Can You Consolidate Private and Federal Student Loans?

The terms refinancing and consolidation are often used interchangeably to describe the process of combining multiple debts into a single new loan with one monthly payment. However, there are key differences between them when it comes to student loans.

Consolidation applies only to federal student loans, while refinancing allows you to combine private and federal student loans, if you're willing to give up federal borrower benefits. 

This guide explains the consolidation and refinance processes so you can see which is best for you.

Current student loan refinance rates

Can you consolidate private and federal student loans together?

“Consolidation and refinancing are often conflated with each other, but borrowers should understand that these are two fundamentally different tools that solve for different issues,” says Kathleen Boyd, founder of Student Loan Savvy and certified financial planner. “Consolidation is about simplification and creating eligibility for certain federal provisions. Refinancing is about lowering interest costs and speeding up the payoff timeline.”

Direct Consolidation Loans are available through the Department of Education and can be used only to combine federal student loans. If you want to combine federal and private loans, refinancing is your only option. This involves taking out a private student loan to pay off both your federal and private loans.

Federal student loan consolidation explained

You can apply for a Direct Consolidation Loan from the Department of Education to repay one or more eligible federal student loans. 

Most federal student loans qualify, including Federal Family Education Loans (FFEL), Direct Loans, Perkins Loans, and loans for students pursuing specific careers, including nursing student or faculty loans and health professional loans.  

Private student loans can't be consolidated using a Direct Consolidation Loan because they weren't issued by the government and aren't eligible for the same benefits. 

Reasons to consolidate federal student loans

There are multiple reasons to consolidate federal student loans, including to:

• Simplify repayment by reducing the number of loans and monthly bills.
• Make older non-Direct federal loans, such as Perkins or FFEL loans, eligible for income-driven repayment plans and forgiveness programs.
• Get out of default status and pay off defaulted loans using a consolidation loan.
• Gain access to income-driven repayment plans if you have Parent PLUS loans. Parent borrowers must complete the consolidation process before July 1, 2026, to remain eligible for ICR or IBR repayment plans, so parents should begin the consolidation process before April 1, 2026.  

Reasons not to consolidate federal student loans

Consolidation should be considered carefully, as it can have downsides too. If you have Direct Loans or are pursuing loan forgiveness, it may not be worth consolidating for the following reasons.

• Consolidating could extend your payment term, increasing the amount of interest you pay over the life of the loan.
• Unpaid interest capitalizes when you consolidate. This means it is added to your principal, so your student loan balance increases. 
• Consolidating may reset the clock on payments that count toward eligibility for forgiveness under income-driven plans.

It's also worth noting that consolidation doesn't change your interest rate. The new consolidation loan has a fixed rate based on the “weighted average” of the rates on the loans you consolidated. 

Some of your federal student loans — like Perkins Loans — also offer benefits that you'll lose through consolidation. The good news is, you don't have to consolidate all your debt. 

“Borrowers can pick and choose what gets consolidated,” says Nicole Mulea, a certified financial planner and student loan professional at Covington & Alsina, a Maryland-based financial services firm.   

Refinancing private and federal student loans together

Although you can't combine federal and private student loans by consolidation, you can do so by refinancing. However, it’s important to understand that you permanently lose access to federal loan benefits by refinancing with a private lender. These benefits include:

• Income-driven repayment plans
• Forgiveness and discharge programs
• Generous forbearance and deferment options 

“If there’s any chance in the future you’d be going for student loan forgiveness, then I wouldn’t refinance federal loans,” Mulea says.

Refinancing can be a good way to lower your interest rate if you've improved your credit score. You can also refinance to change your repayment schedule by shopping around for a new loan with more favorable terms than your current loans.

Pros and cons of combining private and federal loans

When you refinance private and federal student loans together, this combines your loans. Some people call this consolidating, even though it is not the same thing as taking out a Direct Consolidation Loan. 

You should consider both the pros and cons of refinancing to consolidate your federal and private loans. 

When it makes sense to combine private and federal loans

For some borrowers, refinancing to combine federal and private loans is the right move. 

Boyd rarely recommends refinancing federal loans, but says it sometimes makes sense for borrowers who meet a specific profile. Typically, these borrowers have:

• Consistently high, stable income
• Minimal risk of layoff
• No eligibility (or need) for loan forgiveness
• The ability to pay off the loan on a shortened schedule, reducing overall interest paid.

When you should keep loans separate

For many borrowers, refinancing federal student loans doesn't make sense. If you may pursue student loan forgiveness, repay debt on an income-driven plan, or take advantage of temporary payment relief options, you are better off not refinancing federal loans.

“Even if a federal borrower can score a lower interest rate by private refinancing, sometimes it can be worth it to pay a little more by keeping the loans in the federal system to preserve optionality,” says Boyd.