What are my loan consolidation options?

Student Loan Consolidation: Why Consolidate or Refinance?

Student loan consolidation, or refinancing, pays off your existing loans with a new student loan. A consolidation loan simplifies and streamlines your finances by replacing multiple loan payments with a single loan payment.

There are two types of refinancing loans: federal and private. A federal consolidation loan can refinance federal student loans and parent loans. A private refinance loan can refinance both federal student loans and non-federal student loans from private financial institutions, such as banks and credit unions, as well as non-federal student loans financed by states or colleges/universities.

Loan Eligibility

Federal Consolidation Loan:

✔ Federal Stafford Loan

✔ Federal Grad PLUS Loan

✔ Federal Parent PLUS Loan

✔ Federal Perkins Loan

✔ Federal Consolidation Loan (in some cases)

✔ Federal Family Education Loans

Private Refinance Loan:

✔ Private student loans

✔ Private parent loans

✔ Federal Stafford Loan

✔ Federal Grad PLUS Loan

✔ Federal Parent PLUS Loan

✔ Federal Perkins Loan

✔ Federal Consolidation Loan

Federal Consolidation Pros:

  • Cut monthly student loan payments
  • Simplify repayment with a single loan instead of multiple loans
  • Renew eligibility for deferment and forbearance benefits
  • Multiple payment plans (including income-based repayment for some borrowers)

Federal Consolidation Cons:

  • Total cost of loans could increase if the repayment period is extended
  • Potential loss of borrower benefits offered with the original federal loans
  • The remaining grace period on the existing loans will be lost if they are consolidated before the end of the grace period
  • Your interest rate will remain roughly the same – it will not go down
  • If you are a servicemember on active duty and you refinance or consolidate your student loans while serving, you will no longer qualify for an interest rate reduction under the Servicemember Civil Relief Act (SCRA) for student loans taken out prior to your service.

Private Refinancing Pros:

  • Potentially qualify for a lower interest rate
  • May reduce monthly student loan payments
  • Switch to the lender of your choice

Private Refinancing Cons:

  • All federal loan benefits, such as repayment plans and forgiveness and discharge benefits or access to federal programs may be lost
  • If the repayment term is extended, overall loan costs may increase
  • A creditworthy cosigner may be required to qualify for the lowest interest rates

How Private Refinancing Can Save You Money

  1. If you qualify, a private refinance loan can help you cut the interest rate on some or all of your federal loans and your private loans.
  2. When your monthly payment is reduced, you can use the savings to pay off higher interest rate debts.
  3. Some private lenders offer an additional interest rate reduction to borrowers with other accounts, such as checking or savings.
What are my loan consolidation options?