Student Loan Consolidation and Refinancing Guide

For many saddled with student loan debt, the financial future is not as bright as they would hope. Thankfully, two major options exist to help past students get control of their student loan debt — consolidation and refinancing. Depending on the characteristics of your unique borrowing situation, one of these two options may be an ideal path forward.

College Ave

College Ave
Min. Loan Fixed APR Eligible Degrees
$1,000 3.59% - 12.99% Undergraduate & Graduate

on lender's secure website

College Ave

College Ave
Min. Loan Fixed APR Eligible Degrees
$5,000 4.64% - 8.99% Undergraduate & Graduate

on lender's secure website


Min. Loan Fixed APR Eligible Degrees
Varies 3.95% Undergraduate & Graduate

on lender's secure website


Min. Loan Fixed APR Eligible Degrees
Varies From 2.17% Undergraduate & Graduate

on lender's secure website


Min. Loan Fixed APR Eligible Degrees
$5,000 4.24% – 12.39%¹ Undergraduate

on lender's secure website


Min. Loan Fixed APR Eligible Degrees
$5,000 4.25% – 12.35% Undergraduate & Graduate

on lender's secure website


Min. Loan Fixed APR Eligible Degrees
$5,000 3.19% - 7.75% Undergraduate & Graduate

on lender's secure website

Sallie Mae

Sallie Mae
Min. Loan Fixed APR Eligible Degrees
$1,000 4.74% - 11.86%¹ Undergraduate

on lender's secure website


Min. Loan Fixed APR Eligible Degrees
$5,000 3.20% - 6.44% Undegrad & Graduate

on lender's secure website


Min. Loan Fixed APR Eligible Degrees
$5,000 From 1.99% Undergraduate & Graduate

on lender's secure website

The 6 best student loan refinancing and consolidation companies in 2020

Lender APR (Fixed) Min. Loan Max Loan Terms
SoFi 2.99% – 6.238% $5,000 No max 5 – 20 years
Earnest Starting at 3.75% $5,000 $500,000 5 – 20 years
Credible Starting at 4.25% Varies Varies 5 – 20 years
LendKey Starting at 3.19% $5,000 $125,000 for undergraduate degrees
$250,000 for graduate degrees
$300,000 for medical, dental, or veterinary degrees
5 – 20 years
Discover 4.24% – 7.74% for 20 years;
3.99% – 7.49% for 10 years
$5,000 No max 10 – 20 years
Splash Financial Starting at 2.88% $5,000 No max Up to 20 years

* APRs accurate as of June, 2020

SoFi: Best overall

When you’re looking to consolidate your existing student loans, you may want as many options and flexibility as possible. Sofi delivers flexible repayment terms, competitive rates and service to all 50 states. SoFi offers many additional perks like a dedicated financial app, in-person experiences, career services, financial planners and even referral bonuses for introducing your friends to the company.

Disclaimer: Fixed rates from 2.99% APR to 6.24% APR (with AutoPay). Variable rates from 1.99% APR to 6.24% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 1.99% APR assumes current 1 month LIBOR rate of 0.18% plus 3.06% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. 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. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

Earnest: Best app for account management

With over $8.6 billion student loans refinanced, Earnest has the experience you want. At the company’s website, you can get your rate in two minutes, without filling out a full application. Earnest’s app available to all customers for free will help make the process much simpler. Through the app, you can adjust any payments, increase payment size, change due dates, make early payments and even skip one payment a year and make it up later.

Credible: Best marketplace lender

One of the best ways to get the best rate on a student loan consolidation is to shop multiple lenders. Lender marketplaces like Credible offer the ability to do just that without filling out multiple applications. Rates are available in two minutes and your information is not shared with the lenders at this point. Additionally, Credible will give you $200 if you’re able to find a better rate anywhere else.

LendKey: Lowest rates

It’s hard to not get excited about the interest and APR rates offered on student loan consolidation through LendKey. Variable rates start at 2.60% APR and fixed rates start at 3.19% APR. Compared to the rest of the industry, this is impressive. If you’re really looking for low payments, LendKey lets you stretch the costs out over 20 years. You’ll pay more overall in interest, but your monthly payments will be small.

