Refinancing Federal Student Loans to Private: What You Give Up

Published by the Modern Lending Solutions editorial team. Last reviewed: October 30, 2026.

Short answer: a private lender may offer a lower rate, but when it pays off your federal student loans you give up the federal program: income-driven repayment, federal forgiveness, federal deferment and forbearance rights, and federal discharge if you die or become permanently disabled. The CFPB says this kind of consolidation “can’t be reversed”. Compare the whole cost, and what you lose, before you sign. This is general information, not legal or financial advice.

What the CFPB says you give up

The CFPB says: “If you’re considering consolidating federal student loans into a private consolidation loan, keep in mind that you will lose the federal loan’s benefits and protections. Weigh the benefits and risks since this type of consolidation can’t be reversed” (CFPB, page last modified December 5, 2024, read October 30, 2026; an older page, so check for updates). It lists what you lose:

Repayment plans: “If you consolidate with a private lender, you will lose your rights under the federal student loan program, including deferment, forbearance, cancellation, and affordable repayment options”, including income-driven repayment.
Forgiveness: “If you refinance your federal loan with a new private student loan, you will no longer be eligible to participate in these federal loan forgiveness programs”, such as those for public service workers and some teachers.
Discharge: you “may also lose the protection of loan discharge or forgiveness in the case of death or permanent disability, which you get with federal student loans.” Some private lenders offer these, so ask.
Servicemembers: active duty servicemembers “might also lose the 6-percent interest rate cap benefit under the Servicemembers Civil Relief Act (SCRA) if they refinance.”

Another CFPB page says: “Think carefully before refinancing federal student loans into private loans. A private lender may offer a lower interest rate. However, you will lose the flexible repayment options and borrower protections offered by federal student loans” (CFPB, page last modified September 6, 2024, read October 30, 2026). The CFPB adds that you “may still qualify for relief options like forbearance under a private loan”, set by that loan’s terms (CFPB).

For what the federal plans, deferment, forbearance and discharge offer, see federal student loan vs personal loan and the StudentAid.gov pages on repayment plans, deferment, forbearance, discharge due to death and disability discharge. If you are behind on federal loans, see federal student loan default options first.

Federal consolidation is a different thing

The CFPB explains that a Federal Direct Consolidation Loan combines federal loans into a federal loan, with “a fixed interest rate that’s the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth of a percent” (CFPB). It stays in the federal program. A private refinance or private consolidation loan does not.

Rate and term risks

The CFPB points to three things to check (CFPB):

Variable rates: “If you switch from a federal to a private loan with a variable rate, however, your interest rate could rise above the original fixed rate and your payment could go up.” See fixed vs variable rate.
Term: “With a shorter repayment period, you generally have a higher monthly payment. With a longer repayment period, your payments are smaller, but you’ll pay more interest over the life of your loan.”
APR: “The monthly payment on your new loan might be lower, but the interest rate could be higher.” See APR vs interest rate.

On taxes, the CFPB says that if you combine student loans with non-student loans into one loan, “the refinanced loan may no longer qualify for the student loan interest tax deduction” (CFPB). Ask a tax professional about your case.

A $30,000 balance, only for the math

This example is only for the math. The $30,000 balance is an example figure. 6.52% is the fixed rate StudentAid.gov lists for undergraduate Direct Loans first disbursed from July 1, 2026 to June 30, 2027 (StudentAid.gov); your own federal loans may have other rates. The 8.52% row adds 2 points to that rate only to show what a variable rate rising would do. No private lender quoted any of these rates.

Example	Monthly payment	Total paid	Interest
6.52%, 10 years	$340.95	$40,914.00	$10,914.00
6.52%, 20 years	$224.03	$53,767.20	$23,767.20
8.52%, 10 years (example only)	$372.28	$44,673.60	$14,673.60

$340.95 x 120 = $40,914.00; $224.03 x 240 = $53,767.20; $372.28 x 120 = $44,673.60. A longer term lowers the payment but raises the total, and a higher rate raises both. Before you take a lower private rate, compare the whole cost and decide whether you are ready to give up the federal protections above.

Questions to ask a private lender

Is the rate fixed or variable? If variable, how is it set, when can it go up, and is there a cap?
What is the APR, the term, the monthly payment and the total of all payments?
Are there fees to apply, to close, or to pay the loan off early?
What forbearance or hardship options does the contract give if I lose income?
Is the loan discharged if I die or become permanently disabled? Is that in the contract?
If I have a cosigner, can the cosigner be released, and on what terms?
Can I refinance only some of my loans and keep the rest federal?

For cosigner release on private loans, see cosigner release options.

Checklist

List each federal loan, its rate and the benefits you use or may need.
Check whether you work toward a federal forgiveness program before you refinance.
Compare the total cost at the same term, not only the monthly payment.
Read whether the private rate is fixed or variable.
Remember the switch to private cannot be reversed.
Keep any loans you may need federal options for in the federal program.

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Sources

Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.

Refinancing Federal Student Loans With a Private Lender: What You Give Up