Pros and Cons of Consolidating Student Loans

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Both federal and private consolidation can help you tackle your debt, but the two are different. Plus, each strategy has its own pros and cons. Find out about the pros and cons of consolidating student loans and how to choose which is best for you.

In this post:

• What is federal loan consolidation?
• Pros of federal student loan consolidation
• Cons of federal student loan consolidation
• What is private student loan consolidation?
• Pros of private student loan consolidation
• Cons of private student loan consolidation
• Best loan consolidation lenders

What is federal loan consolidation?

Most federal loans, including subsidized loans, unsubsidized loans, and PLUS loans can be consolidated with a Direct Consolidation Loan. In general, you can consolidate loans once you graduate and your loans are either in repayment or during your grace period.

Direct Consolidation Loans have a fixed interest rate for the length of your repayment term. Your interest rate will be the weighted average of your current loans, rounded up to the nearest one-eighth of one percent.

You can apply for a Direct Consolidation Loan online at StudentLoans.gov.

Pros of federal student loan consolidation

If you have federal student loans, combining them together with a Direct Consolidation Loan has several benefits:

• Simplify your loan repayment: When you take out a Direct Consolidation Loan, all of your current federal loans are consolidated into one. Going forward, you’ll have just one loan to manage with one simple monthly payment to remember.

• Reduce your monthly payment: With a Direct Consolidation Loan, you can opt for a repayment term as long as 30 years. With a longer repayment term, you can dramatically lower your monthly payments, making them more affordable.

• Get access income-driven repayment plans: If you have federal loans that are ineligible for income-driven repayment (IDR) plans — such as Perkins Loans — consolidating them with a Direct Consolidation Loan can be a smart workaround. Once you finish the consolidation process, the loan is eligible for IDR plans, helping you reduce your payment.

Cons of federal student loan consolidation

Although federal loan consolidation can be helpful for some, it’s not for everyone. There are some significant drawbacks to consider:

• Resets the clock on loan forgiveness programs: If you’re pursuing either income-driven repayment plan forgiveness or Public Service Loan Forgiveness, consolidating your loans will restart the clock, and you will lose credit for the payments you’ve made to date.

• Potentially pay more in interest: Because most people choose a longer repayment term when they consolidate their loans, you may end up paying more in interest fees than if you stayed on a standard 10-year repayment plan.

• Loss of borrower benefits: You may lose out on certain borrower benefits, such as interest rate discounts or loan cancellation benefits, that you have with your current federal student loans.

What is private student loan consolidation?

Private student loan consolidation is quite different than federal consolidation. With private consolidation, also called student loan refinancing, you work with a private lender rather than the federal government.

You take out a new loan for the amount of your current debt, including private and federal loans, and use it to pay them off. Like federal loan consolidation, you’ll have just one loan and one monthly payment going forward.

Pros of private student loan consolidation

Private student loan consolidation has benefits that federal loan consolidation doesn’t offer:

• Lower interest rate: Your private consolidation loan will have a new interest rate that is based on your creditworthiness. Borrowers with good credit can get a lower rate, so you’ll pay less money in interest charges and save money.
• Become debt-free sooner: With a lower interest rate or a shorter repayment term, you can pay off your debt much sooner.
• Combine both federal and private loans: With federal loan consolidation, you can only combine federal loans together. But with private consolidation, you can combine both federal and private loans into one loan, simplifying your repayment.

Cons of private student loan consolidation

Private consolidation can be a smart way to tackle your debt, but there are some drawbacks to keep in mind:

• You’ll lose federal benefits: If you refinance federal student loans, you’ll no longer be eligible for federal benefits like income-driven repayment plans, Public Service Loan Forgiveness, and federal forbearance and deferment programs.

• Interest rates can vary: With private loan consolidation, you can choose a variable or fixed interest rate loan. If you choose a variable rate loan, you should know that your variable rate can fluctuate over time, and could end up being higher than your loan’s original interest rate. And all private lenders offer different rates.

• Good to excellent credit required: To qualify for a low-interest loan, you’ll need to have good to excellent credit and a stable income. If your credit is less-than-stellar, or if your income is insufficient, you won’t be able to qualify for a loan — or you may have to settle for a higher interest rate.

Best loan consolidation lenders

If you decide that private loan consolidation is right for you, it’s a good idea to shop around and compare offers from some of the best student loan refinancing lenders to ensure you get the best rates.

