Let's face it, life after graduation can get very expensive. Living expenses like housing, car payments, and relocation costs can be overwhelming when student loan bills are added on top of your existing financial obligations.
Student loan consolidation or refinancing can help you manage your budget. You'll save the frustration of dealing with multiple lenders and reduce the risk of missing a payment because you can combine your loans into a single loan, with a single bill.
Federal vs. Private Student Loan Consolidation
There are two types of student loan debt restructuring: federal Direct Consolidation Loan and refinancing your student loans with a private lender.
A Direct Consolidation Loan can consolidate (generally two or more) federal student loans including federal parent loans. This type of consolidation is available for federal student loans only. No private loans, state loans, or institutional loans can be included.
A private refinance loan—sometimes called private student loan consolidation—can refinance both federal student loans (including Parent PLUS Loans) and non-federal student loans from private financial institutions (such as banks and credit unions) as well as loans financed by states or colleges/universities.
With either option, you can combine several loans into one. Although private student loan refinancing will allow you to refinance just one loan.
The reasons you should consider consolidating or refinancing your loans have as much to do with financial factors as they do with non-monetary concerns. Your monthly budget may be extremely tight, your interest rates may be higher than current market rates, and you could be missing an opportunity to save on the total amount of interest repaid by locking in a lower APR and choosing the right repayment terms.
At the same time you may be experiencing additional stress if you are shelling out so much money each month on your student loan payments that it affects your ability to make ends meet and save for the future, including limiting your ability to contribute to your retirement savings.
The bottom line is there are a lot of variables in play that may influence your decision to consolidate or refinance. If you’re looking to take control of your financial future, once you know why you want to consolidate or refinance, it’s best to get a thorough understanding of your options.
Should I Refinance My Student Loans or Consolidate?
You have a lot of flexibility when it comes to choosing how you want to treat your loans. You may want to consolidate your federal student loans with the federal program, and refinance your private loans with a private lender. Or you may want to include some or all federal student loans in a private student loan refinance.
Whether you are consolidating or refinancing, you are not required to include all of your loans. However, note that while federal student loans can be included in private student loan refinancing, private student loans can never be included in a Direct Consolidation Loan (the federal program is for federal loans only).
Note: If your goal is to reduce the number of bills you need to keep track of each month, the more loans you combine, the fewer monthly bills you will have. With either option, you are not required to include all of your loans.
Private Student Loan Refinancing
How you can benefit from student loan refinancing:
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Take some pressure off your budget with a lower monthly payment
Those first student loan bills can swallow your income quickly, especially when you’re just getting started in your career. By refinancing you may be able to choose a longer repayment plan which may give you more affordable monthly payments. And that can help you stay current and avoid default. Plus, you can use the savings to pay off high-interest debts, like credit cards, build an emergency expense fund, or start contributing to your retirement savings.
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Choose from flexible interest rates and repayment terms
Many private student loan lenders offer fixed or variable interest rates based on today’s competitive market rates. The rate you typically qualify for is commensurate with your employment history and credit score. If you pay your loans off within the original timeline, but with a lower APR, you will save on interest and pay less over the life of your loan.
If your goal is to pay less each month and you’re ok with extending your repayment term (which may increase the amount you pay over the life of the loan), most private lenders offer a variety of repayment terms to choose from, depending on your loan balance. When you can afford to pay more than your monthly payment, you can do so at any time with no prepayment penalties.
Note: Applying with a creditworthy cosigner may help you qualify for a lower interest rate and better loan terms.
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Simplify your finances with a single monthly student loan bill and a single lender of your choice
Many students take out several types of loans to pay for college. You might leave college with loans from the federal government, your college and a few different private lenders. Keeping track of multiple due dates and payments can be tough. Refinancing combines your loans, giving you far less to keep track of. Another added benefit, you can choose the lender you want to work with.
What are the Pros and Cons of Refinancing Student Loans?
Student Loan Refinancing Pros
- Potentially qualify for a lower interest rate
- May reduce monthly student loan payments by increasing the length of your repayment period
- Combine both federal and private loans together
- Many lenders do not charge origination fees
- You may be able to transfer Parent PLUS Loans from the parent’s name to the student’s name (subject to credit qualifications of the student)
- You may be offered an additional interest rate reduction for setting up automatic payments, or by having other accounts with that lender (such as checking or savings)
- You may be able to combine your student loans with those of your spouse.
Note: Benefits vary by lender. Easily compare benefits on our Compare Lenders page.
Student Loan Refinancing Cons
- All benefits associated with your federal student loans will be forfeited, such as repayment plans, forgiveness and discharge benefits
- If the repayment term is extended, overall loan costs may increase
- A creditworthy cosigner may be required to qualify for the lowest interest rates
- If you are a servicemember on active duty and you refinance your student loans while serving, you will no longer qualify for an interest rate reduction under the Servicemember Civil Relief Act (SCRA) for student loans taken out prior to your active duty service
Which Loans are Eligible for Student Loan Refinancing?
