Student Loan Consolidation: Everything You Need to Know

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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If you’re looking for ways to simplify your education debt or pay it down faster, student loan consolidation can help. According to the latest student loan debt statistics, 12 million federal loan borrowers have Direct Consolidation Loans, and many others have refinanced their debt with private lenders.

For many, the idea of consolidating student loans is appealing. But while you might get some benefits from consolidating, you might also lose some in the process. This guide will walk you through how student loan consolidation works and how to decide if it’s right for you.

How student loan consolidation works

Student loan consolidation is the process of rolling one or more loans into a new loan to take advantage of a single monthly payment, a potentially lower interest rate, or special federal loan protections.

There are two main types of student loan consolidation: federal loan consolidation through the Direct Loan Consolidation Program and private student loan consolidation, more often called refinancing.

Direct Loan Consolidation

The Direct Loan Consolidation Program allows you to combine one or more federal student loans into one new loan under the Direct Loan Program. You don’t need to undergo a credit check to qualify for federal student loan consolidation, but you can’t consolidate a defaulted loan unless you make at least three consecutive monthly payments on it.


If you have multiple federal loans, consolidating them can simplify your debt repayment by combining them into one. Plus, if your loan isn’t already part of the Direct Loan Program, consolidating could qualify you for certain repayment plans and forgiveness programs that you weren’t previously eligible for.

For example, if your federal loan is through the Federal Family Education Loan (FFEL) Program, you don’t qualify for the Public Service Loan Forgiveness (PSLF) program, and you can only choose one of the four income-driven repayment (IDR) plans. But if you consolidate your FFEL Loans with a Direct Consolidation Loan, you’ll have access to PSLF and all four IDR plans.

Also, parents can consolidate their Parent PLUS Loans and get access to Income-Contingent Repayment.

Student loan consolidation through the federal government can also allow you to extend your repayment period from 10 years to up to 30 years, depending on your loan balance and the payment plan you choose.

Lastly, it resets the clock on deferments and forbearances you’ve already taken on your current loans. “Federal loans have up to three years of deferments and forbearances for things like economic hardship and unemployment,” said Mark Kantrowitz, a student loan expert. “If you consolidate your loan, that’s a new loan with a new set of deferments and forbearances.”


While federal student loan consolidation offers some benefits, saving you money isn’t one of them. “With federal consolidation, you’re not actually changing the cost of the loan,” said Kantrowitz. “The new loan has an interest rate that’s based on the weighted average of the interest rates on the loans that you’re consolidating, rounded up to the nearest one-eighth of a percent.”

As an example, let’s say you have the following loans:

  • Loan A: $10,000 balance, 4.50% APR
  • Loan B: $15,000 balance, 5.25% APR
  • Loan C: $7,500 balance, 6.00% APR

Your weighted average interest rate for these three loans is 5.19%, which would be rounded up to 5.25% for your new Direct Consolidation Loan. This means that in most cases, you’ll end up paying more interest over the life of the new loan if you consolidate.

And while consolidating through the Department of Education resets the clock on deferments and forbearances, it does the same thing to your progress toward loan forgiveness through PSLF and IDR plans.

Private student loan refinancing

Instead of consolidating through the federal government, you can choose to refinance your student loans through a private lender.

“With a private consolidation loan, it’s a new loan with a new interest rate based on your current credit score and the credit score of a cosigner if any,” said Kantrowitz.

If you or your cosigner’s credit score isn’t good enough, though, you might not qualify for a lower interest rate than what you’re currently paying.


The biggest benefit of refinancing your student loans is the possibility of scoring a lower interest rate. Student loan refinancing lenders typically offer both fixed and variable interest rates to give you more options. If you can get a lower interest rate, you could end up paying off your student loans faster and with less interest.

For example, let’s say you just left school and will be paying an average of 5.25% on $30,000 worth of federal student loans over a 10-year period. You check your rates for refinancing and get a fixed rate of 4.00%.

If you remained on a 10-year repayment plan on the new loan, you’d save $2,177 in interest over your repayment period.

As with federal student loan consolidation, you’ll also be able to reduce the number of monthly payments you have to keep track of. Plus, you’ll usually have a few repayment terms from which you can choose, giving you even more flexibility as you pay down your debt.


