How to Consolidate and Refinance Student Loans? Full Detail

consolidate students loans

Combining multiple student loans into a single new loan, a student loan consolidation, is a way to potentially save money and reduce your monthly payment. The Department of Education offers federal loan consolidation for federal student loans, which extends the loan term but doesn’t lower the interest rate.

Alternatively, you can consolidate both federal and private loans into a new private loan, which is commonly known as student loan refinancing.

However, refinancing federal student loans turns them into private loans, which means they’re no longer eligible for federal programs like income-driven repayment or loan forgiveness.

Student Loan: Consolidation vs Refinancing

What actually it does?Combines multiple federal loans into one federal loan.Combines private and/or federal loans into one private loan.
Which loan can you combine?Federal loans only.Private and/or federal loans.
Can You lower Your rates?No.Yes.
Can You save money?No. Consolidation may lower your payments by extending the loan term, but your interest amount will increase.Yes.
Can You access federal loan protections, repayment options and forgiveness programs?Yes.No.
Will You pay just one monthly bill?Yes.Yes.

Consolidate private student loans

If you’re looking to save money on your student loans, consolidating or refinancing private student loans could be an option if you can secure a lower interest rate. To determine the interest rate, the lender will consider your financial history, including credit score, income, job history, and education background. Generally, a credit score in the high 600s or above is required to qualify, and interest rates for refinancing can range from 5% to more than 9%.

Private student loan consolidation may be a good choice if you already have private student loans, good or excellent credit (usually a credit score of 690 or higher), and a steady income. If your credit score or income is not strong enough, you can apply with a cosigner who has better credit.

However, if you have federal student loans, it may be wise to hold off on refinancing. Federal student loan interest rates are currently at zero, and payments are on hold until later this year. Waiting until the end of the student loan payment forbearance period and any potential loan cancellation or income-driven repayment credits are applied (if you qualify) could be beneficial.

Use online calculators to compare your monthly student loan payments under three scenarios: federal student loan consolidation, private student loan refinancing, and income-driven repayment.

How to consolidate private student loans

When it comes to finding the best lenders for student loan refinancing, the key is to shop around. Take the time to research several lenders and gather multiple interest rate offers before making a decision.

  1. Look for lenders that fit your specific needs. Some lenders may cater to different situations such as refinancing international student loans or offering refinancing options for those who did not complete a degree.
  2. Collect multiple interest rate offers. Prequalifying may require providing basic information, but this usually does not affect your credit score. Your objective should be to find the lowest interest rate possible.
  3. Select your lender and loan terms. Understand the interest rate – whether it is fixed or variable – and your repayment term. These are important factors that determine your monthly payment and overall cost.
  4. Complete the application process. If you are comfortable with the loan offer, complete an application to formally apply.

If your application is approved, you can sign the required documents and wait for the new lender to pay off your current lender. Continue making payments to your current lender until your refinancing process is complete.

Current rates from private refinancing lenders

Few are as:

LenderAPRCheck Rates
EarnestFixed: 4.96% – 8.99%
Variable: 4.99% – 8.94%
Click Here
SofiFixed: 4.99% – 9.99%
Variable: 5.74% – 9.99%
Click Here
Education Loan FinanceFixed: 5.08% – 8.04%
Variable: 4.78% – 8.49%
Click Here
LandKeyFixed: 4.49% – 10.68%
Variable: 4.76% – 7.86%
Click Here
LaurelroadFixed: 4.49% – 8.7%
Variable: 4.74% – 8.6%
Click Here

Federal student loan consolidation

Federal loan consolidate offers a significant advantage of combining several student loan payments into one, which makes it easier for you to manage your debt. Since it is a federal program, there is no credit requirement, but it does not provide a chance to lower your interest rate.

If you:

  • Need to consolidate your loans to become eligible for income-driven repayment, public service loan forgiveness, or other relief programs. This applies to those who have Federal Family Education Program, Perkins, or parent PLUS loans.
  • Require a single federal loan payment, but don’t expect it to be significantly lower.
  • Are in student loan default and need to get back on track.

You may be eligible for federal student loan consolidation once you graduate, leave school or drop below half-time enrollment.

When you consolidate your federal loans, the government will repay your previous loans and replace them with a direct consolidation loan. Your new interest rate will be a fixed rate that represents the weighted average of your previous rates, rounded up to the next one-eighth of 1%. For example, if the weighted average is 6.15%, your new interest rate will be 6.25%.

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When consolidating federal loans through the Department of Education, the repayment term could range from 10 to 30 years and typically starts within 60 days of disbursement. Consolidation through the Department of Education is free, and it is advised to avoid companies that charge fees for consolidating.

How to consolidate federal loans

To access the direct consolidation loan application, login to and gather the documents listed in the “What do I need?” section before starting. Ensure to complete the application in one session and set aside about 30 minutes to fill it out.

  • 1. Enter which loans you do — and do not — want to consolidate.
  • 2. Choose a repayment plan. You can either get a repayment timeline based on your loan balance or pick one that ties payments to income. If you pick an income-driven plan, you’ll fill out an income-driven repayment plan request form next.
  • 3. Read the terms before submitting the form online. Continue making student loan payments as usual until your servicer confirms consolidation is complete.

If your loans are in default, consolidation is one of a few methods to get your loans back on track. To consolidate defaulted loans you’ll need to make three full, on-time consecutive monthly payments on the defaulted loan and agree to enroll in an income-driven repayment plan.

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