Consider these pros and cons before refinancing your student loans

If you're burdened with federal student loans, you may have come across websites or advertisements encouraging you to refinance your loans at a lower interest rate.

Refinancing student loans essentially means that you trade inyour current loans to a private lender in exchange for a new loan (hopefully with favorable financing) that you agree to pay off instead.

When you refinance, you can often lower the amount of interest you owe every month, helping you save more on your monthly payments over time. Refinancing also allows you to choose a more ideal payment plan, with the option to pay off the loan over many years or to pay it off more aggressively over a shorter amount of time.

There are, however, also downsides that you should consider before deciding to refinance your student loans. Below, CNBC Select breaks down the pros and cons of refinancing.

The biggest advantage of refinancing your student loans happens when you qualify for a lower interest rate that can either help you pay off the principal faster and/or decrease how much you pay each month.

Lower monthly payments free up cash that you can use on other expenses or put into a high-yield savings account earning above-average interest, such as the LendingClub LevelUp Savings and Marcus by Goldman Sachs High Yield Online Savings.

Here are a few other pros to consider when refinancing your student loans:

• Refinancing lets you alter your payment plan: Once you qualify for refinancing, you can choose the new term of your loan, whether it's five, 10 or 20 years. By setting a new repayment term, you can decide how quickly you want to pay off your loans. A shorter timeframe would mean making more aggressive monthly payments and a longer timeframe would mean lower payments.
• Your payments are streamlined and grouped together: Instead of owing multiple monthly payments to various lenders, refinancing might help you make only one monthly payment to one lender.
• There is the option to apply with a co-signer: Lenders like to see good credit and a low debt-to-income ratio when approving borrowers for refinancing. If you don't qualify, you might be able to have a co-signer who does hit these marks apply to you.
• Lower monthly payments help your overall financial picture: When you refinance and get a lower interest rate on your student loans, it's easier to avoid missing a payment. On-time payments are the biggest factor in having a healthy credit score, which can help you qualify for the best credit cards and reach life milestones like a mortgage on your first home.

The biggest drawback of refinancing your student loans is giving up the protections that you otherwise receive with federal loans, such as income-driven repayment plans. You'd also miss out on federal student loan forgiveness programs and any future relief measures as soon as your loans switch from federal to private.

While private student loan lenders don't offer all the same protections you receive with federal loans, they do have some alternatives. Some private lenders offer deferment in the case of unemployment or economic hardship, as well as the option to make interest-only payments before your repayment term begins. Be sure to inquire about these protections before you refinance with a private lender.

Here are a few other cons to consider when refinancing your student loans:

• Not every borrower is eligible for refinancing: To get approved, you'll likely need good credit and a low debt-to-income (DTI) ratio. This shows lenders how much of your monthly income goes toward your bills. Typically, at least a 650 credit score is required to be eligible for refinancing, but a score in the 700s gives you a much better chance of qualifying. Lenders look for a DTI ratio under 50%, but the lower the better. To calculate your DTI ratio, divide your total monthly payments by your monthly earnings. Those borrowers who don't qualify on their own often need a co-signer who does.
• Your credit score helps determine your new interest rate: The better your credit score is, typically the better interest rate you'll be given. Keep in mind, however, there's no guarantee that your rate will be lower.
• Refinancing may lengthen your timeline for paying off loans: Refinancing your student loans when you are already halfway through paying them off may give you lower monthly payments for the rest of the term, yet it maystretch out the amount of time it takes to pay them off completely.
• You may not get a much lower interest rate: Before choosing to refinance, use student loan refinancing calculators like SoFi's to see how much you would actually save in interest compared to what you pay now. Many lenders also offer prequalification tools where borrowers can enter their information to receive a rate quote without having to submit an actual loan application (which results in a hard credit inquiry). Prequalifying lets you shop around for the best personalized rates and terms so you have a better idea of what to expect if you were to refinance, without hurting your credit.

It's also important to note that refinancing your federal student loans will permanently convert them into private loans. Make sure the possible lower rate you get from refinancing is worth giving up the benefits you only get with federal loans.

If you've decided you want to refinance your student loan, use a loan marketplace like Credible to compare lenders or take a look at CNBC Select's top picks for student loan refinancing. You're likely to see the most savings from refinancing when choosing a lender that offers competitive interest rates, zero application or origination fees and no penalties for prepayment — which all of our selections do.

• Best for member benefits: SoFi Student Loan Refinancing
• Best for fair credit score: Earnest Student Loan Refinancing
• Best for having a co-signer: Citizens Bank Student Loan Refinancing
• Best for parent loan refinancing: Education Loan Finance Student Loan Refinancing (ELFI)
• Best for medical school loan refinancing: Laurel Road Student Loan Refinancing

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every student loan article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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Information about Marcus by Goldman Sachs High Yield Online Savings has been collected independently by Select and has not been reviewed or provided by the banks prior to publication. Goldman Sachs Bank USA is a Member FDIC.