What You Need To Know Before Consolidating Federal AND Private Student Loans

 July 30, 2021
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Note that the government has paused all repayment on federally held student loans through the end of 2022, with no interest to be charged during that period and no loans to be held delinquent or in default.

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While you can’t consolidate federal and private student loans through a Direct consolidation loan, you can combine them through refinancing.

A Direct consolidation loan comes from the federal government, and it’s only available for federal loans. However, you can consolidate federal and private student loans together through refinancing with a private lender, such as a bank, online lender or credit union.

Let’s take a closer look at both types of consolidation so you can decide if either option is right for you. Specifically, we’ll cover the following:

How to consolidate student loans with a Direct consolidation loan

If you have federal student loans, you can consolidate them with a Direct consolidation loan. Most federal student loans are eligible, including Direct subsidized loans, Direct unsubsidized loans and PLUS loans.

Private student loans, however, are not eligible. You can’t consolidate federal and private student loans through Direct loan consolidation.

You can apply for a Direct consolidation loan for free at StudentLoans.gov. When you apply for federal student loan consolidation, you’ll also have the option to choose new repayment terms.

For example, you might choose a long term (up to 30 years) to lower monthly payments. Keep in mind, though, that extending your term means you’ll pay more interest over the long run.

You should also note that federal student loan consolidation causes your interest rate to go up slightly. When you consolidate, your new interest rate will be the weighted average of your old interest rate rounded up to the nearest one-eighth of 1%.

This small increase could be worth the cost, though, since federal student loan consolidation can seriously simplify repayment.

Pros and cons of consolidating federal student loans


  • Direct consolidation loans offer one single payment and potentially lower monthly payments.
  • Consolidating federal loans is free via the federal government. Beware of companies which offer to help you consolidate federal student loans for a fee.
  • No credit check is required to consolidate federal student loans, and you can apply online.


  • A lower monthly payment means paying the loan over a longer period of time, which will cost you more money due to interest charges.
  • When you consolidate your federal student loans, you lose the ability to strategically target your highest interest and/or highest balance loans using a method such as the debt avalanche or debt snowball.
  • Federal consolidation doesn’t result in a better interest rate. Rather, the new rate is a weighted average of all the interest rates on your student loans, rounded up to the nearest one-eighth of a percentage point.
  • Some federal consolidation loans may come with higher interest rates than private refinanced loans. That difference can really add up over time — you can check our refinancing calculator to see how much.

How to consolidate student loans through refinancing

Your second option for consolidating comes in the form of student loan refinancing. You can consolidate federal and private student loans through refinancing, which you’ll do through a private lender.

Not only will refinancing combine multiple loans into one, but it could also lower your interest rate. If you have decent credit and a steady income — or can apply with a creditworthy cosigner — you could qualify for low rates on a refinanced student loan.

What’s more, refinancing lets you restructure your debt by choosing a new repayment plan. You might shorten your term to pay your loan off fast. Or you could give yourself extra time and decrease your monthly bills.

Most student loan refinancing companies, whether they’re a bank, credit union or online lender such as SoFi or Earnest, offer both variable and fixed rates, as well as flexible repayment terms often between five and 20 years.

If you’re considering refinancing, make sure to compare offers from a few different lenders. You can check your rates online after providing a few basic pieces of information (and don’t worry, your credit won’t be impacted).

By shopping around, you could find your best offer for a refinanced student loan.

Pros and cons of consolidating private student loans

  • You may benefit by creating an easier-to-manage financial situation, getting better terms or securing lower monthly payments.
  • One big benefit of consolidating private student loans through refinancing is potentially securing a much lower interest rate. Your rate will be based on your creditworthiness or that of a cosigner.
  • If your credit score has significantly improved from the time you took out your loans, or you have built a solid income and employment history, you’re more likely to get a low rate that could make refinancing a smart financial move.


  • When considering consolidation, keep in mind whether you’re also extending the repayment term. Again, with more payments comes more interest.
  • While there’s no cost to originate a federal Direct consolidation loan, some private lenders will charge an origination fee.
  • A credit check is required to consolidate private student loans via refinancing, which may be a downside, depending on your credit history.

A note of caution about refinancing federal student loans

Refinancing and consolidating your loans through a private lender — and not the federal government — means you are taking out a private loan. If you refinance federal student loans, they will no longer be eligible for federal repayment options that can help you out during tough times, such as,

Most private lenders don’t offer these same plans, though some might grant forbearance (or temporarily pause your payments) during a time of financial hardship.

Before turning any federal student loans into a private one through refinancing, make sure you’re confident about your ability to keep up with repayment, as you’ll lose access to federal protections.

Is student loan consolidation right for you?

Whether you have federal student loans, private student loans or both, consolidation could be a good fit for you if you’re looking to simplify repayment and ease the burden of numerous due dates and loan servicers.

Federal student loan consolidation via a Direct consolidation loan can also lower your payments (assuming you choose a longer payoff term), but can result in higher interest charges over time.

Consolidating and refinancing with a private lender, on the other hand, could lower your monthly payments or save you money on interest — or maybe even accomplish both.

Before making changes to your student loans, make sure you understand the ins and outs of both types of consolidation. By doing your due diligence, you’ll have a clear sense of how consolidation or refinancing will affect your costs of borrowing over the life of your loans.

Melanie Lockert contributed to this article.