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Best Student Loan Refinancing and Consolidation

by Barbara Friedberg Personal Finance Contributing Editor

Read our guide to discover the best student loan refinancing companies for you. Student loan debt can be overwhelming, especially if you’re dealing with multiple lenders. Consolidation and refinancing are two popular methods to simplify your payments. We look at the pros and cons of both to help you make an informed financial decision.

Student Loan Refi and Consolidation Companies


Student loan consolidation vs. refinancing

You have a few options when it comes to managing your student loan debt: consolidation and refinancing. If you’ve done any research on the topic, you know first hand how confusing it can be to understand the differences between the two and which option is right for you. Our goal is to break it down and make it as simple as possible for you to make an informed decision.

Simply put, consolidation is the act of combining multiple loans into a single loan with one lender and one monthly payment. Refinancing offers many of the same benefits, but also allows you to save money through improving your interest rate and/or payment terms.

Let’s take a deeper dive into your options using the most common terms you’ll see:

  • Federal Loan Consolidation
    If you have government-issued student loans like Stafford loans or Perkins loans, you have the option to do loan consolidation through the federal government with a Federal Direct Consolidation Loan. These consolidation loans take all of your government-issued student loans and combine them into one new loan.

    The new loan’s interest rate will be a weighted average of the loans you’re consolidating. For example, if you’re consolidating two federal loans, one with an 8% interest rate and one with a 6% interest rate, the interest rate on your new, consolidated loan will be 7%.

    Only federal student loans qualify for this program. You cannot consolidate private student loans via a Federal Direct Consolidation Loan.

  • Private Loan Consolidation
    Private loan consolidation is the act of consolidating your student loans through a private lender. Both federal and private student loans can be consolidated through a private lender. However, if you choose to consolidate your federal loans with a private lender, you will lose any federal borrower protections you currently have on your government-issued student loans. This includes options like deferment and forbearance, income-driven payment plans like PAYE (pay as you earn), and other loan forgiveness programs like government plans for public service workers and teachers. There is no forgiveness for private loans.

    Here’s where the terminology can get tricky.

    Through private loan consolidation, you also have the opportunity to refinance the loans you’re consolidating. Some sources online may use these terms interchangeably and make it more complicated than it needs to be. Consolidating is the act of turning multiple loans into one loan, refinancing is done to get a better interest rate or loan terms. They can be done separately or together.

  • Student Loan Refinancing
    With student loan refinancing, you will take out a new loan and use it to pay off your existing student loans. This part of the process is essentially loan consolidation. What makes refinancing different is that through refinancing you can qualify for a new, lower interest rate and/or negotiate new loan terms. Student loan refinancing is ideal for those with good credit, as those with higher scores are likely to save more money by qualifying for the lowest available interest rates.

    Student loan refinancing is only available through private lenders. So, if you want to refinance your government-issued loans, you will have to do it through a private lender and lose all of the federal protection benefits mentioned above.

Student loan consolidationStudent loan refinancing
Qualifying loansFederal loansPrivate and federal loans
PurposeCombine multiple loans into one loanReduce interest rate and combine multiple loans into one loan
Will I save money?
Will I lower my interest rate?
Will I maintain federal borrower protections?
Student loan consolidationFederal loansCombine multiple loans into one loan
Student loan refinancingPrivate and federal loansReduce interest rate and combine multiple loans into one loan

How to consolidate student loans

Consolidating federal student loans can be done online with a guided application and should take about 30 minutes to complete.

To consolidate your student loans:

  1. Go to studentloans.gov and complete the Direct Consolidation Loan Application. You will need to create a Federal Student Aid (FSA) ID if you do not already have one.
  2. Select which loans you want to consolidate.
  3. Choose your repayment plan. You’ll have the option to select a time-based repayment plan or income-based repayment plan.

After you complete the application you should hear back within 30 to 60 days. You’ll need to keep making your regular student loan payments as scheduled while you wait.

Pros and cons of consolidating student loans

Benefits of consolidating student loans

  • One payment: Make your life easier with only one bill to pay each month.
  • Fixed loan rate: While there are pros and cons to both fixed and variable interest rates, having a fixed rate means you always know what to expect and your payment will stay consistent over the life of the loan.
  • Adjust your loan terms: When you consolidate your loans, you’ll have the option to select an income-based or time-based repayment plan. Depending on which you select, you may be able to lower your payments by increasing the length of your loan term.
  • No credit check: Unlike refinancing, consolidating your federal student loans requires no credit check or prerequisite.