Discover: Best bank for student loans

Borrowers looking for student loan consolidation will have the option to utilize Discover for student loans over $5,000. Variable rates between 2.37% to 6.12%1 APR for 10-20 years, fixed rates between 4.24% to 7.74%1 APR (includes an auto-pay discount of 0.25%) for 20 years and 3.99% – 7.49% for 10 year fixed. The loan terms are only 10 to 20 years, offering loans from $5,000 to $150,000, and on the plus side, there are no late fees. Apply in 15 minutes or less from your phone, computer or another mobile device.

Discover Student Loans Disclosure
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for the Discover Private Consolidation Loan and include an Auto Debit Reward. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.375%% as of July 1, 2020. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APR is only available to customers with the best credit and other factors. Your APR will be determined after you apply. It will be based on your credit history, which repayment option you choose and other factors, including your cosigner’s credit history (if applicable). Learn more about Discover Student Loans interest rates.

Splash Financial: Best for medical school loan refi

Medical school is expensive, which makes it important to try and save everywhere you can. Borrowers who want to refinance medical school debt will want to check out Splash Financial. When borrowers refinance medical school debt with Splash Financial, they can pay only $100 a month during residency and training, plus another six months after that. This gives borrowers a chance to make reasonable payments during training, so interest doesn’t pile up.

How to choose a student loan refinancing provider

Choosing the right lender to refinance your student loan can end up saving you or costing you a lot of money in the long run. By taking a detailed and structured approach to the selection process, you give yourself a better opportunity for a successful experience. Make sure you look at all of the important criteria before making a decision. Choosing a lender by one factor only (like interest rate) is not a wise move.


Before you start choosing a student loan consolidation company based on your needs, you must work through your options to find what you eligible for. While many student loan consolidation companies are open to many different borrowers, there are still limitations you need to understand.

  • Credit requirements: Due to the nature of the business, lenders have to be somewhat selective about who they help get control of their debt. If the companies take on customers that are too risky and end up defaulting, they aren’t able to help those in need who are going to make good on their obligations. You’ll want to check with each lender to see the requirements it has for your credit profile. Often, this includes your credit score, debt to income ratio and potentially the option of utilizing a cosigner.
  • Employment stipulations: Many lenders will require some form of employment and may also require minimum income levels.
  • Degree requirements: There are some student loan consolidation companies that look at more than just your credit profile. One of these additional factors may be the area of study you got your degree in. This is not always the case, but it may be something that can help you to get approval.
  • Other requirements: Ultimately, it’s up to the lender whether it wants to work with you or not. Because the company holds all the cards, it may have additional requirements to help you with student loan consolidation.

Interest rates

Qualification for a loan is only the first step. Once you know what you can and can’t get, it’s time to find the best option. One of the most important factors to assess will be the interest rate or APR. This is the cost of the loan added on to your repayments. The best way to get the best interest rate possible is to shop multiple lenders as each may give you a different rate.

Loan and refinancing terms

It can be tempting only to look at the interest rate or APR when selecting a loan provider. The problem, though, is that is only a part of the puzzle. You’ll additionally want to look at the terms of the loan, how long you have to pay it back, and the minimums and maximums the company will work with. Some student loan consolidation companies won’t work with debt under certain amounts (often $5,000).

Repayment and hardship options

Ideally, you’ll have no future debt issues and will repay your loan in line with the terms laid out in the debt consolidation. The problem is that sometimes that doesn’t happen. You’ll want to know what happens if you fall on hard times during the repayment of your loan. Does the lender offer options to help? Are there contingency plans available?

Fees and discounts

Many loans come with additional fees like origination fees, application fees, late penalty fees and more. Make sure you fully understand all the applicable costs associated with your loan. Looking at the APR instead of the interest rate is a helpful move in this area. APRs take into account the interest rate as well as any applicable fees you may be charged. It’s a much more transparent metric to use when gauging the cost of borrowing.

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Student loan consolidation vs. student loan refinancing

Often, people confuse student loan consolidation and refinancing. While both actions have similarities, the processes are most effectively used in different situations. Typically, those with multiple loans will look into consolidation, while those with a single loan will look into refinancing.