✔ Private student loans
✔ Private parent loans
✔ Direct Subsidized Loans (sometimes called Subsidized Stafford Loans)
✔ Direct Unsubsidized Loans (sometimes called Unsubsidized Stafford Loans)
✔ Grad PLUS Loans
✔ Parent PLUS Loans (also eligible for child to include in their refinance)
✔ Perkins Loans
✔ Federal Family Education Loans (FFELP)
✔ Existing federal consolidation loans
How to Compare Student Loan Refinance Lenders
The features and benefits you want to compare will depend on your overall goal for refinancing. Some items to look at when comparing lender options are:
Interest Rates
- Are the latest advertised rates for refinancing better than your current APR?
- Does the lender offer variable and fixed rates?
- Can you get a better rate with a cosigner?
Repayment Terms
- What repayment terms are available? (Most lenders offer terms between 5 and 20 years, actual terms vary from lender to lender.)
- Does the lender offer any type of forbearance during periods of hardship, such as unemployment?
- Will your refinanced loan be forgiven in the event of death?
Loan Fees
- Does the lender charge an origination or application fee?
- What about late fees during repayment?
Other Benefits
Federal Student Loan Consolidation
When it comes to the Federal Direct Consolidation Loan you are generally required to combine two or more eligible federal student loans into a new Direct Consolidation Loan. This program is managed by the U.S. Department of Education. Rather than being based on competitive market rates, when you consolidate, your new interest rate will be based on the weighted average interest rate of all of the loans you are consolidating. This means, your interest rate will remain essentially unchanged. However, you may retain many of the benefits that come with federal student loans such as income-based repayment, and generous deferment and forbearance periods.
What are the Pros and Cons of Student Loan Consolidation?
Student Loan Consolidation Pros
- May reduce the amount of your monthly student loan payments by increasing the length of your repayment period
- Simplify repayment with a single loan instead of multiple loans
- May qualify to renew eligibility for deferment and forbearance benefits
- Multiple payment plans (including income-based repayment for some borrowers)
Student Loan Consolidation Cons
- Total cost of loans could increase if the repayment period is extended
- Potential loss of borrower benefits offered with the original federal loans, for example, a Perkins loan will lose its subsidized loan status and cancellation benefits. And if you were making payments towards Public Service Loan Forgiveness, you will be restarting the clock on your qualifying payments
- The remaining grace period on the existing loans will be lost if they are consolidated before the end of the grace period
- Your interest rate will remain roughly the same – it will not go down
- If you are a servicemember on active duty and you consolidate your student loans while serving, you will no longer qualify for an interest rate reduction under the Servicemember Civil Relief Act (SCRA) for student loans taken out prior to your active duty service
Which Student Loans are Eligible for a Direct Consolidation Loan?
✔ Direct Subsidized Loans (sometimes called Subsidized Stafford Loans)
✔ Direct Unsubsidized Loans (sometimes called Unsubsidized Stafford Loans)
✔ Grad PLUS Loans
✔ Parent PLUS Loans
✔ Perkins Loans
✔ Existing federal consolidation loans (in some cases)
✔ Federal Family Education Loans (FFELP)
Best Student Loan Refinance Lenders
College Ave Student Loans
- Variable rate range: 5.99% – 11.99% APR1
- Fixed rate range: 5.99% – 11.99% APR1
- No application or prepayment fees
- Apply in 3 minutes or less for instant credit decision
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2This informational repayment example uses typical loan terms for a refi borrower who selects the Full Principal & Interest Repayment Option with a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
3$5,000 is the minimum requirement to refinance. The maximum loan amount is $250,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.
Information advertised valid as of 03/01/2023. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
ELFI Student Loan Refinance
- Customers are saving an average of $309 every month and an average of $20,936 in total savings after refinancing their student loans with Education Loan Finance1
- Variable and fixed rates starting from 4.53% APR and 5.08% APR2
- Prequalify in as little as two minutes
- Award winning customer service from your dedicated Student Loan Advisor who is matched to you from the moment you sign up
1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.
2Rates accurate as of 3/15/23. The interest rate and monthly payment for variable rate loans may increase after closing. Your actual interest rate may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10 year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. To qualify for refinancing or student loan consolidation through Education Loan Finance, you must have at least $10,000 in qualified student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary Education Loan Finance institution. Education Loan Finance Parent Loans are limited to a maximum of the 10-year term.
SoFi Student Loans
- Rates as low as 5.09% variable and 4.49% fixed1
- No fees or prepayment penalties
- Unemployment protection
1Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
Splash Financial Refinance Loan
- Rates as low as 4.59%1 Variable APR and 4.47%1 Fixed APR
- No pre-payment penalties, origination, or application fees
- See rates in 3 minutes without affecting your credit score2
1The rates displayed may include a 0.25% autopay discount.
2To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Earnest Student Loan Refinancing
- Variable rates starting at 4.99% APR (including 0.25% Auto Pay discount)*
- Fixed rates starting at 4.96% APR (including 0.25% Auto Pay discount)*
- Choose your own monthly payment
- No fees of any kind and exceptional customer service for the life of your loan
- Check your rate in under 2 minutes
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.21% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.24% APR to 9.19% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
*Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. Not all borrowers will qualify for our lowest rates, and your rate will be based on creditworthiness at time of application.
The information provided on this page is updated as of 03/09/2023. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
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