Private student loans and refinancing, compared.

Federal first: why you almost always use up Direct loans before private

The order of operations for paying for school is unromantic but consistent: scholarships and grants, then work-study, then federal Direct Subsidized loans (interest paid by the government while you're enrolled at least half-time), then federal Direct Unsubsidized loans, and only after that, private. Federal rates are fixed by Congress for a given school year, the same rate is offered to every borrower regardless of credit, and the loans carry protections — income-driven repayment, deferment, forbearance, death-and-disability discharge, and Public Service Loan Forgiveness — that private lenders simply do not replicate. The most common mistake we see is families taking a private loan first because the rate looks competitive, then maxing federal afterward. The reverse is almost always the right move. Estimates only — final terms are set by the partner.

Refinancing federal loans: what you give up

Refinancing existing student debt with a private lender like SoFi or Earnest can drop the APR by several points for borrowers with strong credit and steady income. The trade-off is that any federal loans rolled into the refi become permanently private. That means no SAVE or other income-driven repayment plan, no Public Service Loan Forgiveness, no Teacher Loan Forgiveness, no automatic discharge on death or total permanent disability, and no political-relief eligibility if Congress ever forgives or pauses federal balances again. For a borrower earning $150k+ in the private sector with no plan to use any of those programs, refinancing $80k of 7.5% federal debt down to 5.5% private can save five figures over the term. For a teacher, nurse, or anyone counting on PSLF, refinancing federal loans is almost always a mistake.

How a co-signer changes your APR (and what release means)

Most undergraduate borrowers don't have the credit profile to qualify for a private student loan in their own name — and when they do, the rate is usually at the high end of the published range. Adding a creditworthy co-signer (typically a parent) is the single largest lever on APR. The co-signer's score and income are layered onto the application, often dropping the rate by 2–4 percentage points and unlocking higher loan amounts. The catch: the co-signer is fully liable for the loan, the balance shows on their credit report, and a missed payment damages two scores. Some lenders — Sallie Mae, College Ave, and Earnest among them — offer co-signer release after 12–48 consecutive on-time payments and a credit re-check on the primary borrower. Others don't, and the only exit is refinancing into the borrower's name alone.

Variable vs. fixed: the volatility math

Most private student loans and refinance products offer both fixed and variable rate options. The variable rate usually starts lower — sometimes a full point or more below the equivalent fixed rate — because the lender is shifting interest-rate risk onto the borrower. Variable APRs reset monthly or quarterly against a benchmark (SOFR, plus a margin), so a 50-basis-point move from the Federal Reserve flows directly into the monthly payment within a billing cycle or two. On a 10-year refi of $80,000, a sustained 1.5-point increase over the loan's life can add roughly $7,000 in interest. Variable rates make sense when the loan will be paid off aggressively — three years or fewer — so the borrower is out before any meaningful rate cycle plays through. For a standard 10-, 15- or 20-year payoff, the fixed rate is almost always the safer trade.

PSLF, IDR, and the public-service forgiveness math

Public Service Loan Forgiveness wipes out the remaining balance on Direct federal loans after 120 qualifying monthly payments — roughly 10 years — while the borrower works full-time for a government or qualifying non-profit employer. The payments only count if they're made under an income-driven repayment plan (SAVE, PAYE, IBR or ICR), which is why PSLF and IDR are paired in any honest analysis. For a borrower earning $55,000 as a public-school teacher with $90,000 in federal debt, PSLF can mean tens of thousands of dollars of forgiven balance — a vastly better outcome than refinancing privately for a marginally lower APR. The administrative burden is real (annual employer certification, paperwork through MOHELA), but the math is one-sided. Anyone in qualifying employment should not refinance federal loans privately, full stop.