The latest student loan refinancing rates

For 10-year fixed rate loans, the average student loan refinancing rate continued its upward trajectory to 5.81% from 5.42% the week prior, according to the latest rates from Credible for the week ending June 27. However, average rates on 5-year variable-rate loans decreased to 3.29%, down from 3.37% the week prior. (You can see the lowest rates you may qualify for here.)

With more than 40 million Americans on the hook for student loan debt totaling more than $1.7 trillion dollars, it’s not surprising that many people are looking to refinance their student loans. For Americans with private student loans, it can make a lot of sense. If you’re in that boat, and your credit score has improved or your finances have changed or you simply haven’t shopped around in awhile — and you’re able to get a more attractive interest rate or shorten your loan term, you’re likely to benefit from a refinance.  But those with federal loans may want to think twice. Here’s what to know.

That’s because when refinancing a federal student loan, the borrower effectively takes out a new private loan to pay off their existing federal loan. But in doing so, you lose federal protections that accompanied your federal loans. These protections include any pandemic-related forbearance (currently, student loan payments are interest are on pause until August 31, 2022), government-issued loan forgiveness and more forgiving repayment plans based on your income. Even if you aren’t taking advantage of these perks now, think about whether you might in the future.

If you do decide to refinance your student loans, shop around to find the lender with the best rates and terms. Note that unlike federal loans, private loans may offer a variable rate, which often starts off lower than a fixed rate loan. But they may start increasing over the term of the loan, which could increase the cost of that loan over time, and thus your monthly payment could increase. “The only time I would recommend a borrower getting a variable rate right now is if they are capable of repaying the loan and fully intend to do so before interest rates rise too much,” Mark Kantrowitz, a student loan expert and founder of PrivateStudentsLoans.guru. recently told MarketWatch Picks.