Consolidation Refinancing
You’ll combine multiple student loans into one payment You’ll get a new loan that replaces the old one
Generally, you consolidate to simplify the payment process Generally, you refinance to get a lower rate or monthly payment to save money
After consolidation, the schedule will have debts paid off in 10 years. When refinancing, the structure can be changed to have up to 20 years to pay off the debt.

But how do you know which one is right for you?

“Borrowers should consider a few things when determining if consolidation or refinancing is right for them,” says Travis Hornsby, CFA and founder of Student Loan Planner. “They’ll want to determine if they want to consolidate private and federal student loans into a single loan [and] if they want to keep federal student loan benefits.”

Hornsby reminds borrowers that the ability to make income-based payments and eligibility for student debt forgiveness programs is eliminated when refinancing federal loans into private loans.

The basics of student loan consolidation and refinancing

There are two types of consolidation loans: federal and private, and each comes with distinct advantages and drawbacks. Federal consolidation loans can only be used for federal student loans, but private consolidation loans can be used for both federal and private student loans. Consolidation loans repay old loans with a brand new loan that has its own unique terms and conditions. The basics of federal and private consolidation loans are outlined below.

How federal consolidation loans work

Borrowers can combine at least two or more federal loans into a single Direct Consolidation Loan. All types of federal student loans can be consolidated together except a Direct PLUS Loan that was taken out by a parent to help pay for a child’s education. However, private loans can’t be included in a federal consolidation loan.

The new Direct Consolidation Loan provides a single fixed interest rate that is equal to the weighted average of all the loans being consolidated and rounded up to the nearest eighth of a percent. A weighted average means that the loans with a higher balance influence the interest rate more than loans with a smaller balance — the overall impact of each old loan on the new interest rate is proportional to the comparative balance of that loan.

Because the interest rate is a weighted average and rounded up, borrowers won’t receive an interest rate benefit by opting for a federal consolidation loan unless the loans are pre-2006 and have a variable interest rate. The new interest rate would still be equal to the current interest rates in that situation, but it might save money in the future if the variable rates rise (the new fixed rate would stay the same).

The following table illustrates how a weighted average works. In this example, there are three students that each have three loans. A federal student loan consolidation calculator provided by Federal Student Aid was used to calculate the weighted average.


Eligibility requirements

In order to consolidate federal student loans, you must meet the eligibility requirements. First, your loans must be in the grace period and you cannot consolidate an existing consolidated loan. In some cases, you may be able to reconsolidate an existing FFEL consolidation loan as long as you are not including any additional loans. Defaulted loans can be consolidated, but only if you meet an extensive criteria list outlined in the attached link.

How private consolidation loans work

With a private consolidation loan, a private lender writes a new loan that pays off the old loans. The interest rate is primarily determined by the lender’s evaluation of the borrower’s credit history. However, some lenders also factor in the borrower’s current financial and professional circumstances. The new interest rate can be lower or higher than the weighted average of the old loans and can be fixed (the interest rate won’t ever change) or variable (the rate changes based on the market conditions).

Eligibility requirements

Private and federal loans can both be refinanced with a private consolidation loan. To be eligible, borrowers must have a clean credit history and a “good” credit score (a score of 670 or above is considered good, according to FICO). Borrowers with a poor credit history may still be able to qualify if they can secure a cosigner with good credit or with a select few lenders.

Some lenders require that the borrower’s debt-to-income ratio be below a certain threshold. Many lenders also factor in a borrower’s employment stability and prospects –companies may even have minimum annual income requirements. Additionally, certain lenders only offer loans to those who have graduated or have completed a specific type of degree.

Federal vs. private student loan consolidation

Federal and private consolidation loans have unique advantages and disadvantages. So let’s go through them.

Pros and cons to federal student loan consolidation

Overall, borrowers should consider a federal consolidation loan if:

  • They have federal loans with variable interest rates (pre-2006).
  • They want to combine a large number of federal loans to get one simple payment.
  • They need to lower their monthly payments and are okay with paying more over the lifetime of the loan.
  • They have federal loans that aren’t eligible for income-driven repayment plans.

