If you’re feeling overwhelmed by your student loans, you can take comfort in the fact that you’re not alone: Over 44 million Americans have student loan debt today.
You might have a mix of both federal and private loans and have several different loan servicers. This can make keeping track of your total debt, minimum payments, and monthly due dates confusing. Sometimes it might even cause you to miss payments.
In cases like this, consolidating your student loans could help you manage your loans more efficiently. But it’s not a one-size-fits-all strategy. Here’s what to keep in mind before you dive into student loan consolidation.
What is student loan consolidation?
If you have multiple federal student loans and want to simplify your payments, consolidating can be a smart strategy. One way to consolidate your debt is to apply for a federal Direct Consolidation Loan.
With this method, the Direct Consolidation Loan is used to pay off your old debts. You’ll get a new loan equal to the combined amount of your old loans. It will have a fixed interest rate based on a weighted average of the loans you consolidate.
By taking out a Direct Consolidation Loan, you can minimize the stress of your debt while retaining your federal loan benefits. Often, Direct Consolidation is required in order to enroll in federal programs such as income-based repayment.
The difference between consolidation and refinancing
While the terms are sometimes used interchangeably, consolidating your loans is different than refinancing them. Because the interest rate is a weighted average, rounded up, consolidation is unlikely to save you money. Consolidation simply makes keeping track of your loans easier since you’ll have just one loan to manage and one payment to make each month.
Refinancing is a completely different process. If you refinance, you can consolidate several loans into one. However, you can refinance both federal and private loans. Plus, refinancing is only available through private lenders, so you lose the federal benefits associated with any federal loans you refinance.
The new, refinanced loan can have completely different terms, too. For instance, you might be able to get a much lower interest rate and shorten your repayment term.
When student loan consolidation makes sense
Although consolidating won’t save you money, it can make repaying your loans easier. Here are three situations when consolidating your student loans might make sense for you:
1. You want to extend your repayment period. If you’re struggling to make your payments under a 10-year, Standard Repayment Plan, consolidation can help reduce your monthly payments. When you take out a Direct Consolidation Loan, you can extend your repayment term to up to 30 years and get a smaller payment.
While extending your payment term can make your payments more manageable, keep in mind you’ll pay more in interest over the length of the loan.
2. You want to qualify for an income-driven repayment plan. If you consolidate loans other than Direct Loans, you can become eligible for income-driven repayment plans. Under these plans, the government extends your repayment term and caps your payments at a percentage of your income. That can help give you more breathing room in your budget.
You’ll pay more in interest over the length of your new repayment term, but an income-driven repayment plan can make keeping up with your payments possible on a small salary. Plus, if you have debt left over when the repayment term is up, it will be forgiven (but taxed as income).
3. You want your loans to have a fixed rate. If you have older federal loans, you may have some with variable interest rates. That means the interest and monthly payment can change according to market conditions. If you want the stability of a fixed-rate loan with steady payments, consolidating can help.
Switching to a fixed-rate loan may give you a slightly higher interest rate, but it will remain the same for the duration of your loan.
When refinancing your student loans makes sense
If your goal is to save money on your student loans, refinancing may be a better option for you than consolidation. Here are some reasons you might consider refinancing instead:
1. You want to lower your interest rate. When you refinance, lenders will offer you different loan terms. Depending on your credit score and income, you may qualify for a loan with a lower interest rate. Lowering your rate can save you a lot of money over time and allow you to pay off your loan faster.
Use our calculator to see if refinancing can save you money.
Student Loan Refinancing Calculator
2. You want to secure a fixed interest rate. If you currently have private loans, you may have a variable interest rate. That means your interest charges could increase over time.
By refinancing, you can get a new loan with a fixed interest rate and guarantee a consistent rate for the life of your loan.
3. You want to reduce your monthly payment. If you’re on a tight budget and your loan payments eat up a big chunk of your salary, refinancing can help.
In addition to getting a lower rate, you can choose a new repayment term. By opting for a longer repayment period, such as 10 to 20 years, you may be able to reduce your minimum payment. That approach can give you more breathing room.
Keep in mind that refinancing has some drawbacks, though. If you have federal loans and refinance them, you will lose out on benefits like access to income-driven repayment plans, deferment and forbearance, and some forgiveness plans. In addition, if you opt to extend your repayment term, you could pay back more in interest over time.
If you want to compare the immediate benefits of consolidating vs. refinancing for your situation, check out the calculator below:
Consolidation vs. Refinancing Calculator
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Refinancing is the only way to lower your interest rate but you may lose some of the safeguards associated with having federal loans, so make sure you are fully educated on the decision by reading our recommended resources below:
Beware of consolidation and refinancing scams
In recent years, many scams have arisen that prey on borrowers struggling to keep up with their payments. For a fee, many companies will offer to consolidate your loans for you. But consolidating your federal loans is completely free, and you can apply online in less than 30 minutes.
If you decide to refinance instead, you can also shop around and compare offers from lenders on your own. You can also complete the application online, without ever paying an application fee.
When it comes to consolidating or refinancing your loans, avoid companies that try to charge you fees to get started.
Should I consolidate my student loans?
The answer to that question depends on several factors, including whether you want to simplify your payments or save money with refinancing.
The most important aspect in making this decision, as with any financial decision, is being aware of all of your options. Weigh the benefits and drawbacks carefully to choose the best path for you and your finances.
Interested in refinancing student loans?Here are the top 9 lenders of 2021!
|Lender||Variable APR||Eligible Degrees|
|1.88% – 6.15%1||Undergrad & Graduate|
|1.88% – 5.64%2||Undergrad & Graduate|
|2.50% – 6.85%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|2.25% – 6.59%5||Undergrad & Graduate|
|1.88% – 5.64%6||Undergrad & Graduate|
|1.90% – 5.25%7||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|2.13% – 5.25%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.59% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance 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 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Refinancing Loan Cost Examples
These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.
One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.
© 2021 Earnest LLC. All rights reserved.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for SoFi.
Fixed rates from 2.49% APR to 6.94% APR (with autopay). Variable rates from 2.25% APR to 6.59% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
6 Important Disclosures for Navient.
7 Important Disclosures for LendKey.
Refinancing via LendKey.com 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 LendKey.com. 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 LendKey.com 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.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.75% Fixed APR with AutoPay.
8 Important Disclosures for PenFed.
Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are 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.