Downsides of consolidating student loans

  • You won’t save money: Federal loan consolidation will not save you money. It simply makes the repayment process easier by combining loans.
  • You won’t get a better interest rate: Your interest rate will be set using a weighted average, meaning you will pay in the same interest you would have before consolidating.
  • You may pay more: The option for a longer repayment term means lower monthly payments, but it also means you pay more in interest over time.

Should I consolidate my student loans?

If you’re satisfied with the current terms of your loans and want a simplified repayment method, or if you need the benefit of an income-based repayment plan, we recommend looking into consolidating your student loans. Income-based repayment programs are unique to federal student loans and federal student loan consolidation. Lowering your monthly payment through consolidation can be a good option if you’re struggling to make your current monthly payments. However, it will lengthen the term of the loan, meaning you’ll pay more in interest. If you’re trying to decide when to consolidate student loans, be sure to weigh your options and decide if lowering your monthly payments will be best for you in the long run. You may want to simplify multiple payments into a single, monthly fee by consolidating your student loans without choosing to lengthen your repayment term.

How to refinance student loans

Unlike with federal student loan consolidation, refinancing through a private lender means you have options. You’ll want to shop around and get information from multiple lenders to determine which rates work best for you.

If you think you’ll be able to pay off the loan quickly, you might want to select a variable interest rate instead of a fixed interest rate. Variable interest rates are tied to an index rate and can change as often as each month, while a fixed rate is locked in for the length of the loan. With a variable rate, if the index rates go down, your interest rate goes down with it. However, this means the flip side is also true, and your interest rate can go up. A variable interest rate can save you money, but a fixed interest rate is a safer option.

To refinance your student loans:

  1. Get quotes from multiple lenders.
  2. Select a lender.
  3. Gather important assets. To apply, you’ll need a government-issued ID, proof of citizenship, proof of income and official statements from all of the federal and private student loans you want to refinance.
  4. Select loan terms. Decide if you’d prefer a variable or fixed interest rate and compare the cost benefits of paying off your loans with different repayment terms, for example comparing a 5-year repayment plan vs. a 15-year repayment term.

You’ll continue to pay your student loans while you wait for approval.

Pros and cons of refinancing student loans

Benefits of student loan refinancing

  • You’ll save money: Perhaps the biggest benefit of refinancing your student loans is the option to get a new, lower interest rate. This has the potential to save you quite a bit of money over the length of your loan.
  • Variable or fixed rates available: Refinancing gives you the option to select a fixed or variable interest rate, unlike a federal loan consolidation where you get a predetermined fixed interest rate.
  • Adjust payment terms: You’ll have the opportunity to change the term of your loan, either by shortening or lengthening.
  • Choose your lender: Going the private lender route means who you work with is 100% up to you.
  • Enjoy the benefits of consolidation: While you can choose to refinance a single loan, refinancing your student loans usually includes consolidating multiple loans into one loan. This means you get the same benefits of consolidation while enjoying the better interest rates and terms that come with refinancing.

Downsides of student loan refinancing

  • Lose federal borrower protections: By refinancing federal student loans with a private lender, you will lose the ability to defer your loans or qualify for student loan forgiveness.
  • There may be fees: When you’re shopping around for a lender, be sure to ask if there are any origination fees or other costs associated with the loan.
  • You may not save as much as you want: While most people save money through refinancing, adjusting the length of your payment term can mean you pay more if you’re not careful.
  • Your credit score matters: Refinancing requires a credit check, and the best interest rates will go to those with higher scores.

Should I refinance my student loans?

If you have good credit and are looking for ways to save money on your student loans, we recommend looking into refinancing. Refinancing is good for those with a regular, steady income who do not anticipate needing an income-based repayment program through the government. Refinancing will allow you to have a lot more say over the terms and conditions of your loans, including getting an ideal interest rate and customizing your repayment terms. For the right person, refinancing can be a good, money-saving choice.

Not sure how to choose?

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    Student loan refinancing and consolidation reviews


    Sofi offers personal, home, student and small business loans. Refinancing is available for mortgages and student loans. Personal loan amounts range from $5,000 to $100,000 with 4.99% to 19.63% APRs.

