happens to your income.
- Forgiveness. Public Service Loan Forgiveness after 10 years of qualifying payments, and forgiveness at the end of an income-driven plan.
- Help in a hard year. Federal deferment and forbearance options when your income drops or you go back to school.
- Every future federal option. Once a loan is private, no new federal program can reach it.
The rate is the wrong comparison
Take a single borrower with $186,000 in federal loans at 6.54% and an income of $72,000. We ran the federal options through our engine and priced a 10-year refinance at SoFi’s lowest advertised rate.
| Option | Monthly payment | Total cost |
|---|---|---|
| Refinance, 10 years at 4.49% | $1,927 | about $231,240 |
| Federal Standard, 10 years at 6.54% | $2,116 | $253,894 |
| RAP (federal, income-driven) | $420 | $193,627, including the estimated tax on the forgiven balance |
The refinance beats the federal Standard plan. It loses to RAP by about $1,500 a month and more than $37,000 over the life of the loan, and that is at the best rate SoFi advertises, which most borrowers won’t get. The lower rate never had a chance against a payment set by income.
Every borrower is different, and these are estimates under today’s rules. That is the point: run your own numbers before you sign anything.
When refinancing can make sense
- Your loans are already private. Refinancing a private loan to a lower rate gives up nothing federal.
- You have federal loans, a high and stable income, no path to forgiveness, and you will pay them off quickly anyway. Even then, compare your federal options first, because you can’t undo it.
Run your federal options first
You can compare every federal plan your loans can actually use, free, in ChatGPT or Claude. Add Finology Software to ChatGPT or to Claude, create a free login, and ask. Our borrower hub shows how to make your 5 free questions count.
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Put your plan where you can see it
Add your loans and your plan in a free borrower account. See your payoff date, watch your progress, and know exactly what an extra $50 a month changes.