Here are some of the advantages of federal consolidation loans:

  • Free: There are no origination fees or other costs to consider.
  • No credit check or a cosigner: Borrowers with less-than-optimal credit don’t have to worry about a credit check or finding a cosigner.
  • Smaller monthly payments: Federal Direct Consolidation Loans may offer borrowers the option for an income-driven repayment plan (the monthly payment is based on the borrower’s income), which may result in a lower overall payment. Also, consolidation loans typically lead to a longer repayment term, which allows for smaller monthly payments.
  • Deferment and forbearance: If you encounter a financial hardship (like a serious illness or a loss of work), you have deferment and forbearance options that allow you to stop making payments for a period of time without entering default.
  • Federal Student Loan Forgiveness: Direct consolidation loans have access to loan forgiveness or cancellation if the borrower qualifies.

There are also drawbacks to federal student loan consolidation to consider:

  • It won’t lower your interest rate: Since the new interest rate of a Direct Consolidation Loan is the weighted average of the old loans, no money will be saved over the life of the loan. In fact, the interest rate is rounded up to the nearest eighth of a percent, so the new loan might actually have a slightly higher cost overall.
  • It could even cost more: If the new repayment term is longer than the length of the loans being consolidated, more interest will be charged over the life of the loan unless it’s paid off before the end of the term (this strategy requires additional payments or paying more than the minimum payment due each month).
  • Loan forgiveness progress is lost: Loan forgiveness requires borrowers to make a certain number of qualifying payments on the loan while meeting certain conditions (like working as a teacher or paying under an income-driven repayment plan). Since consolidation involves a brand new loan, progress towards student loan forgiveness is reset.
  • Can’t prioritize high-interest loans: If borrowers have lower interest loans (typically undergraduate) and higher interest loans (typically graduate), consolidating them all together will make it impossible to prioritize paying off the higher interest loan first (by paying extra on that specific loan).
  • The consequences of default are severe: The federal government can garnish your wages or use tax refunds to repay student loans that have entered default.

Pros and cons to private student loan consolidation

There are three main advantages to private consolidation loans:

  • Lower interest rates: Private consolidation is the only way to refinance both federal and private loans with the potential of a lower interest rate which can result in lower monthly payments or help reduce the overall loan cost.
  • Can release a cosigner: Some lenders might be willing to consolidate old loans that were cosigned into a new loan without the cosigner.
  • Longer repayment terms: Private lenders may allow for the repayment term on a consolidation loan to be extended past that of the old loans — this will save money on monthly payments but will increase the overall cost of the loan.

While private consolidation loans can be beneficial, there are significant disadvantages to mull over — especially when consolidating federal loans with a private loan.

  • Strict requirements: Borrowers will need to undergo a credit check as certain FICO credit scores will typically be eligible. If a person’s credit isn’t great, a cosigner may be required. Additional requirements like degree completion or annual income thresholds may also apply.
  • Limited loan terms: Loan terms for private loans tend to be shorter than those of federal consolidation loans. Federal consolidation loans range from 10 to 30 years while private consolidation loans typically range from 5 to 20 years.
  • Few fringe benefits: Compared to the benefits that federal consolidation loans offer, private consolidation loans don’t offer much help for borrowers with hardship or those who are seeking loan forgiveness. For example, forbearance isn’t always granted if a person were to lose his or her job. What’s more, any existing benefits (such as interest reduction after a certain period of on-time payments) from current private loans may be lost.

How to use consolidation effectively

If you have a mix of federal and private student loans, here are two strategies to make student loan consolidation work for you:

Strategy #1: Consolidate federal and private student loans separately: Given the benefits that federal student loans come with, many experts recommend consolidating federal and private student loans separately.

Strategy #2: Consolidate less favorable federal loans and private loans together: Graduate loans tend to have higher interest rates than undergraduate loans. For example, a current Direct PLUS loan for a graduate student comes with an interest rate of 7.08%, which is higher than the interest rate on a Direct Loan for undergraduates (4.53%). Consolidating your undergraduate loans with a federal loan, and then consolidating graduate loans with any private loans using a private lender has the potential to save money, provided you can obtain a low-interest private loan.