Lender	Variable rates from (APR)	Fixed rates from (APR)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.3%+	4.85%+
Fixed APR: 4.85%+ Variable APR: 5.3%+ Min. credit score: 720 Loan amount: $10,000 to $400,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Military deferment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must have a credit score of at least 720, a minimum income of $60,000, and must be a resident of Texas Customer service: Email, phone Soft credit check: 720 Cosigner release: No Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 - $149,000 Max. Graduate Loan Balance: $200,000 - $400,000 Offers Parent PLUS Refinancing: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.06%+1	6.8%+1
Fixed APR: 6.8%+1 Variable APR: 7.06%+1 Min. credit score: Does not disclose Loan amount: $10,000 to $750,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay, loyalty Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $150,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	6.99%+2	6.99%+2
Fixed APR: 6.99%+2 Variable APR: 6.99%+2 Min. credit score: Does not disclose Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 12, 15 Repayment options: Military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay Eligibility: All states except for ME Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: College Ave Servicing LLC Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $300,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.03%+5	6.0%+5
Fixed APR: 6.0%+5 Variable APR: 8.03%+5 Min. credit score: 700 Loan amount: $7,500 to $200,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and submit two personal references Customer service: Email, phone Soft credit check: Yes Cosigner release: After 36 months Loan servicer: Granite State Management & Resources (GSM&R) Max. Undergraduate Loan Balance: $150,000 to $249,000 Max. Graduate Loan Balance: $150,000 to $199,000 Offers Parent PLUS Refinancing : Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.28%+3	5.08%+3
Fixed APR: 5.08%+3 Variable APR: 5.28%+3 Min. credit score: 680 Loan amount: $10,000 to $250,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Forbearance Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident, have at least $15,000 in student loan debt, and have a bachelor’s degree or higher from an approved school Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: Mohela Max. Undergraduate Loan Balance: $250,000 Max. Graduate Loan Balance: $250,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.12%+4	5.9%+4
Fixed APR: 5.9%+4 Variable APR: 8.12%+4 Min. credit score: 670 Loan amount: $5,000 to $250,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Academic deferment, military deferment, forbearance Fees: Late fee, returned payment fee Discounts: Autopay Eligibility: Must be U.S. citizen or permanent resident Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: Yes Max undergraduate loan balance: $250,000 Max graduate loan balance: $250,000 Offers Parent PLUS refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.02%+	4.49%+
Fixed APR: 4.49%+ Variable APR: 5.02%+ Min. credit score: 700 Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 15 Max. undergraduate Loan Balance: $125,000 Time to Fund: 10 to 30 days Repayment options: Immediate repayment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from an eligible institution Customer service: Email, phone Soft credit check: Yes Cosigner release: After 12 months Loan servicer: LendKey Technologies Inc. Max. graduate Loan Balance: $175,000 Credible Review: LendKey Student Loans review Offers Parent PLUS Refinancing: No
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.75%+
Fixed APR: 5.75%+ Variable APR: N/A Min. credit score: 670 Loan amount: $10,000 up to the total amount Loan terms (years): 7, 10, 15 Repayment options: Military deferment, loans discharged upon death or disability Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: AES Max. Undergraduate Loan Balance: No maximum Max. Gradaute Loan Balance: No maximum Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.34%+ - 10.79%+8	7.58%+ - 14.48%+8
Fixed APR: 5.34%+ - 10.79%+8 Variable APR: 7.58%+ - 14.48%+8 Min. credit score: Mid-to-high 600's FICO8 Loan amount: $5,000 to $500,000 (depending on degree) Loan terms (years): 5, 7, 10, 15, 20, 25 years8 Time to fund: 3 business days Repayment options: Immediate Fees: Late fee, NSF fee Discounts: Autopay8 Eligibility: Must be a U.S. citizen or have permanent residency status with a valid U.S. Social Security number Customer service: Email, phone Soft credit check: Yes8 Cosigner release: After 24 months8 Loan servicer: Firstmark Services Max. undergraduate loan balance: $125,000 Max. graduate loan balance: $500,000 Offers Parent PLUS loans: Yes Min. income: You or your cosigner must meet Nelnet Bank's income criteria
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.79%+
Fixed APR: 5.79%+ Variable APR: N/A Min. credit score: 680 Loan amount: $7,500 to $250,000 Loan terms (years): 5, 10, 15 Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Available in all 50 states; must also have at least $7,500 in student loans and a minimum income of $40,000 Customer service: Email, phone Soft credit check: Does not disclose Cosigner release: No Loan servicer: Rhode Island Student Loan Authority Max. Undergraduate Loan Balance: $150,000 - $249,000 Max. Graduate Loan Balance: $200,000 - $249,000 Offers Parent PLUS Refinancing: Yes
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures  | 8Nelnet Bank Disclosures

Managing your debt

If you’re having trouble remembering all of your student loan payment due dates, loan consolidation can make a lot of sense.

Whether you opt for federal loan consolidation or private loan consolidation is dependent on the type of loans you have and your comfort level with their benefits and drawbacks. By understanding consolidating student loans pros and cons, you can make an informed decision about what will work best for you.

About the author

Kat Tretina

Kat Tretina is a freelance writer who covers everything from student loans to personal loans to mortgages. Her work has appeared in publications like the Huffington Post, Money Magazine, MarketWatch, Business Insider, and more.

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