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Typically, student loan borrowers cannot refinance their debt until they graduate or withdraw from school. At that point, federal student loans and the majority of private student loans have a grace period, so it can make sense to refinance right before the grace period ends.

Depending on your financial situation, the goal of refinancing may be to snag a lower interest rate and/or have lower monthly payments. Doing so can alleviate some of the stress you may feel when repaying your debt. In this guide, you’ll learn when you can refinance and what options are available, plus the potential benefits and downsides of each.

What Do Your Current Loans Look Like?

Before deciding whether or not to refinance your student loans, you need to know where your loans currently stand. Look at the loan servicers, loan amounts, interest rates, and terms for all loans before making a decision.

Contact Info for Most Federal Student Loans

The government assigns your loan to a loan servicer after it is paid out. To find your loan servicer, visit your account dashboard on studentaid.gov, find the “My Aid” section, and choose “View loan servicer details.” You can also call the Federal Student Aid Information Center at 800-433-3243.

Loans Not Owned by the Department of Education

Here’s how to get in touch:

•   If you have Federal Family Education Loan Program loans that are not held by the government, contact your servicer for details. Look for the most recent communication from the entity sending you bills.

•   If you have a Federal Perkins Loan that is not owned by the Education Department, contact the school where you received the loan for details. Your school may be the servicer for your loan.

•   If you have Health Education Assistance Loan Program loans and need to find your loan servicer, look for the most recent communication from the entity sending you bills.

Private Student Loans

Private student loans are not given by the government, but rather banks, credit unions, and online lenders. You’ll need to find your specific lender or servicer in order to find out your loan information.

Can You Refinance Student Loans While Still in School?

You may be able to refinance your student loans while still in school with certain lenders, but doing so may not make the most sense for your situation.

If you’re worried about interest accruing on your unsubsidized federal loans and/or private student loans while in school, you can most certainly make interest-only payments on them in order to keep the interest from capitalizing.

One important note: With federal student loans, any payments you make while still in school or during the grace period will not count as a qualifying payment toward loan forgiveness, if you plan on using that.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

Which Loans Can Be Refinanced While Enrolled?

You can refinance any type of student loan while enrolled in school, assuming that the lender allows it. If you’re still in school and want to refinance, a lender will want to make sure you have a job or job offer on the table, are possibly in your last year of school, and have a solid credit profile. You could also consider refinancing your student loans with a cosigner if you do not meet the lender’s requirements on your own.

A couple of important points if you are considering refinancing federal student loans with a private lender:

•   Doing so means you will forfeit federal benefits and protections, such as forbearance and forgiveness, among others.

•   If you refinance for an extended term, you may have a lower monthly payment but pay more interest over the life of the loan. This may or may not suit your financial needs and goals, so consider your options carefully.

Which Loans Can’t Be Refinanced While Enrolled?

If you find a lender willing to refinance your student loans while still in school, they most likely won’t exclude a certain type of loan. However, it is best not to refinance federal student loans while enrolled. Federal Subsidized Loans, for example, do not start earning interest until after the grace period is over. Since you aren’t paying anything in interest, it doesn’t make sense to refinance and have to start paying interest on your loans immediately.

If you plan on using federal benefits, such as income-driven repayment plans or student loan forgiveness, refinancing student loans could be a bad idea. Refinancing gives you a new loan with a new private lender, thereby forfeiting your eligibility to federal benefits and protections, as noted above.

Is It Worth Refinancing Only Some of Your Loans?

Yes, it can be worth refinancing only some of your loans. The student loans you may want to focus on refinancing may include ones that have a variable rate (and you prefer a fixed rate), ones with a relatively high interest rate, or ones where you’ve had a less-than-ideal relationship with the servicer and are looking for a new experience.

When you might want to think twice about refinancing:

•   If you have federal loans and plan on using an income-based repayment plan, for example, it makes sense not to include those loans in the refinance.

•   If you have a low, fixed interest rate currently, you should probably keep those loans as is. The main reason to refinance is to secure a lower interest rate or a lower payment. Keep in mind, though, that by lowering your payment, you typically are extending your term. This can mean that you end up paying more in interest over the life of the loan.

Examples of Refinancing Before Earning a Degree

As stated above, there are some lenders that may allow you to refinance before you graduate or withdraw from school. These lenders may currently include Citizens Bank, Discover, RISLA, and Earnest.

Graduate students are also eligible to refinance their undergraduate student loans, assuming they meet the lender’s requirements or use a cosigner. Parents with Parent PLUS Loans are also typically allowed to refinance their loans prior to their child graduating. Rules will vary by lender, so make sure to do your research and choose a lender that will work with your unique situation.


💡 Quick Tip: Federal parent PLUS loans might be a good candidate for refinancing to a lower rate.

Alternatives to Refinancing

If refinancing your student loans isn’t the right option for you, there are alternatives to refinancing you can explore.

•   The main alternative is student loan consolidation, which combines your federal student loans into one loan with one monthly payment. The main difference between consolidation and refinancing is the interest rate on a federal loan consolidation is the weighted average of the rates of the loans you are consolidating, rounded up to the nearest one-eighth of a percentage.

