How to consolidate and refinance student loans

Submit the Direct Consolidation Loan application online to consolidate your federal student debt. If you have private student loans, consider refinancing.

By Janet Berry-Johnson

Written by

Janet Berry-Johnson

Writer

Janet Berry-Johnson is an authority on income taxes and small business accounting. She was a CPA for over 12 years and has been a personal finance writer for more than five years. Janet has written for several well-known media outlets, including The New York Times, Forbes, Business Insider and Credit Karma. In 2021, Canopy named her one of the Top 10 Influential Women in Accounting and Tax.

Edited by Renee Fleck

Written by

Renee Fleck

Editor

Renee Fleck is a student loans editor with over five years of experience in digital content editing. Her work has been featured in Fast Company, Morning Brew, and Sidebar.io, among other online publications. She is fluent in Spanish and French and enjoys traveling to new places.

Updated May 1, 2024, 5:25 PM EDT

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Consolidating your federal student loans into a Direct Consolidation Loan allows you to combine multiple loans into a single loan with one monthly payment. Consolidated loans have fixed interest rates and allow you to access federal benefits, such as income-driven repayment plans, loan forgiveness programs, and deferment and forbearance options.

Private student loan consolidation, often called refinancing, works a little differently. It involves taking out a new private loan to pay off your existing debts, potentially lowering your interest rate.

Consolidation vs. refinancing

Student loan consolidation and refinancing each offer different benefits and cater to different financial situations.

	Federal student loan consolidation	Private student loan refinancing
Lender	U.S. Department of Education	Banks, credit unions, and online lenders
Loan types	Federal student loans only	Federal and private student loans
Interest rate	Fixed, weighted average of your existing rates	Fixed or variable, new rate (potentially lower)
Key benefits	Single loan with one monthly payment Access to loan forgiveness and income-driven repayment plan	Streamlined payments with one lender Can shorten or lengthen your repayment term Potentially lowers your interest rate if you have good credit
Credit score requirements	Not dependent on credit score	A minimum FICO score of 670 is usually required to qualify

Consolidation is specifically for federal student loans, and involves combining multiple loans into a single loan with a fixed interest rate. Your new interest rate is calculated using a weighted average of all of your consolidated loans, rounded up to the nearest one-eighth of one percent. This process can simplify federal loan repayment by allowing you to have just one monthly payment instead of multiple.
Refinancing is a process that can be applied to both federal and private student loans. When you refinance student loans, a private lender pays off your existing debt, and creates a new loan with a new interest rate and terms. If you have a strong financial profile, you can potentially secure a lower interest rate, saving you money over the life of your loan.

Important:

You should generally avoid refinancing federal student loans with a private lender since you’ll lose important benefits, like income-driven repayment, access to loan forgiveness programs, and forbearance and deferment options.

How to consolidate federal student loans

Step 1: Gather your loan information

Start by gathering information on each of the loans you wish to consolidate. Loans eligible for consolidation include Direct Subsidized and Unsubsidized Loans, Direct PLUS Loans, and federal Perkins Loans, among others.

The information you’ll need to gather includes:

Loan servicer names
Your account numbers
Your interest rates on each loan
Your current loan balances

You’ll also need your personal information, such as your mailing address, phone number, email address, and income.

Tip:

To find details on your loan servicer and outstanding debt, log in to your StudentAid.gov account and visit the “My Aid” page.

Step 2: Complete the online application

Next, head over to the Federal Student Aid (FSA) website and begin your Direct Consolidation Loan application. You’ll need to provide your verified FSA ID to apply.

Fill out the application by selecting the loans you wish to consolidate, and choose a repayment plan that works for you. You can also use the FSA’s loan simulator tool to compare different plans and estimate your monthly payment amount, repayment period, and the total interest you’ll end up paying for the remaining life of your loan. This can help you determine whether consolidation is the right move for you financially.

Step 3: Wait for your application to be processed

After submitting your application, you'll get confirmation that it has been received. It may take some time for your application to be processed, and you’re required to continue making your regular loan payments until the new loan is approved and everything has been consolidated.

