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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?

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

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 loan consolidation?

Private 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.

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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.

LenderVariable rates from (APR)Fixed rates from (APR)Check rates from multiple lenders in 2 min
advantage education loan consolidationN/A4.54%+Get Rates
Advantage review
brazos student loan refinancing1.90%+3.10%+

Get Rates
Brazos review
citizens bank student loans2.19%+¹3.45%+¹Get Rates
Citizens Bank review
college ave student loans2.37%+23.54%+2Get Rates
College Ave review
edvestinu student loan consolidation4.66%+4.93%+Get Rates
EdvestinU review
elfi student loans2.39%+33.14%+3Get Rates
ELFI review
mefa refinancing3.24%+3.60%+Get Rates
MEFA review
penfed purefy student loan consolidation2.32%+3.48%+Get Rates
Penfed review
rhode island student loan authority refinancingN/A3.49%+Get Rates
RISLA review
sofi student loan refinancing2.21%+43.46%+4Get Rates
SoFi review
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Bank Disclosures | 2College Ave Disclosures | 3 ELFI Disclosures | 4SoFi Disclosures

Citizens Bank Education Refinance Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2019, the one-month LIBOR rate is 1.70%. Variable interest rates range from 2.19%-8.92% (2.19%-8.92% APR) and will fluctuate over the term of the borrower's loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 3.45%-9.02% (3.45%-9.02% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.

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

Kat Tretina is an authority on student loans and a contributor to Credible. Her work has appeared in publications like the Huffington Post, Money Magazine, MarketWatch, Business Insider, and more.

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