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Student loan consolidation lets you combine your existing loans into a single loan with a new interest rate and repayment term. There are two popular ways to consolidate student loans:
- Federal direct consolidation: Most government loans can be converted into a federal Direct Consolidation Loan. You won’t get a lower interest rate, but you do have the option to lower your monthly payments by stretching them out over a longer period of time.
- Private student loan consolidation: Also called student loan refinancing, this is available for both private and federal loans. Not only can you adjust your repayment term, but you may qualify for a lower interest rate.
In this post:
- Who should consolidate student loans
- Loan types that can be consolidated
- How consolidation compares to refinancing
- How to consolidate federal student loans
- How to consolidate private student loans
Who should consolidate student loans
Both federal and private student loan consolidation can simplify your life by allowing you to make a single monthly payment on the loans you combine.
Consider federal loan consolidation first if:
- You’re having trouble making the monthly payments on your federal loans
- You want to enroll in an income-driven repayment plan
- You hope to qualify for loan forgiveness
Private loan consolidation may be a better option if:
- You won’t qualify for loan forgiveness
- You’re paying high interest rates on your student loans
- You can afford your monthly payments
Learn More: The Complete List of Student Loan Forgiveness Programs
For a federal Direct Consolidation Loan you’ll need:
- To be in grace or repayment: You can’t consolidate while you’re in school, or consolidate a loan that is currently in default.
- Your FSA ID: This is your Federal Student Aid ID. It gives you access to the online portal for your loans and also serves as your digital signature.
- Financial documents: Depending on your plan, you might be required to complete income information, so have recent tax returns handy. If you’re married, you’ll need your partner’s tax returns and income information as well.
For private student loan consolidation you’ll need:
- A history of earnings and credit: If your credit score keeps you from being approved, you can try applying with a cosigner.
- Enough income to manage your monthly payments: If your debt-to-income ratio is too high, you might not be approved.
Loan types that can be consolidated
Private student lenders will consolidate almost any federal or private student loan taken out by a creditworthy borrower to attend a qualified school. Most lenders will refinance parent PLUS loans, and a few will also let parents transfer those loans to their children.
Only government student loans are eligible to be combined in a federal Direct Consolidation Loan. But almost any type of federal loan, including the following, qualifies:
Federal loans that can be consolidated
- Subsidized Federal Stafford Loans
- Unsubsidized and Nonsubsidized Federal Stafford Loans
- PLUS loans from the Federal Family Education Loan (FFEL) Program
- Supplemental Loans for Students
- Federal Perkins Loans
- Direct PLUS Loans
- Parent PLUS loans
- Grad PLUS loans
- Nursing Student Loans
- Nurse Faculty Loans
- Health Education Assistance Loans
- Health Professions Student Loans
- Loans for Disadvantaged Students
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- FFEL Consolidation Loans and Direct Consolidation Loans (only under certain conditions)
- Federal Insured Student Loans
- Guaranteed Student Loans
- National Direct Student Loans
- National Defense Student Loans
- Parent Loans for Undergraduate Students
- Auxiliary Loans to Assist Students
How consolidation compares to refinancing
Federal student loan consolidation can lower monthly payments by stretching out your loan term to as long as 30 years. But your interest rate does not change — it’s the weighted average of your existing loans, rounded up to the nearest one-eighth of a percent.
Since you don’t get an interest rate reduction, the tradeoff for lowering your monthly payment through federal consolidation can be thousands of dollars in additional interest charges. But if you end up qualifying for loan forgiveness in an income-driven repayment plan, you may come out ahead.
You may qualify for a lower interest rate with lenders that offer private student loan consolidation. Refinancing with a private lender also allows you to adjust your repayment term, and a lower interest rate can help you pay your loans off faster. Borrowers who lower their interest rate and shorten their repayment term can save tens of thousands in interest charges.
Learn More: Student Loan Consolidation vs. Student Loan Refinancing
| Federal consolidation | Private consolidation (refinancing) | |
|---|---|---|
| What is it? | Combines most types of federal student loans into a new federal loan | Get a new interest rate and repayment term by refinancing into a private loan |
| Best if |
| Your interest rates are too high |
| Which loans can be combined? | Most federal loans | Private loans and most federal student loans |
| Will it lower my interest rate? | No | Yes (creditworthy borrowers may qualify for a lower interest rate) |
| Can it save me money? | Maybe, if you qualify for loan forgiveness (you may pay more if you don’t qualify for loan forgiveness) | Yes, especially if you don’t extend your repayment term |
| Will I keep federal benefits and protections? | Yes | No |
| Credit check required? | No | Yes |
How to consolidate federal student loans
To consolidate federal loans, apply through the Department of Education’s website, studentloans.gov, for a Direct Consolidation Loan. The process is easy, and free — there’s no need to pay third-party companies that may offer to help you apply for federal loan consolidation.
When to consider federal consolidation
You can consolidate your federal student loans any time after you graduate. If you’d like to keep the six-month cushion provided by your grace period, you can specify that you want the loan application to be processed closer to when the grace period ends.
Some types of federal loans must be combined into a federal Direct Consolidation Loan in order to be eligible for income-driven repayment options which can lead to loan forgiveness. Parent PLUS loans, for example, are only eligible for IDR plans after being consolidated. Older Stafford loans from the FFEL program must also be consolidated in order to qualify for an IDR plan.
But be careful. If you already have loans enrolled in an income-driven repayment plan, or have made qualifying payments toward Public Service Loan Forgiveness, you’ll have to start over if you convert those loans into a federal Direct Consolidation Loan. Payments made before you consolidated won’t count toward forgiveness.
