Student Loan Refinancing and Consolidation Options

What is Federal Student Loan Consolidation?

Federal Student Loan Consolidation is a government program that allows borrowers to combine multiple federal student loans into a single loan. This can simplify repayment, as you’ll only have one monthly payment to manage.

Key Features:

  • Only available for federal loans – Private loans cannot be consolidated through this program.
  • Interest rate – The new interest rate is a weighted average of your existing federal loans’ interest rates, rounded up to the nearest 1/8 of a percent.
  • Apply online – You can apply directly through the U.S. Department of Education
  • Available for Parent PLUS loans (taken by parents for a dependent student) and Grad PLUS loans (taken by graduate/professional students). A parent is able to consolidate the PLUS loans with their own Federal subsidized and unsubsidized loans, but those Parent PLUS loans cannot be included in the students consolidation.

Pros:

  • Simplifies monthly payments
  • May help borrowers regain eligibility for federal repayment programs
  • Access to alternate repayment plans (like Income-Driven Repayment)

Cons:

  • It may not lower your interest rate
  • May result in a longer repayment term, increasing total interest paid
  • Cannot consolidate private student loans or Parent PLUS loans taken out on your behalf.

What is Student Loan Refinancing?

Loan refinancing is offered by lenders. It allows borrowers to combine federal and/or private loans into a new, single private loan, often with a new interest rate and terms.

Key Features:

  • Credit-based – Approval and interest rate depend on your credit score and financial history (and that of a co-signer, if used)
  • Can combine federal and/or private loans – Some federal student loans come with unique benefits that may not be available through private student loans. These benefits can be especially important for borrowers who are employed in public service, serve in the military, are pursuing or may become eligible for loan forgiveness programs, are currently enrolled in or considering income-driven repayment plans, or who may experience changes in income that could affect their ability to make regular payments. Before refinancing, it’s important for borrowers to carefully review the federal protections they may be giving up. When federal loans are refinanced through a private lender, borrowers permanently forfeit any existing or potential future benefits associated with their federal loans.
  • Potential for lower interest rate – Especially if you or your co-signer have excellent credit.

Pros:

  • Could lower your monthly payment and/or reduce total interest paid over time
  • Simplifies repayment under one loan servicer
  • Flexible loan terms with some lenders

Cons:

There is a list of trusted lenders that many borrowers consider for refinancing student loans on our alternative loan website.

Final Considerations

  • Federal consolidation does not lower your interest rate, it simply combines loans. The new interest rate is a weighted average of your existing federal loans’ interest rates, rounded up to the nearest 1/8 of a percent.
  • Refinancing may lower your rate, but you'll lose federal protections.
  • Consider your long-term career plans. If you're pursuing loan forgiveness, federal benefits may outweigh the cost savings of refinancing.
  • Always compare interest rates, repayment terms, and borrower protections across multiple lenders before choosing a refinancing option.