Historically, the benefits of federal student loans have mostly outweighed those of private loans. 

The government's loans come with protections such as a fixed interest rate determined by Congress, borrowing limits to help ensure undergraduate students aren't taking on too much debt and various repayment plans. Plus, programs like Public Service Loan Forgiveness have allowed federal borrowers to have their loans forgiven.

Given all these benefits, refinancing federal student loans into private loans has generally been discouraged by experts and advisors. But recent developments in the federal student loan program may be making private financing more attractive.

The last five years have highlighted both the benefits of federal loans — borrowers got a three-year break from payments during the pandemic, for example — as well as the limits. Federal borrowers stood to benefit from President Joe Biden's debt forgiveness initiatives, but many of them were ultimately struck down in court. 

Under the Trump Administration, it is unlikely any student loan forgiveness will continue. There is also concern that the dismantling of the Department of Education could upend federal student loan servicing altogether. 

"While refinancing federal loans into private ones has traditionally been seen as risky, the landscape is shifting," Alyssa Schaefer, general manager and chief experience officer at digital banking platform Laurel Road, tells CNBC Make It. 

Here's when refinancing your student loans from federal to private may make sense.

Good credit may make refinancing worth it

The primary benefit of private student loans is that borrowers who have good credit scores may be able to get a lower interest rate than the flat rate federal borrowers receive, saving those borrowers money over the life of the loan. 

"The best candidates to refinance are high-income earners with a good credit score," says Hermes Conesa, an advisor at Student Loan Planner. "If they also have high debt, this may save them a lot on interest."

New federal undergraduate student loans disbursed between July 2024 and July 2025 come with a 6.53% fixed interest rate. Borrowers with excellent credit may be able to refinance to a private loan with an interest rate below 5%, according to SmartAsset. Plus, lenders typically don't charge origination or application fees for student loan refinancing.

Say you have a $30,000 student loan balance. To pay it off in 10 years with the federal interest rate of 6.53%, you'd pay $341 a month for a total of $40,932, according to SmartAsset's payment calculator. 

But for a private loan with a 4.99% interest rate, you'd pay $318 a month over 10 years for a total of $38,166. Assuming you make every monthly payment in full, you'd save around $3,000.

'Do a total cost analysis'

If you're considering refinancing from federal to private student loans, you "need to do a total cost analysis comparing both paths," Schaefer says. Personal circumstances, such as your credit score and debt burden, will impact your refinancing options.

"Look at how much you'd pay over the life of the loan under federal programs versus private refinancing," she says. "If there's substantial savings and you're financially stable, refinancing could be worth considering."

It's also important to keep in mind what you'd be giving up. Borrowers who want any chance at having their loans forgiven through PSLF should stick with federal loans, Conesa says, as private loans are ineligible.

He adds that the common advice to generally avoid refinancing hasn't changed, in part because federal borrowers still have access to valuable benefits like income-driven repayment plans. Though Trump and Republicans in Congress have floated changes to those options, as well as the elimination of PSLF, plans like income-based repayment are still available for now.

And remember that refinancing is irreversible, Schaefer says. If another president reinstates or expands benefits for federal loan borrowers in the future, you would likely not be eligible. 

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