If your application is approved, you'll receive notification of your consolidation loan details, including the fixed interest rate, repayment terms, and next steps. Review these details thoroughly to ensure they align with your expectations.

Should I consolidate private student loans?

Consider consolidating your private student loans into a refinance loan if:

You have outstanding private student loan debt
You have a good credit history and a strong credit score. To qualify for a lower interest rate, an ideal score is usually 700 or higher.
You can provide proof of steady income

If you don’t have stable income or good credit, applying with a creditworthy cosigner may help you qualify for a better interest rate refinance loan.

How to consolidate private student loans

If you have private student loans, consolidating them into a new refinance loan may be a better option for you. Eligibility for private student loan refinancing varies by lender. However, some common criteria include:

Having good-to-excellent credit (usually a FICO score above 670)
Meeting minimum income and/or debt-to-income ratio (DTI) requirements
Being a U.S. citizen or permanent resident
Having earned a bachelor’s degree or higher

Below is the step-by-step process for how to refinance student loans.

Step 1: Compare different lenders

Many banks, credit unions, and online lenders offer student loan refinancing. Start by researching the best student loan refinancing lenders and comparing interest rates, repayment terms, customer reviews, and any additional benefits they provide.

Many lenders offer prequalification, allowing you to get an estimate of the rates and terms you may qualify for without impacting your credit score.

4.64.6

Fox Money rating

Fixed (APR)

5.24% - 9.60%

Loan Amounts

$5,000 - $250,000

Min. Credit Score

680

Check Rates

on Credible’s website

View Details

Overview

Founded in 2009, LendKey partners with 300+ community banks and credit unions to connect borrowers with the loans they need. You can compare multiple lenders at once without affecting your credit score.

However, the exact terms and qualification requirements available through LendKey vary depending on your chosen community lender. While you can easily compare options, you’ll need to read the fine print of each offer to make sure the loan offers everything you need.

Interest rates

Fixed or variable

Minimum credit score

680

Minimum income

Does not disclose

Loan terms

5, 7, 10, or 15 years

Loan amounts

$5,000 to $250,000

Cosigner release

Varies based on lender's terms

Eligibility

Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from one of LendKey lenders’ eligible institutions.

4.44.4

Fox Money rating

Fixed (APR)

5.48% - 8.69%

Loan Amounts

$10,000 up to total refinance amount

Min. Credit Score

680

Check Rates

on Credible’s website

View Details

Overview

Borrowers who graduated with at least a bachelor’s degree may refinance their student loans with ELFI. Every applicant is assigned a student loan advisor to help guide them through the process.

Students who wish to take over their parents’ PLUS loan may do so by refinancing with ELFI — something not offered by every lender — but spouses can’t consolidate their loans into a single refinancing loan.

Unfortunately, ELFI doesn’t allow borrowers to release cosigners, nor does it offer any rate discounts. However, borrowers who experience financial hardship may be eligible for up to 12 months of forbearance.

Interest rates

Fixed and variable

Minimum credit score

680

Minimum income

$35,000

Loan terms

5, 7, 10, 15, or 20 years for student loan refinancing; 5, 7, or 10 years for parent loan refinancing

Loan amounts

Minimum of $10,000 with no set maximum.

Cosigner release

None

Eligibility

Must be a U.S. citizen or permanent resident with a bachelor’s degree or higher. Must have at least $10,000 in student loans to refinance and a minimum credit history of 36 months.

3.83.8

Fox Money rating

Fixed (APR)

6.00% - 10.37%

Loan Amounts

$7,500 - $200,000

Min. Credit Score

700

Check Rates

on Credible’s website

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Overview

EdvestinU is a loan program offered by Granite Edvance Corporation and offers affordable rates for refinance loans. Borrowers can refinance federal and private loans, and fixed and variable rate loans are available.

EdvestinU refinance loans are available to residents of about 20 states, and the lender has higher loan minimums and lower maximums than some competitors. Both of these factors limit who can (or might want to) refinance with this lender, but eligible borrowers do have various repayment term options.

