Student loan refinance rates for those with higher credit scores have dropped. But is a refi right for you?

The latest rates for refinancing student loans.

Getty Images/iStockphoto

To refinance your student loan into a 10-year fixed-rate loan, average rates are 5.98% for the week ending November 1, compared to 5.90% the week before, while variable-rate loans on 5-year bonds saw their rates settle at 3.54%, down. down 3.65% the previous week, according to data from personal finance firm Credible surveying those who prequalified in their student loan market. For those with credit scores of 720 and above, rates have fallen to 5.74% for 10-year fixed loans and 3.31% for 5-year variable loans. Check out some of the best student loan refi rates you can get here.

It’s not always easy to determine whether or not you should refinance your student loans. If you are considering a private student loan because your credit score has improved or your finances have changed and/or you are able to obtain a more attractive interest rate or shorten the term of your loan, you will likely benefit from a refinance.

But for those with federal student loans, refinancing can be more complicated. For one, a student loan repayment pause remains in effect until January 2023, so if you take advantage of it, you might not want to refi until the end. Also, when you refinance, you’re actually taking out a new private loan to pay off an existing public loan, but that means all of the federal protections that come with federal loans are lost. So the borrower forgoes things like government-issued loan forgiveness and income-based repayment plans that might act as a parachute at some point during the life of the loan.

That’s why, before refinancing, experts recommend weighing the pros and cons of a refi, especially if the borrower has federal loans and uses – or plans to use – one of the repayment programs or rebates based on loan income. Even if a borrower is not currently taking advantage of the programs and protections offered, it is important to determine whether or not they will need repayment or loan forgiveness plans in the future, before completely rejecting the option. If you decide to refinance, be sure to shop around for the best rates and terms.

Any advice, recommendations, or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our business partners.

Previous Why Friday Night High School Football is Hit by a Bus Driver Shortage
Next First Look at RENT at the Porchlight Music Theater