If you think you’ll want to take advantage of IDR plans and PSLF, refinancing your federal student loans isn’t a good idea. That’s because there’s only one major student loan refinancing company that offers an IDR plan: the Rhode Island Student Loan Authority. No major student loan refinancing companies offer student loan forgiveness.

Another drawback to refinancing is the credit check requirement. If your credit and income aren’t in good shape, you might have a hard time getting approved. Of course, you can get a cosigner. But it can be tough to convince someone to cosign long-term debt, even with the small possibility of getting removed from the loan at some point in the future through a cosigner release program.

How to consolidate your student loans

If you’re considering refinancing your student loans, start the process by comparing several student loan refinancing companies. You’ll be able to see what rates and benefits they might offer you. And while private lenders don’t require a hard credit check to show you tentative rate offers, they will check your credit when you officially apply.

If you’d rather consolidate your federal loans through the Direct Loan Consolidation Program, you can start the application process on the Federal Student Aid (FSA) website. To apply, you’ll need to log in to your FSA account and provide the following information:

  • Permanent address
  • Email address
  • Phone number and the best time to reach you
  • Information about your current federal loans
  • Your adjusted gross income from your latest tax return or documents proving your current income

Applying for the Direct Loan Consolidation Program is free, and the application process takes about 30 minutes. During the process, you’ll select a consolidation servicer, which will be your point of contact until you get a final decision. Approval isn’t immediate or guaranteed, so keep making payments on your current loans until you hear back from the servicer.

Should you try student loan consolidation?

There’s no guarantee that student loan consolidation will help you, but it’s worth knowing what your options are and how they can help you with your student loan repayment.

If you have federal student loans and want to get or retain the benefits of the Direct Loan Program, consolidating your loans through the Department of Education might be a good idea.

But if you don’t plan on taking advantage of federal student loan benefits and have great credit and income (or a cosigner who does), you might want to try refinancing to see if you can get a lower interest rate on your loans.

Whether you choose to consolidate or refinance your student loans, be smart about how you do it, especially if you have some loans with low rates and others with high rates.

“If you have high interest rates and low interest rates and the interest rate you get with refinancing is between those,” said Kantrowitz, “it makes sense to refinance the higher-rate loans and leave the others with a lower interest rate.”

And if you’re planning on consolidating, Kantrowitz recommended leaving higher-rate loans out of the consolidation process. That way, you can target them for faster repayment. “If you pay off the higher-interest loan in a few years, you may be saving more than you would if you consolidate,” he said.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit, email us at, or call 888-601-2801 for more information on ourstudent loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.

2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.899% APR to 8.179% APR (with AutoPay). Variable rates from 2.570% APR to 6.980% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. SoFi rate ranges are current as of September 14, 2018 and are subject to change without notice. See APR examples and terms. Lowest variable rate of 2.570% APR assumes the current index rate derived from the 1-month LIBOR of 2.08% plus 0.740% margin minus 0.25% AutoPay discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.

5 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.57%-8.17% (2.57%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.75%-8.69% (3.75%-8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit We also have several resources available to help the borrower make a decision at, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Estimated average savings amount is based on 14,659 Education Refinance Loan customers who saved on loans between August 1, 2017 and July 31, 2018. The calculation is derived by averaging monthly savings across Education Refinance Loan customers whose payment amounts decreased after refinancing, calculated by taking the monthly payment prior to refinancing minus the monthly payment after refinancing. We excluded monthly savings from customers that exceeded $4,375 and were lower than $20 to minimize risk of data error skewing the savings amounts. Savings will vary based on interest rates, balances and remaining repayment term of loans to be refinanced. Borrower’s overall repayment amount may be higher than the loans they are refinancing even if monthly payments are lower.

2.57% – 6.98%3Undergrad
& Graduate
Visit SoFi
2.47% – 5.87%1Undergrad
& Graduate
Visit Earnest
2.47% – 8.03%4Undergrad
& Graduate
Visit Lendkey
2.80% – 6.22%2Undergrad
& Graduate
Visit Laurel Road
2.48% – 6.25%5Undergrad
& Graduate
Visit CommonBond
2.57% – 8.17%6Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.