How the student loan refinance calculator works
Both loans use the standard amortization formula for fixed-rate loans:
Payment = P × r ÷ (1 − (1 + r)−n)
P is the balance, r is the yearly rate divided by 12, and n is the number of monthly payments. Total interest is the payment times the number of payments, minus the balance. Savings are what you'd pay in total on your current loan, minus what you'd pay on the new one, including fees.
Watch the term. A longer term lowers the monthly payment, but you pay interest for more years, so the total can go up even at a lower rate. The calculator tells you when that happens.
Refinancing federal loans: what you give up
Refinancing means a private lender pays off your loans and gives you a new private loan. Federal consolidation is a different thing: it combines federal loans into a new federal Direct Consolidation Loan and keeps them federal. (studentaid.gov: loan consolidation)
If you refinance federal loans privately, the new loan no longer qualifies for federal programs. That includes repayment plans based on income, Public Service Loan Forgiveness, and federal deferment and forbearance if you lose your job or go back to school. A lower rate is worth less if you might need any of these. Review your options on studentaid.gov first.
Refinancing private loans doesn't carry this tradeoff, since they never had federal benefits.
Worked example
You owe $40,000 at 7.5% with 10 years left. Your payment is $474.81 and you'd pay $16,977 in interest from here.
A lender offers 5.5% for 10 years with no fees. The new payment is $434.11, $40.70 less each month, and total interest drops to $12,093. You save about $4,884.
Stretch the same 5.5% loan to 20 years and the payment falls to $275.15, but total interest rises to $26,037. That's $9,060 more than your current loan, despite the lower rate.
Common questions
Should I refinance federal student loans?
Think carefully. A private refinance can lower your rate, but you permanently lose federal benefits, including income-driven repayment, Public Service Loan Forgiveness, and federal deferment and forbearance. If your job or income isn't steady, those protections can be worth more than the interest you'd save.
Is refinancing the same as consolidation?
No. Federal Direct Consolidation combines federal loans into one federal loan and keeps federal benefits. It doesn't lower your rate; the new rate is the weighted average of the old ones, rounded up slightly. Refinancing is done by a private lender and can change the rate.
Why does a longer term cost more?
You pay interest every month you owe money. A longer term means smaller payments but more months of interest, so the total usually goes up even if the rate is lower.
Should I include fees?
Yes. Enter any origination or other one-time fee so the savings figure is honest. If the lender adds the fee to your new balance instead of charging it up front, that fee also earns interest, so the real cost is a little higher than shown.
Does this work for variable-rate offers?
Only as a snapshot. A variable rate can change, so the payment and total interest shown are what you'd pay if the starting rate never moved.