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Student loan consolidation can be confusing. This is mainly because there are two types of consolidation — federal consolidation of student loans and student loan refinancing — that many use interchangeably. But they aren’t the same thing.

Although both allow you to combine all your loans into one, a Direct Consolidation Loan is only for federal loans, whereas, refinancing can combine both federal and private loans.

To help you decide, here’s a breakdown of the similarities and differences between student loan consolidation and refinancing and the pros and cons of each.

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Student loan consolidation

A federal Direct Consolidation Loan can be used to combine your loans into one. But the difference is that the consolidation loan is a loan from the government that can only be used with federal loans.

You might want to do this to simplify your payments, especially if you have multiple loans or servicers. The interest rate on a federal Direct Consolidation Loan is the weighted average of the rates on your existing loans, so you generally won’t save any money with federal consolidation.

Keep in mind that federal loan consolidation can help you lower your monthly payment and qualify for loan forgiveness if you enroll in an income-driven repayment plan or extend your loan term. But because you’re not getting a better interest rate, your total repayment costs may increase if you stretch your payments out over a longer period of time.

Pros of consolidating your student loans

  • Allows you to consolidate your federal student loans so you have just one monthly payment
  • Able to keep federal benefits like income-driven repayment and Public Service Loan Forgiveness
  • No credit check required
  • You can pick the servicer that will service the new loan

Cons of consolidating your student loans

  • Private student loans don’t qualify
  • Doesn’t lower your interest rate
  • Could end up paying more depending on the interest rate and new loan terms

How to consolidate your student loans

Trying to simplify your loan payments doesn’t have to be complicated. Check out studentaid.ed.gov to learn more about federal student loan debt consolidation and whether or not it’s right for you.

Learn More: How to Consolidate your Student Loans

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Student loan refinancing

Just like with consolidation, student loan refinancing can help you combine multiple loans into one. It also allows you to combine both private student loans and federal into one. You might even be able to lower your interest rate, saving you money in the long run.

Pros of refinancing your student loans

  • Allows you to consolidate federal student loans as well as private student loans so you have just one monthly payment
  • May be able to lower your interest rate which could save you money
  • May have the opportunity to lower your monthly payments by choosing a longer term (but if you choose to do so, you might end up paying more in interest over the life of your loan)
  • If you use a cosigner to initially get a lower interest rate, you might have the opportunity to release them from the loan after a set amount of on-time payments

Cons of refinancing your student loans

  • If refinancing federal loans, you’ll lose benefits like income-driven repayment and Public Service Loan Forgiveness
  • Credit check required

How to refinance your student loans

If you want to lower your interest rate or combine federal and private student loans into a single loan with one monthly payment, student loan refinancing could be the right choice.

There are a number of lenders who offer student loan refinancing. To ensure you get the best rates and terms for your situation, it’s always a good idea to check options from multiple lenders. Credible helps you compare your refinancing options, so you can find the option that’s right for you.

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Consolidation vs. refinancing: Which is right for you?

Now that you understand the differences between federal consolidation and refinancing, and the pros and cons of each, deciding which option is best for your loans is the next step.

Both can be helpful in combining your loans into a single simplified payment, making your life easier. If your goal is to maintain federal benefits like an income-driven repayment plan, federal consolidation is probably your best bet. But if you’re looking to save money on your student loans overall, refinancing may be the right move.

More: How to Tell If You Should Consolidate Your Student Loans

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Check Your Refinancing Rates