•   You typically won’t save on interest, but you can lower your monthly payment by extending the loan term. Doing this, however, means you’ll probably pay more in interest over the life of the loan.

•   Student loan refinancing refers to paying off current loans with a new loan from a private lender, preferably with a lower rate. This rate is not the weighted average of the loans, but rather is based on current market rates, your credit profile, and your debt-to-income ratio.

•   Other alternatives to refinancing include making interest-only payments while still enrolled in school or requesting a student loan forbearance if you’re struggling to make your payments. Forbearance means you can reduce or pause payments for a designated period of time.

You’ll want to know all your student loan repayment options — and the pros and cons of consolidating or refinancing your loans, prior to making a decision.

A calculator tool for student loan refinancing can come in handy when estimating savings, both monthly and over the life of your loan.

Weighing Perks and Interest Rates

Before deciding whether refinancing is right for you, it’s important to again highlight this important point: If you refinance your federal student loans with a private lender, those loans will no longer be eligible for programs like income-driven repayment plans, federal forbearance, and Public Service Loan Forgiveness.

But if you can get a lower interest rate, refinancing may be a good fit. Most refinancing lenders offer loan terms of five to 20 years. Shortening or elongating your loan term can affect your monthly payment and the total cost over the life of your loan.

For some borrowers, lengthening the term and lowering the monthly payment will be a valuable option, even though it can mean paying more interest over the life of the loan. Only you can decide if this kind of refinancing makes sense for your personal finances.

The Takeaway

When can you refinance student loans? As soon as you establish a financial foundation or bring a solid cosigner aboard. Can you refinance your student loans while in school? Yes, however, not all lenders offer this and it may not make sense for your situation. It’s also important to understand the implications of refinancing federal student loans with a private lender. If you do not plan on using federal benefits and protections and are comfortable with the possibility of paying more interest over the loan’s term, it might be a move worth considering.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

A 401(k) plan is an employer-sponsored retirement plan that you fund with pre-tax dollars deducted from your paycheck.

Understanding the nuances of a 401(k) plan may help individuals maximize their savings.

While financial and retirement situations differ, there are some 401(k) tips that could be helpful to many using this popular investment plan. Consider these eight strategies to help you save for retirement.

1. Take Advantage of Your Employer Match

2. Consider Your Circumstances Before Contributing the Match

3. Understand Your 401(k) Investment Options

4. Stay the Course

5. Change Your Investments Over Time

6. Find—and Keep—Your Balance

7. Diversify

8. Beware Early Withdrawals

8 Tips for Managing Your 401(k)

1. Take Advantage of Your Employer Match

Understanding an employer match is important to making the most of your 401(k).

Also called a company match, an employer match is an employee benefit that allows an employer to contribute a certain amount to an employee’s 401(k). Depending on the plan, the amount of the match might be a percentage of the employee’s contribution up to a specific dollar amount, or a set dollar amount.

Some employers may require that employees make a certain minimum contribution to be eligible for matching funds. For example, an employer might match 3% when you contribute 6%. Your employer may do something different, so be sure to check with your HR or benefits representative.

Even if you don’t contribute the maximum allowable amount to your 401(k), you still may want to take advantage of the match. In other words, in the example above, if the maximum contribution limit for your 401(k) is 10% and you aren’t contributing that much, it might make sense to at least contribute 6% to get the employer match of 3%.

An employer match is sometimes referred to as “free money,” as in, “don’t leave this free money on the table.” An employer match is money that is part of your compensation and benefits package. Claiming it could be your first step in wealth building.

💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

2. Consider Your Circumstances Before Contributing the Max

Contributing the maximum amount allowed to a 401(k) may make sense for some individuals, particularly if contributing the max isn’t a financial stretch for them. But if you’re struggling to reach that maximum contribution number, or if you have other pressing financial obligations, it may not be the best use of your money.

For 2024, the maximum amount you can contribute to a 401(k) is $23,000 if you’re under age 50, and $30,500, including catch-up contributions, if you’re 50 or older. (These limits don’t include matching funds from your employer.)

If you are living paycheck to paycheck, or you don’t have an emergency savings fund for unexpected expenses, you may want to prioritize those financial situations first. Also, if you have a lot of high-interest debt like credit card debt, it may be in your best interest to pay that debt down before contributing the full amount to your 401(k).

In addition, you may want to think about whether you’re going to need any of the money you might contribute to your 401(k) prior to retirement. Withdrawing money early from a 401(k) can result in a hefty penalty.

There are some exceptions, depending on what you’ll use the withdrawn funds for. For example, qualified first-time home buyers may be exempt from the early distribution penalty. But for the most part, if you know you need to save for some big pre-retirement expenses, it may be better to do so in a non-qualified account.

You might also want to consider whether it makes sense to contribute to another type of retirement account as well, rather than putting all of your eggs in your 401(k) basket. While a 401(k) can offer benefits in terms of tax deferral and a matching contribution from your employer, individuals who are eligible to contribute to a Roth IRA, may want to think about splitting contributions between the two accounts.

