Am I eligible to refinance my student loans?

Student Loan Consolidation and Refinancing FAQs for 2018

Answers to the most frequently asked questions on federal student loan consolidation, private student loan refinance, and the difference between the two.

Questions About Federal Student Loan Consolidation for 2018

Federal student loan consolidation enables you to combine all of your federal student loans into a single new loan with one monthly payment. You may not consolidate your federal student loans with any private student loan debt or your parent's Parent PLUS Loans.
You can consolidate your federal student loans once they are in repayment or in the grace period. And generally, you can’t consolidate an existing consolidation loan unless you include an additional (eligible) federal student loan in the consolidation. 

Most federal loans are eligible, such as:

  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • PLUS Loans (both Parent PLUS and Grad PLUS)
  • Federal Perkins Loans
  • HEAL Loans
  • Supplemental Loans for Students

For a complete list, please refer to the U.S. Department of Education.

In general, most individuals who have federal student loans will be eligible to consolidate their loans. However, there are some requirements:

  • Your loans must be in repayment or in their grace period.
  • Generally, if you already have a consolidation loan you will need at least one additional eligible loan to consolidate again.
  • If you're in default, you will need to agree to additional terms set by the U.S. Department of Education.

Loan consolidation is a personal choice.

Here are some of the pros:

  • If you have more than one servicer, it may be easier for you to manage your loans if they are all in one place.
  • If you have a Federal Family Education Loan Program loan and would like to take advantage of some of the loan benefits offered in the Direct Loan program (e.g., certain income-driven repayment plans or Public Service Loan Forgiveness (PSLF)).
  • If you have loans with a variable interest rate and would like to have a fixed interest rate.
  • If you need smaller monthly payments, you can extend your repayment term to make your monthly payments more affordable. (Keep in mind you will pay more over the life of the loan.)

Here are some of the cons:

  • Your overall interest rate will slightly increase. If you are consolidating in hopes of a lower interest rate, then you should reconsider your strategy. Your interest rate for a Federal Direct Consolidation Loan is not based on your credit score, but rather the weighted average of the interest rates on the loans you are consolidating loans rounded up to the nearest 1/8 of a percent. If you are looking to lower your interest rate you may want to consider private loan refinancing (link to Private Loan Refi).
  • If you have already been making eligible payments towards PSLF or forgiveness under one of the income-driven repayment plans, your eligible payments restart.
  • You could lose borrower benefits on your underlying loans. For example, a consolidated Perkins loan will lose its interest subsidy and cancellation benefits.
  • A longer repayment term will mean it will take you longer to repay your loan, and it will cost you more.
In some cases, you can include an existing consolidation loan in a new Direct Consolidation Loan, particularly if you've taken out one or more additional federal student loans. Check with StudentLoans.gov to learn more.
No. Eligibility for federal student loan consolidation does not depend on the borrower's credit history or credit scores.
Direct Consolidation Loans use a fixed interest rate. Your interest rate will be the weighted average of the interest rates on the existing federal student loans, rounded up to the nearest one-eighth of 1%. Our Consolidation Loan Calculator can help you estimate your new rate and monthly payment.
No. Students may not consolidate their federal student loans with their spouse's federal student loans. However, some private refinancing lenders, like PenFed, will allow you to refinance your debt together.
No. Students may not consolidate their federal student loans with their parent’s Parent PLUS Loans.  However, a parent may consolidate their Parent PLUS loans with their own federal student loans. 
A Direct Consolidation Loan cannot include private student loans or other types of non-student loan debt. However, you may be able to include your private student loan balances for the U.S. Department of Education to determine your overall education debt, which will determine the length of your repayment term (up to 30 years). If you would like to combine all your loans—both federal and private—you may want to consider private loan refinancing. Keep in mind, if you do refinance your federal loans with a private lender, you will lose the federal benefits on those loans. 
Consolidation typically takes 30 to 60 days, but can take up to 90 days. While you wait, you should continue to make your payments. Any payments received after the loan consolidation will be returned to you.

If you choose to combine your loans into a Direct Consolidation Loan, you will need to submit an application at StudentLoans.gov. The application process should take about 30 minutes. The Direct Consolidation Loan program is run by the U.S. Department of Education.

