Here's how to decide whether you should refinance your student loans

If you are one of the millions of Americans with student loans, you are probably interested in anything that can save you money. In many cases, refinancing your student loans will do just that.

Refinancing is a fancy term for paying off your old loans with a new loan. Essentially you take a loan with a private lender (SoFi, Earnest, and Commonbond are popular options for refinancing) and allow that lender to pay off your original loans. Then, you're responsible for paying the new loan, usually at a lower interest rate.

But don't rush and refinance before you understand the long-term costs and ramifications. Follow these steps to decide if refinancing your student loans makes sense.

Should I refinance my student loans?

1. Review your student loans

Start by gathering all of the details on your current loans in one place. Make a list of your loans with balances, interest rates, and minimum payments so you can get an idea of the total you owe, what you have to pay each month, and how far you are from paying off each loan if you have multiple.

2. Note which loans are federal and which are private

While going through your loan list, also note if they are federal student loans or private student loans. Federal loans have some benefits like the ability to sign up for an income-driven repayment plan, deferment, or forbearance that may not be the case with private loans. Federal loans may also be subsidized and could allow loan forgiveness if you participate in a qualifying plan. With private loans, you can expect to pay all interest and all balances down to zero.

3. Check out refinance options

Private lenders and loan companies like SoFi, Earnest, and Commonbond offer loans to pay for your education as well as refinance loans that can repackage existing student debt. Sites like Credible allow you to compare multiple quotes in one place. Getting a preliminary quote isn't hard: You just enter some basic information online. The more information you enter, the more detailed your quote will be.

Your options to refinance may vary based on your credit history and current debt load. Shopping around will help you find the best deal to refinance your loans. The most important place to look when shopping around is the interest rate. You should never refinance at a higher interest rate than you pay today. Only refinance if you will save money.

If you have a willing cosigner with excellent credit, it could be a path to a lower interest rate that saves you even more over the life of the loan.