    Read 202 Reviews
    EduLoan Docs

    EduLoan Docs helps former students pay off federal student loan debt. They have services that will help you consolidate your loan debt, help you with loan forgiveness and assist you in preparing the documents to enroll in common programs like Standard and Graduated repayment plans, as well as income-based repayment. EduLoan Docs helps student loan borrowers enroll into several different loan forgiveness programs. If you are a teacher, work in public service or are unable to work due to a disability, EduLoan docs can see if you qualify for total loan forgiveness. EduLoan Docs guarantees that you can find a consolidation and repayment plan, or you get your money back.

    Read more about EduLoan Docs

    Credible partners with multiple lenders to give consumers the opportunity to receive competitive student loan refinancing solutions. Their online portal helps students determine the best options for refinancing their student loan debt by comparing loan offers online for free. Putting information from a variety of reputable private lenders in one place, Credible brings transparency to the student loan selection process. Credible offers refinancing options for both federal and private loans including Parent PLUS loans. The company presents a list of lending solutions with accompanying interest rates from multiple lenders. The information includes total repayment amount, APR and monthly payment amounts so refinancers can accurately compare offers. Multiple rates from a variety of lenders enable borrowers to select the best combination of terms and rates to meet their needs. The Credible blog provides useful articles related to a variety of lending, borrowing, interest rates, college funding and other related topics.

    Read 21 Reviews
    Student Loan Hero

    Student Loan Hero was created by a former indebted graduate who was motivated to provide an unbiased solution to help other graduates manage, organize and repay their loans. Student Loan Hero is a portal for access to a variety of student loan refinancing companies. The site lists interest rates, loan types, terms and eligibility requirements for the specific refinancing companies and lenders. Student Loan Hero helps borrowers understand their loans and make smart repayment decisions. Customers receive an in-depth student loan summary and financial analysis. Repayment plans are customized to fit the client. Student Loan Hero offers advice on federal and private loan repayments. The site offers several calculators, such as student loan pre-payment, student loan comparison, and student loan payoff versus investing so consumers can make informed decisions that positively impact their financial future.

    Read 14 Reviews
    Citizens Bank Education Refinance Loans

    Citizens Bank is part of Citizens Financial Group, one of the oldest and largest financial services firms in the United States. Included in their portfolio of offerings, Citizens Bank provides a student loan refinancing product for both private and federal student loans. Citizens Bank promises low, competitive fixed and variable interest rates. Their product doesn’t have any application, origination or disbursement fees or a prepayment penalty. Citizens also offers loyalty and automatic payment discounts. A loan calculator is available to compare rates and examine future payment scenarios. Citizens offers a FAQ section and additional banking and borrowing related articles.

    Read Review

    Earnest claims to offer better refinancing rates through data analysis. The company uses a data-driven evaluation of the consumer’s complete financial profile to give qualified borrowers lower, more personalized interest rates than those available through traditional lenders. Loan rates are disclosed after a completing a quick questionnaire. Their Precision Pricing keeps loan payments low, regardless of the loan's term. Earnest services the loan for the entire life of the loan with no third party involvement. It’s easy for consumers to adjust their payments and due dates. Earnest promises additional strategies for faster loan repayment without fees. Earnest’s blog covers a range of student loan repayment questions as does their comprehensive FAQ section. Their iPhone app enables consumers to manage their loan on the go. Requirements include U.S. citizenship, debt from a Title IV accredited school, graduation from school, employment and status as primary borrower.

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    Rhode Island Student Loan Authority

    The Rhode Island Student Loan Authority has been providing affordable higher-education solutions for students since 1981. RISLA offers a path to refinance existing private and federal education loans and lower interest rates and payments. The organization offers an instant credit decision, and you do not have to be a resident of Rhode Island to qualify for their fixed rate refinancing loan product. Their ‘Rates and Fees’ chart clearly outlines interest rates, terms and estimated monthly payments, and RISLA offers a 0.25% interest rate discount with auto deposit.

    • Services: Student loan refinancing
    • Loan types refinanced: Private and federal student loans
    • Minimum loan amount: $7,500
    • Loan terms: 5, 10 or 15 years
    • Loan rates: 3.49% APR - 8.14% APR fixed, variable rates not available
    by Barbara Friedberg Personal Finance Contributing Editor

    Barbara Friedberg, MBA, MS is a former investment portfolio manager with decades of financial experience. Friedberg taught Finance and Investments at several universities. Her work has been featured in U.S. News & World Report, Investopedia, Yahoo!Finance and many more publications.