  1. Log in with your FSA ID
  2. Choose the federal loans you would like to consolidate. Though you can’t roll your private student loans into the Direct Consolidation Loan, you can include the loan balances of your overall student debt—which will give you an option to extend your repayment term up to 30 years. 
  3. Select your servicer, unless you are working towards Public Service Loan Forgiveness (PSLF). If you are working towards PSLF, the Department will choose the loan servicer who is working with all PSLF borrowers.
  4. Pick a repayment plan. If you choose an income-driven repayment plan (like income-based repayment), you will need to link the application to the IRS in order to confirm your income. 
  5. Review the terms and conditions carefully. You are committing to these terms so do not just scroll down to the end.
  6. Enter your personal information as requested. This will be where you have to include two references who must have different addresses and telephone numbers from each other.
  7. Review and sign your application.

The repayment period is determined by your total education debt, which considers both federal and private student loan debt. In your application you can report the amount of your private student loans, even though you can't include the actual loans in your consolidation.

The following table shows the maximum repayment term under the standard repayment plan:

Loan Balance Maximum Repayment Period

 Less than $7,500         10 years
 $7,500 to $9,999         12 years
 $10,000 to $19,999         15 years
 $20,000 to $39,999         20 years
 $40,000 to $59,000         25 years
 $60,000 and above         30 years

You do not need to choose the standard repayment plan. You are free to choose another repayment plan if you prefer a shorter term.

There are no prepayment penalties on federal student loans. Making extra payments is a great way to pay off your loans faster and save money on interest. 
Federal student loans, including federal Direct Consolidation Loans, offer borrower benefits such as deferment and forbearance. As long as you meet the criteria and have not used up all your time, you will be able to temporarily postpone payments on your loans. You may want to also consider income-driven repayment plans which will base your monthly payment on your income rather than your loan balance.
You can consider consolidating your loans via private student loan refinancing.
If you have other types of debt to refinance, you can look for a personal line of credit or loan from a bank, credit union, or other financial institution. 

Questions About Private Student Loan Refinancing and Consolidation for 2018

Yes, it is possible to consolidate private student loans. This process is also known as refinancing and is done through a private lender.When you consolidate via refinancing, you can choose to refinance one, some, or all of your loans.

You can also choose to include your federal student loans and private student loans when you refinance with a private lender.

But you must be sensitive to some important things:

  1. Private student loan consolidation (a.k.a. refinancing) is based on credit worthiness and income criteria. If you do not have a strong credit and employment history, you will likely need a cosigner to qualify.
  2. Should you choose to include federal loans in a private consolidation, be prepared to forfeit certain borrower benefits such as generous deferment periods, income-based repayment plans, and possibly loan forgiveness programs. Some private lenders offer brief periods of loan deferment under specific circumstances, but they are not comparable to the benefits of the federal program.
Most private student loans and federal student loans are eligible for refinancing, including loans taken out for undergraduate and graduate studies. Some private lenders may determine loan eligibility based on the college attended, degree level, or field of study.

Some benefits of refinancing a private loan may include:

  • Simplify repayment by combining several loans into one (reduces the number of loan payments you need to keep track of each month)
  • Reduce the amount of monthly payments by increasing the term of the loan*
  • Qualify for a lower interest rate
  • Change from a fixed to a variable interest rate or vice-versa
  • Borrowers who don’t like their current lenders can switch to a different lender
*NOTE: Increasing the term of your loan may increase the total interest paid over the life of your loan, but can help make your monthly payments more manageable.
Private refinance loans are generally not school-certified since they are refinancing existing private student loan debt after the student has graduated or is no longer enrolled.
Interest rates on private refinance loans vary with the lender, and may be variable or fixed. Typically, the interest rate is based on the credit score of the borrower and the cosigner (if any). Generally, a better credit score will lead to a lower interest rate. 
Some lenders provide auto-debit discounts for making automatic monthly payments by direct debit from a bank account. Typical discounts include an interest rate reduction of 0.25% or 0.50%.

It depends. 

A private refinance loan may reduce your monthly payment by increasing the term of the loan. This may help you free up some cash for other things such as paying off higher-interest debts. This could help save you money. However, increasing the term of your loan often leads to more interest being charged over the life of the loan. 

If you qualify for a lower interest rate, and don’t extend the term of the loan, the total cost of the loan will be lower, and you will ultimately end up paying back less money than you would have if you had not refinanced.

If your spouse will be listed as a cosigner on the refinanced loan, both of your incomes will be considered. Also, if you choose to work with a lender that offers combined, spousal refinancing (such as PenFed), both incomes will be considered.

