Am I eligible to refinance my student loans?

Should you consolidate student loans? The pros weigh in.

Should I consolidate my student loans? The pros answer.

Student loan consolidation can sound pretty enticing. The prospect of fewer monthly payments, lower APR, or freeing up some of your monthly cash flow may help you realize your financial goals. Depending on how you consolidate your student loans, you may even be able to achieve significant savings in the long run, by paying off your loans faster with a lower interest rate.

While there are a lot of benefits to be had from student loan consolidation (or refinancing), there are still some potential drawbacks that you will want to consider before you move forward. People consolidate student loans for different reasons, so what worked best for your brother or your best friend, may not be the right approach for you.

Kimberly Schrant, financial coach and CPA, who runs KansasMoneyCoach.com, advises, “Everyone’s life is different, so there is not a cookie-cutter approach to this part (or any part) of a personal financial plan.”

With this in mind, let’s look at some of the details the pros suggest you consider before you make up your mind.

Your student loan consolidation goal

The first thing to consider is why you want to refinance or consolidate your student loans. Matt Hylland, financial planner with Hylland Capital Management states, “Refinancing student loans can be beneficial in a number of ways, depending on your goals. Borrowers could refinance to lower their interest rate, pay off their loans sooner, or free up monthly cash flow.”

Knowing what it is you want to achieve by refinancing or consolidating student loans will also help you weigh the pros and cons effectively. Hylland continues “If refinancing enables you to pay off higher interest debt, or save more into retirement accounts, it may be beneficial in the long run.”

Is your goal a lower interest rate, a more manageable monthly payment, or freeing up cash for other purposes? Nail down the purpose and motivation for consolidating your student loans first. This will help guide the process.

Loss of federal student loan benefits

If you want to consolidate federal student loans, you’ll want to look at the Direct Consolidation Loan program first. This is the consolidation program offered by the federal government, and it will allow you to retain the benefits of your federal student loans, such as deferment, forbearance, Income Driven Repayment, Public Service Loan Forgiveness, etc.

When you consolidate through the federal program however, your new interest rate is a weighted interest rate determined by your existing student loans. This program may help streamline the repayment process, but you won’t see much of a change in your interest rate.

Private student loan consolidation (a.k.a. refinancing) can offer highly competitive interest rates that may be much lower than what you are currently paying. However, if you refinance your federal loans with a private lender, you will lose the guaranteed benefits of the federal program.

According to Hylland, “There are many cases where it would be worth paying a higher interest rate on certain government backed loans compared to a lower interest rate with a private lender. Although interest rate is important, there is usually more to consider.”

If you’re confident in the stability of your income, private student loan consolidation may offer the savings and flexibility you’re looking as you plan for your financial future.  However, if you are consolidating because you’ve fallen on leaner times, the benefits of the Direct Consolidation Loan program may offer you more financial security.

Compare private student loan refinance lenders

If you are consolidating your student loans via private student loan refinance (rolling federal, private or both types of student loans into one), you will want to compare lenders to find the best option to help you achieve your goal. Common items to evaluate include:

Available repayment terms
Fixed and variable APRs
Cosigner release
Benefits (some lenders offer short periods of deferment in cases of unemployment, APR discounts if you enroll in autopay, flexible terms, no origination fees, spouse loan consolidation, etc.)

Schrant also points out the importance of your relationship with your lender. “…having a lender with great customer service is important. When talking to people dealing with student loan repayment, a complaint often heard is that the lender's customer service leaves a lot to be desired. Since this relationship could be long-term, be sure to have this be a consideration in the refinance plan.”

After you refinance or consolidate student loans

Once you’ve followed through with the decision to consolidate or refinance, make sure you keep your goals in mind.

“The danger in a refinance, oftentimes, is that the borrower feels like they have really accomplished something with the refinance. However, their balance sheet has not changed at all. The amount of their liabilities is still the same,” Schrant advises.

If your goal was to free up money on a monthly basis in order to pay off a high interest rate debt (such as a credit card) or save for retirement, make sure you follow through with that plan.

Keep in mind that whether you pursue federal consolidation or private consolidation via refi, there are no penalties for paying your loan off early. If you extended your repayment term to help get you through financially challenging times, and later find yourself earning more, paying your debt off early can save you hundreds, even thousands of dollars over the life of your loan. This can help you achieve other goals, such as buying a home, saving for retirement, or saving for your children’s education.

Ready to get started? Check out our Student Loan Consolidation and Refinancing Calculator!

More Must Read Articles

Why Consolidate or Refinance Your Student Loans

Why Consolidate My Student Loans?

Learn the pros and cons of student loan consolidation and refinancing, like cutting interest rates and monthly payments, or losing federal loan benefits.

