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Student loan consolidation comes in two forms: private and federal. Although both private and federal consolidation allow you to combine all your loans into one, student loan consolidation is for only federal loans, and “private consolidation”, known as student loan refinancing, can combine both federal and private loans.

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

In this post:

Consolidation vs. refinancing

 Federal Student Loan ConsolidationStudent Loan Refinancing
Are federal loans eligible?YesYes
Are private loans eligible?NoYes
Will it combine all my loans into one?YesYes
Will I get a lower interest rate?NoTypically, yes
Is a credit check required?NoYes
Will I keep my federal benefits?YesNo

Student loan consolidation

Student loan consolidation, known as a federal Direct Consolidation Loan, can be used to simplify your payments, especially if you have multiple loans or servicers. The interest rate on a 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.

Advantages of student loan consolidation

  • 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 (from a list of potential servicers)

Keep in mind that private student loans don’t qualify for federal consolidation and consolidation won’t lower your interest rate, so your total repayment costs may increase if you stretch your payments out over a longer period of time.

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.

Advantages of student loan refinancing

  • 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

Keep in mind, though, that if you refinance your federal loans, you’ll lose benefits like income-driven repayment and Public Service Loan Forgiveness.

See: The Best Student Loan Refinance Companies

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Which is right for you?

Now that you understand the differences between federal consolidation and refinancing, 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.

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Check Your Refinancing Rates