If you’re refinancing, but not including your spouse as a cosigner on the loan, it’s important to note that 100% of any joint debt you hold (like a mortgage) will be considered your debt. The lender will compare this debt to your income only. If the debt-to-income ratio is too high, you may be asked to add a cosigner.

No. If you are able to qualify for a private refinance loan on your own, you can combine your existing student loans into the new refinance loan without a cosigner. This will pay off your existing loans, and create a new loan solely in your name.
Some lenders offer cosigner release as an option on their private refinance loans. Typically, these require 12, 24, 36, or 48 months of consecutive on-time payments by the primary borrower. The primary borrower must also satisfy credit criteria.

If you do not satisfy a lender’s credit criteria, a cosigner may be required. Recent college graduates may not have a long enough credit history or work history to qualify without a cosigner.

Even if a cosigner is not required, adding a cosigner may yield a lower interest rate. A cosigner is a co-borrower, equally obligated to repay the loan. The private refinance loan will be reported as debt on the credit history of both you and your cosigner until the loan is paid in full.

Refinancing can increase or decrease your credit score, or it may remain unchanged. Refinancing reduces the number of loans, but is usually not treated as new indebtedness since it is replacing existing loans. If refinancing reduces your monthly payment through a longer repayment term, it may improve your credit score by reducing your debt-to-income ratio.
Many lenders do not charge fees on their private refinance loans. Some lenders roll the fees into the interest rate. We recommend you ask any potential lenders to explain any fees they may charge.

Loan limits and minimum balance requirements vary by lender. Some will allow you to get a private refinance loan for as little as $7,500 or $10,000. Others require a higher initial loan balance.

The loan limits may vary based on whether you have an undergraduate or graduate degree. It may also depend on your credit score and income.

The length of the repayment term varies by lender, typically 15, 20, or 25 years. Lenders offering fixed interest rates may have shorter repayment terms. The repayment term may depend on the amount of the loan.
Typically, it takes 30-60 days from loan approval until the private loan refinance is complete.You should continue making payments on your old loans until the lender notifies you that the old loans have been paid off. Any overpayments will either be forwarded to the new lender or refunded back to you.

Yes. Until you receive confirmation from your new lender of your new loan, you should continue making payments to your existing lender. Any overpayment with either be forwarded to your new lender or refunded back to you.

NOTE: Keep track of your payments during this time period. If you are due a refund from your former lender, it’s a good idea to know how much so you can follow up, if needed.

You will need to find a lender that offers student loan refinancing. To review lenders who offer student loan refinancing, and to check your eligibility, we would suggest www.studentloanconsolidator.com/compare-lenders

As with all federal and private student loans, there are no prepayment penalties for making extra payments or paying off your balance early.

General Questions About Student Loan Consolidation and Refinancing for 2018

They are very similar, but there are subtle—and important—distinctions. Consolidation brings multiple loans together. Refinancing may bring multiple loans together, or may be done with just one loan. People typically choose to refinance because they are also looking for a lower interest rate.

The Direct Consolidation Loan program for federal student loans will not help you lower your interest rate, is only available for federal student loans, and does not require a credit check. The lender in this case will remain the U.S. Department of Education and your Direct Consolidation Loan will be serviced by a federal student loan servicer.

Refinancing can include federal and private loans together, is done with a private lender, and requires a credit check. Terms and underwriter criteria will vary between different private loans, and your interest rate will be based on your credit.

There is no federal option to refinance loans. Under the Direct Consolidation Loan program, you may consolidate any federal student loans held in your name (including Parent PLUS, Grad PLUS and any other types of federal student loans borrowed), but keep in mind, this is not the same as refinancing the loans to qualify for a lower interest rate. 
There are some distinct methods student loan scammers will attempt to use:
  • They ask you to pay up-front fees.
  • They charge monthly fees which are not part of loan repayment.
  • They promise you immediate, or some sort of loan forgiveness.
  • They ask for you to share your FSA ID username and/or password.
  • They ask you to sign and submit written agreements or contracts to give them permission to make decisions on your loan.
  • They claim that the offer they have is limited.
  • They have spelling or grammatical errors in their ads, emails, and communications.

If you feel like you have been approached by one of these companies, please contact your loan servicer. For more information please go to, https://studentaid.ed.gov/sa/repay-loans/avoiding-loan-scams#free-help.

Am I eligible to refinance my student loans?