Benefits of Student Loan Consolidation and Refinancing

Benefits of Student Loan Consolidation and Refinancing

Student loan consolidation or refinancing has several key benefits. You might be able to cut your payments & get a better rate. See if it's right for you.

How Student Loan Consolidation Works

How Student Loan Consolidation Works

Wondering what the first steps are in consolidating or refinancing your student loans? Check out these step-by-step instructions on how to get started.

Basics of Student Loan Refinancing

The Basics of Student Loan Refinancing for 2018

Deciding if you should consolidate or refinance your student loans can get pretty confusing. Learn more about the benefits and drawbacks of refinancing.

5 Common Myths About Student Loan Refinancing

5 Common Myths About Student Loan Refinancing

When it comes to refinancing student loans, what's true, and what's not? We're clearing it up with five common myths and the facts behind them.

Should You Find a Student Loan Cosigner or Go It Alone

Student Loan Refinancing: Cosigner or No Cosigner?

Do the benefits of having a cosigner outweigh the drawbacks? Learn the pros and cons of sharing the weight of your debt with others.

Pros and Cons of Refinancing Parent Loans

The Pros and Cons of Refinancing Parent PLUS Loans

Many parents take out student loans to pay for a child's college education. Learn about the pros & cons of refinancing Parent PLUS Loans & private loans.

Private Student Loan Refinancing Interest Rates

Private Student Loan Refinancing Interest Rates

The interest rate on a private refinance loan is determined by the borrower's or cosigner's credit rating. See the impact of different rates on payments.

Private Student Loan Refinancing FAQs

Private Student Loan Consolidation and Refinancing FAQs for 2018

Get the answers to your questions about private student loan refinancing. Learn more about the benefits, which loans are eligible and how long it takes.

Federal Student Loan Consolidation

Federal Student Loan Consolidation

Learn about the benefits of federal student loan consolidation, what loans can be consolidated & how it can help you manage existing student loan debt.

Federal Student Loan Consolidation Interest Rates

Federal Student Loan Consolidation Interest Rates

When you consolidate your federal student loans, your interest rate will be roughly the same as your current loans. See an example of the rate calculation.

Federal Student Loan Consolidation FAQs

Federal Student Loan Consolidation FAQs for 2018

How do I combine multiple federal loans into one loan? How long does it take to consolidate student loans? Get the answers to these questions and more.

Lending Partners

Interest Rates
  • Fixed as low as 3.18% APR
  • Variable as low as 2.76% APR
  • Hybrid loan rates as low as 3.79% APR
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits Up to $500K
Min. Loan Amount $10,000 Degree Req. Required completion of one of the following degrees at a qualified school:
  • MBA
  • JD
  • MD
  • Engineering
Repayment Terms 5, 10, 15, 20 years
Interest Rates
  • Fixed as low as 3.37% APR
  • Variable as low as 2.35% APR
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits No Maximum
Min. Loan Amount $10,000 Degree Req. Required completion of degree Repayment Terms 5, 7, 10, 15, 20 years
Interest Rates
  • Fixed as low as 5.24% APR
  • Variable as low as 4.74% APR
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits
  • $150K - Undergraduate or Graduate degrees
  • Higher limits may apply for specific fields of study
Min. Loan Amount $5,000 Degree Req. Students from any school could be eligible for our consolidation loan. Repayment Terms 10 - 20 years
Interest Rates
  • Fixed as low as 4.24% APR
  • Variable as low as 2.58% APR
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits Up to $300K
Min. Loan Amount $7,500 Degree Req. Repayment Terms 5, 8, 12, or 15  years.
Interest Rates
  • Fixed from 3.15% - 8.12%
  • Variable from 2.58% - 7.96%
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits
  • $125K - Undergraduate
  • $250K - Graduate
  • $300K - Medical, Dental, Veterinary
Min. Loan Amount $5,000 Degree Req. Graduated from a LendKey eligible school Repayment Terms 5, 10, 15, and 20 years
Interest Rates
  • Fixed as low as 3.74% APR
  • Variable as low as 3.63% APR
  • Rates above include 0.25% auto-debit discount
Max. Loan Limits
  • $120K
  • Minimum qualifying credit score is 660 with an eligible cosigner
Min. Loan Amount $10,000 Degree required. Must have graduated from an eligible school. Repayment Terms 5, 10, or 15 years
Interest Rates
  • Fixed rate range: 3.25% – 7.75% APR1
  • Variable as low as 2.75% – 7.25% APR1
  • No application or prepayment fees
Max. Loan Limits
  • Consolidate and refinance up to $250,0003
Min. Loan Amount $5,0003 Degree required. Must have graduated from a public or private, not-for-profit, degree granting institution. Repayment terms 5 – 15 years2
Am I eligible to refinance my student loans?