Learn More: Pros and Cons of Consolidating Student Loans
For private student loan consolidation, lenders typically want to see a history of earnings, and a good credit score. Although you may qualify to refinance soon after leaving school and landing a job, you may qualify for a better rate once you’ve been working for a year or two.
Qualifying for federal student loan consolidation
For a Direct Consolidation Loan, you’ll need to either be already repaying your current student loans or the loans will need to be in their grace period. You can’t consolidate a loan amount that is currently in default.
How long it takes
You can fill out the application for a federal Direct Consolidation Loan online at StudentLoans.gov. You have to complete the application in a single session — you can’t save your progress — but it takes most people less than 30 minutes.
Repayment begins within 60 days after your new loan is paid out. Your loan servicer will let you know when the first payment is due.
How to consolidate private student loans
If you’re interested in lowering the interest rates on your federal and private student loans, look into private student loan consolidation. Checking rates with several lenders that offer student loan refinancing will help you find the loan that’s the best fit for you.
Qualifying for private loan consolidation
You’ll need a good to excellent credit to qualify for private consolidation — if your credit score is less than 650 to 670, you’ll have better odds applying with a spouse or relative as a cosigner.
To be a good candidate for refinancing, it helps if you:
- Earned your degree: Not all lenders require a degree, but many do
- Have a solid history of credit and earnings: Once you graduate, landing a job boosts your creditworthiness
- Make enough money: The most common reason borrowers are turned down for refinancing is not their credit score, but excessive debt-to-income ratio
Private student loan consolidation makes sense if you don’t expect to qualify for federal student loan forgiveness, and you don’t care about losing access to government programs like income-driven repayment.
Types of loans that are eligible for private loan consolidation
- Federal student loans: Direct subsidized and unsubsidized loans, Federal Family Education Loan (FFEL) loans, FFEL consolidation loans and direct consolidation loans can all be refinanced.
- Private student loans: You can refinance most private loans that were taken out to attend colleges and universities that are certified to accept federal aid. Private loans that were previously refinanced also qualify.
- Parent and grad PLUS Loans: If you took out parent PLUS loans for your child, most lenders will refinance them if you keep them in your own name. Some lenders will also allow parents to transfer PLUS loans to their children if the child qualifies for refinancing.
When you should consider private consolidation
Refinancing can help borrowers meet different goals. The type of loan you pick, and the savings you can achieve by refinancing, will depend on your goal:
- Lower your monthly payment: Many borrowers who want to lower their monthly payment will refinance into a loan with a longer repayment term. Even if you lower your interest rate, your total repayment costs may increase if you stretch your payments out over many years.
- Maximize savings: Refinancing into a loan with a shorter repayment term will get you the lowest interest rate, and produce the greatest total savings over the life of the loan. The tradeoff is that your monthly payment may increase.
- A little of both: If you refinance into a loan with a lower interest rate but roughly the same repayment term, you can lower your monthly payment and total repayment costs, although not as dramatically as if you focused on one goal or the other.
Learn More: 10 Best Student Loan Refinance Companies
Interest rates for consolidating private student loans
| Lender | Variable rates from (APR) | Fixed rates from (APR) | Terms (Years) | ||||||||||||||||
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 Advantage Education Loans | Get Rates | N/A Variable APR | 4.54%+ Fixed APR | 10, 15, 20 Terms (Years) | Get Rates | ||||||||||||||
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 Brazos | Get Rates | 2.38%+ Variable APR | 3.50%+ Fixed APR | 5, 7, 10, 15, 20 Terms (Years) | Get Rates | ||||||||||||||
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 Citizens Bank | Get Rates | 2.72%+¹ Variable APR | 3.49%+¹ Fixed APR | 5, 7, 10, 15, 20 Terms (Years) | Get Rates | ||||||||||||||
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 College Ave | Get Rates | 3.89%+2 Variable APR | 4.89%+2 Fixed APR | 5 to 20 Terms (Years) | Get Rates | ||||||||||||||
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 ELFI | Get Rates | 2.39%+3 Variable APR | 3.20%+3 Fixed APR | 5, 7, 10, 15, 20 Terms (Years) | Get Rates | ||||||||||||||
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 INvestED | Get Rates | 2.12%+ Variable APR | 3.16%+ Fixed APR | 5, 10, 15, 20 Terms (Years) | Get Rates | ||||||||||||||
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 MEFA | Get Rates | 4.65%+ Variable APR | 4.65%+ Fixed APR | 7, 10, 15 Terms (Years) | Get Rates | ||||||||||||||
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 PenFed | Get Rates | 2.17%+ Variable APR | 3.23%+ Fixed APR | 5, 8, 12, 15 Terms (Years) | Get Rates | ||||||||||||||
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 RISLA | Get Rates | N/A Variable APR | 3.49%+ Fixed APR | 5, 10, 15 Terms (Years) | Get Rates | ||||||||||||||
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 SoFi | Get Rates | 3.21%+4 Variable APR | 3.49%+4 Fixed APR | 5, 7, 10, 15, 20 Terms (Years) | Get Rates | ||||||||||||||
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Bank Disclosures | 2College Ave Disclosures | 3 ELFI Disclosures | 4SoFi Disclosures |
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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 June 1, 2020, the one-month LIBOR rate is 0.17%. Variable interest rates range from 2.72%-8.38% (2.72%-8.38% 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 3.49% - 8.63% (3.49% - 8.63%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. |
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