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Student loan consolidation and refinancing guide

Do you have too many student loans to keep track of? Get answers to frequently-asked questions on federal student loan consolidation loans and private student loan refinancing. Find out the pros and cons to consolidation, if you're eligible, and how to apply.

Paying off student loans isn’t fun. But as if having a debt that may take 10 years or more to repay isn’t enough, most of us also graduate with several different student loans. Each loan may have different servicing company, a different interest rate, repayment schedule, and due date.

The last thing you want to do is to miss a student loan payment or fail to pay a loan at all because you forgot about it. (And trust, me, it happens!) But even if you’re organized, life might be a lot simpler if you had one or two student loan payments instead of 10. And sometimes, you might even be able to save money by refinancing your student loans at a lower interest rate.

Here’s a beginner’s guide to student loan consolidation and refinancing. Sometimes it makes sense to consolidate or refinance, but many times it doesn’t. Get the facts before you decide.

What is student loan consolidation?

Student loan consolidation is a program that repackages all of your federal student loans into a single loan with one fixed interest rate and one payment.

How does student loan consolidation differ from refinancing?

The terms consolidation and refinancing are sometimes used interchangeably, but student loan consolidation is a unique program that applies only to federally guaranteed student loans. These include:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • Direct PLUS Loans
  • PLUS loans from the FFEL (Federal Family Education Loan Program)
  • Supplemental Loans for Students (SLS)
  • Federal Perkins Loans
  • Federal Nursing Loans
  • Health Education Assistance Loans
  • Some existing consolidation loans

Refinancing means that you are taking out a new loan to pay off existing loans. Most often, you would refinance private student loans. It is possible to refinance private and federal student loans together, but it’s not always advisable because federal student loans come with certain benefits that are lost if you refinance them with a private lender.

Another big difference is that federal student loan consolidation does not require a credit check, whereas refinancing private student loans requires good credit.

What are the benefits of consolidation?

1. Consolidation can allow you to make one payment for all of your student loans. 

That’s far easier than making several payments and remembering different due dates. Not only will you save time and frustration, you’ll be less likely to accidentally miss a payment and incur fees and/or a negative mark on your credit report. Note: If you have both federal and private loans, don’t consolidate them together; you’ll likely end up paying a higher interest rate on your federal loans than necessary.

2. Refinancing or consolidation could lower your monthly payment. 

If you’re struggling to make your student loan payments, you may be able to reduce your monthly payment by refinancing your student loans either at a lower interest rate, with a longer repayment term, or both. If you can refinance at a lower interest rate, you’ll save money both on your monthly payment and the total interest you pay. Beware, however, that if you extend the term of your loan (for example, from 10 to 20 years), your monthly payment will be lower but you will pay more in interest over the life of the loan.

3. Consolidation gives you a fixed interest rate. 

Student loan consolidation gives you one fixed interest rate. If you still have variable-rate student loans, this may save you money over time if interest rates get higher. The interest rate on your consolidation loan is calculated by taking the weighted average of all of your current interest rates and rounded up to the nearest 1/8 percent.

What are the drawbacks to consolidation?

There aren’t many drawbacks to federal student loan consolidation. For example, when you consolidate, you can keep most of the benefits of your federal student loans—like the ability to reduce or defer payments during periods of financial hardship or enroll in an income-based repayment plan. That said, certain federal student loans have forgiveness programs that are specific for that kind of loan. These programs may pay off the balance of your loan after you’ve worked in a certain field for a period of time. You’ll want to ensure that you won’t lose these benefits if you consolidate.

You may pay more if interest rates go down.

If you have variable-rate student loans, there is always the chance that those rates could go down and the fixed rate you get with a consolidation loan will be higher than you would’ve paid. Right now (2015), however, this isn’t much of a risk as interest rates are low to begin with and will conceivably only go up in the near future.

Who is eligible for federal loan consolidation?

You are eligible for federal loan consolidation if you have two or more federal student loans and have graduated from school or dropped below half-time status. You may be eligible even if you are in default on one or more of your student loans, provided that you have agreed to a modified repayment plan.

Can I consolidate loans with my spouse?

No, you can only consolidate your own federal student loans.

How do I apply for federal loan consolidation?

You can learn more about federal student loan consolidation at StudentAid.Ed.Gov or begin the application at You can also obtain more information about federal student loan consolidation through your loan servicer(s).

These are the only places you should go for federal student loan consolidation. Avoid other companies promising to reduce your interest rates or consolidate your federal loans. Private loans are another matter, which we’ll dive into next.

Can I consolidate private student loans?

Yes, although the process to consolidate private student loans is different than for federal student loans. You cannot consolidate private student loans with a federal consolidation loan. If you have multiple student loans that you want to consolidate, you’ll need to refinance your existing loans with a new loan.

Can I refinance private and federal student loans together?

Yes, but it may not be ideal. If you get a private refinancing loan, you can use it to pay off existing private or federal loans. But federal student loans come with benefits—like the ability to reduce or defer payments during hardships—that private student loans do not have. If you refinance federal student loans with a private lender, you will lose these benefits.

Who is eligible for a private student loan refinancing?

Whether or not you’re eligible for private student loan refinancing depends on your credit, income, and existing debt. You’ll need a good credit score and you must demonstrate that you earn enough to afford the monthly payments on the new loan. For this reason, private student loan refinancing is usually not an option if you are struggling to make your existing student loan payments.

Is there a limit on how much I can refinance?

Not necessarily, but you will need enough income to qualify for whatever amount you borrow. A rule of thumb is that your total monthly debt payments (including mortgage, car payment, credit cards, and student loans) should not be more than 40 percent of your monthly income (before taxes). If your ratio is higher than this, you may have a hard time getting approved for a refinancing loan.

Where can I apply for private student loan refinancing?

Fortunately, student loan refinancing is getting a bit more competitive that in the past. Money Under 30 has partnered with a service called Credible that matches you with the student loan refinancing lenders that can offer you the best interest rates and terms.

Credible Student Loan Refinancing

You can use Credible to compare refinancing offers from multiple lenders at once. Each lender has different benefits and interest rate ranges, so if one Credible lender can’t give you the interest rate you’re looking for, another one might.

Rates starting at 5.28% fixed APR (with autopay)* and 5.28% Var. APR (with autopay) See Terms*.

Special offer: Get a $100 bonus when you close your loan. All bonus payments are by e-gift card. See terms.
  • Single application form
  • Personal information is not shared
  • 100% free to use
  • Limited lending opportunities
Learn More
Credible Credit Disclosure - Requesting prequalified rates on Credible is free and doesn't affect your credit score. However, applying for or closing a loan will involve a hard credit pull that impacts your credit score and closing a loan will result in costs to you.


Consolidation or refinancing may be our best option if you’re struggling with keeping track of your different loans, or if you’re having trouble making your monthly payment. But neither consolidation nor refinancing should be entered into lightly. Make sure you do the necessary research and know all the consequences of your decision.

About the author


David Weliver

Founder of Money Under 30, David has over 20 years of experience as a personal finance journalist covering credit cards, banking and investing.

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