While 401(k) contributions are made with pre-tax dollars and you pay taxes on the withdrawals you make in retirement, Roth IRA contributions are made with after-tax dollars and typically withdrawn tax-free in retirement.

If you’re concerned about being in a higher tax bracket at retirement than you are now, a Roth IRA can make sense as a complement to your 401(k). A caveat is that these accounts are only available to people below a certain income level.

3. Understand Your 401(k) Investment Options

Once you start contributing to a 401(k); the second step is directing that money into particular investments. Typically, plan participants choose from a list of investment options, many of which may be mutual funds.

When picking funds, consider what they consist of. For example, a mutual fund that is invested in stocks means that you will be invested in the stock market.

With each option, think about this: Does the underlying investment make sense for your goals and risk tolerance?

4. Stay the Course

At least part of your 401(k) money may be invested in the stock market through the funds or other investment options you choose.

If you’re not used to investing, it can be tempting to panic over small losses. Getting spooked by a dip in the market and pulling your money out is generally a poor strategy, because you are locking in what could possibly amount to be temporary losses. The thinking goes, if you wait long enough, the market might rebound. (Though, as always, past performance is no predictor of future success.)

It may help to know that stock market fluctuations are generally a normal part of the cycle. However, some investors may find it helpful to only check their 401(k) balance occasionally, rather than obsess over day-to-day fluctuations.

5. Change Your Investments Over Time

Lots of things change as we get older, and one important 401(k) tip is to change your investing along with it.

While everyone’s situation is different and economic conditions can be unique, one rule of thumb is that as you get closer to retirement, it makes sense to shift the composition of your investments away from higher risk but potentially higher growth assets like stocks, and towards lower risk, lower return assets like bonds.

There are types of funds and investments that manage this change over time, like target date funds. Some investors choose to make these changes themselves as part of a quarterly or annual rebalancing.

6. Find — And Keep — Your Balance

While you may want your 401(k) investments to change depending on what life stage you’re in, at any given time, you should also have a certain goal of how your investments should be allocated: for instance, a certain portion in bonds, stocks, international stocks, American stocks, large companies, small companies, and so on.

These targets and goals for allocation can change, however, even if your allocations and investment choices don’t change. That’s because certain investments may grow faster than others and thus, they end up taking up a bigger portion of your portfolio over time.

Rebalancing is a process where, every year or every few months, you buy and sell shares in the investments you have in order to keep your asset allocation where it was at the beginning of the year.

For example, if you have 80% of your assets in a diversified stock market fund and 20% of your assets in a diversified bond fund, over the course of a year, those allocations may end up at 83% and 17%.

To address that, you might either sell shares in the stock fund and buy shares in the bond fund in order to return to the original 80/20 mix, or adjust your allocations going forward to hit the target in the next year.

7. Diversify

By diversifying your investments, you put your money into a range of different asset classes rather than concentrating them in one area. The idea is that this may help to lower your risk (though there are still risks involved in investing).

There are several ways to diversify a 401(k), and one of the most important 401(k) investing tips is to recognize how diversification can work both between and within asset classes.

Diversification applies to your overall asset allocation as well as the assets you allocate into. While every situation is different, you may want to be exposed to both stocks and fixed-income assets, like bonds.

Within stocks, diversification can mean investing in U.S. stocks, international stocks, big companies, and small companies. It might make sense to choose diversified funds in all these categories that are diversified within themselves — thus offering exposure to the whole sector without being at the risk of any given company collapsing.

8. Beware Early Withdrawals

An important 401(k) tip is to remember that the 401(k) is designed for retirement, with funds withdrawn only after a certain age. The system works by letting you invest income that isn’t taxed until distribution. But if you withdraw from your 401(k) early, some of this advantage can disappear.

With a few exceptions, the IRS imposes a 10% penalty on withdrawals made before age 59 ½. That 10% penalty is on top of any regular income taxes a plan holder would pay on 401(k) withdrawals. While withdrawals are sometimes unavoidable, the steep cost of withdrawing funds early should be a strong reason not to, if possible.

If you would like to buy a house, for instance, there are other options to explore. First consider pulling money from any accounts that don’t have an early withdrawal penalty, such as a Roth IRA (contributions can typically be withdrawn penalty-free as long as they’ve met the 5-year rule).

The Takeaway

If you have a 401(k) through your employer, consider taking advantage of it. Not only might your employer offer a match, but automatic contributions taken directly from your paycheck and deposited into your 401(k) may keep you from forgetting to contribute.

Also be aware that a 401(k) is not the only option for saving and investing money for the long-term. One alternative option is to open an IRA account online. While there are income limitations to who can use a Roth IRA, these accounts also tend to have a bit more flexibility when withdrawing funds than 401(k) plans.

Another option is to open an investment account. These accounts don’t have the special tax treatment of retirement-specific accounts, but may still be viable ways to save money for individuals who have maxed out their 401(k) contributions or are looking for an alternative way to invest.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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