[Read: Subsidized vs. Unsubsidized Loans]

How to consolidate your federal student loans

Ready to get started? We’ll walk you through the process, starting with how to consolidate your federal student loans. Borrowers should be aware of several things:

  • The process is free: Borrowers shouldn’t pay for help with their student loans. There are federal loan consolidation services that offer to help consolidate federal student loans for a fee. Whether or not this is an outright scam (many times the money is kept and no service is actually provided), the same services that the company charges for can be obtained for free from your loan service.
  • Consolidation is final: A Direct Consolidation Loan actually pays off the loans being consolidated and the old loans disappear. Potential consolidators should be aware that the process is irreversible.
  • There’s help if you need it: If you have problems or questions during this process, you can call the Federal Student Aid’s Loan Consolidation Information Call Center at 1-800-557-7392. Additionally, your loan servicer may be able to provide help with this process.

Once you’ve completed your research and you’ve decided to consolidate your federal student loans with a Direct Consolidation Loan, the actual process of consolidating is relatively simple. The following is a step-by-step guide to obtaining a Direct Consolidation Loan.

  1. Log in at This process requires you to enter your FSA ID. If you have an FSA PIN and haven’t yet created an FSA ID, you’ll need to do that now. There’s an option to create an FSA ID on the login page.
  2. Start the application. The form that needs to be filed can be found by clicking the “Apply for Loan Consolidation” button on the home page. Those who want to apply online can simply click “Start,” while those who want to fill it out another way can find instructions for doing so on the same page.
  3. Choose which federal student loans to consolidate. As was previously mentioned, those that have made progress towards loan forgiveness or cancellation may want to leave those loans out of the consolidation.
  4. Decide whether to delay processing. If any of their loans are currently in the grace period, borrowers may elect to have their servicer delay the processing of the loan consolidation for one to nine months to take full advantage of the grace period for the loan(s).
  5. Select a loan servicer. The Federal Government contracts private companies to service federal student loans. These companies are called “loan servicers.” Direct Consolidation Loans are managed by one of four servicers chosen by the borrower. Your choices are: FedLoan Servicing, Great Lakes Educational Loan Servicing, Navient, Nelnet, CornerStone, Granite State – GSMR, HESC/Edfinancial, Mohela and Osla Servicing. If one of those servicers currently manages your loans, you can retain the same servicer or choose a different one.
  6. Choose a repayment plan. Regardless of which repayment plans the previous loans were enrolled in, you’ll need to select a new repayment plan for the consolidation loan. There are seven repayment plans to choose from, which fall into two categories: term-based or income-based. Under term-based plans, the monthly payment is determined by the term length. There are options for making equal monthly payments throughout the loan term or payments that start lower and increase as time goes by. Monthly payments on income-based plans are based on a percentage of your income, and qualify for loan forgiveness after a number of qualifying payments have been made (usually 20 years). If you choose an income-based plan, you’ll need to provide financial information. This can be submitted with the application by granting access to personal IRS tax information, otherwise, you’ll have to submit a copy of your most recent federal tax return to your loan servicer before the loan consolidation can be finalized.
  7. Provide personal information and references and submit the application. At this point, you just need to fill out some basic personal information. In addition, you’ll need to provide the names of two references who have known you for at least three years. After you’ve completed the form and double-checked it for accuracy, it’s time to submit it.

What’s next: It’s important to note that while your application is being processed, you’ll still need to make payments on your old loans as usual. Once your application has been processed, your new loan servicer will contact you with instructions for how and when to start making payments on the consolidation loan.

Too long, didn’t read?

Choosing to get control of your student debt is a fiscally responsible move that should benefit you greatly in the long run. That being said, you need to make sure you approach it the right way. Choose the right lender, the right type of loan and make sure you fully understand what you’re signing up for. When done correctly, student loan consolidation can save you a lot of money on interest and help to streamline the repayment process moving forward.

Keep reading

We welcome your feedback on this article and would love to hear about your experience with the student loan consolidation and refinancing providers we recommend. Contact us at with comments or questions.

Jason Lee
Jason Lee
Contributing Writer

Jason Lee is a U.S.-based freelance writer with a passion for writing about dating, banking, tech, personal growth, food and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill sets with the rest of the world. Follow Jason on Facebook here

Reviewed by

  • Courtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for,, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.