Interest rates

Fixed or variable

Minimum credit score

700

Minimum income

Does not disclose

Loan terms

5, 10, 15, or 20 years

Loan amounts

$7,500 to $200,000

Cosigner release

24 months

Eligibility

U.S. citizens or permanent residents who are at least 18 years old and reside in Alaska, Arkansas, Colorado, Connecticut, Florida, Maine, Massachusetts, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Puerto Rico, Rhode Island, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin.

3.93.9

Fox Money rating

Fixed (APR)

6.15% - 10.14%

Loan Amounts

$5,000 - $250,000

Min. Credit Score

670

Check Rates

on Credible’s website

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Overview

INvestEd is an Indiana-based nonprofit lender that provides refinanced student loans nationwide. As a nonprofit, INvestEd offers competitive rates as well as an autopay discount. Cosigner release is also available after 12 on-time payments, which is less than many competitors.

However, the maximum refinance limit of $250,000 is below what other lenders may allow. Borrowers must also comply with strict credit and income requirements to qualify, or must have an eligible cosigner. While credit requirements are clearly defined, there’s no way to prequalify with a soft credit check.

Interest rates

Fixed or variable

Minimum credit score

670

Minimum income

Does not disclose

Loan terms

5, 10, 15, or 20 years

Loan amounts

$5,000 to $250,000

Cosigner release

12 months

Eligibility

U.S. citizens or permanent residents are eligible. Borrowers must meet minimum requirements including a FICO score of 670 or higher, annual income of $36,000, a debt-to-income ratio below 40% to 50%, a year of continuous employment, and no defaults or serious collection activities in recent years.

Fox Money rating

Fixed (APR)

6.20% - 8.99%

Loan Amounts

$10,000 up to the total amount

Min. Credit Score

670

Check Rates

on Credible’s website

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Overview

Massachusetts Educational Financing Authority (MEFA) offers refinancing loans to student borrowers — and unlike many other lenders, you don’t need to have earned your degree to qualify. Only fixed-rate loans are available, but the rates are competitive and may be lower than what other lenders can offer. MEFA also doesn’t charge any fees or penalties.

Refinance loans start at $10,000, and you must have made six consecutive on-time payments on the original loans over the most recent six months. If you can’t qualify based on your own credit history, you can add a cosigner.

Interest rates

Fixed

Minimum credit score

670

Minimum income

Does not disclose

Loan terms

7, 10, or 15 years

Loan amounts

$10,000 up to your total debt

Cosigner release

None

Eligibility

Must be a U.S. citizen or permanent resident who is the primary borrower on education debt used to attend an eligible college or university. Must have made six on-time loan payments over the most recent six months. Must have no history of default or delinquency on education debt for the past 12 months and no history of bankruptcy or foreclosure in the past five years.

3.73.7

Fox Money rating

Fixed (APR)

6.34% - 8.54%

Loan Amounts

$7,500 - $250,000

Min. Credit Score

680

Check Rates

on Credible’s website

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Overview

Founded in 1981, Rhode Island Student Loan Authority (RISLA) is a nonprofit lender that offers refinance loans to borrowers in all 50 states. Though most private lenders require borrowers to have graduated to qualify for refinancing, RISLA also serves borrowers who didn’t complete their degree.

RISLA offers income-based repayment to borrowers in financial distress. Additionally, borrowers may also access up to 24 months of forbearance in the event of financial hardship. Borrowers who return to graduate school may defer repayment on their refinancing loans for up to 36 months.

Interest rates

Fixed

Minimum credit score

680

Minimum income

$40,000

Loan terms

5, 10, or 15 years

Loan amounts

$7,500 minimum up to of $250,000, depending on degree

Cosigner release

None

Eligibility

Borrower or cosigner must meet credit requirements. Student must be a U.S. citizen or permanent resident and have used original student loans to attend an eligible degree-granting institution.

4.74.7

Fox Money rating

Fixed (APR)

6.49% - 10.99%

Loan Amounts

$10,000 - $750,000

Min. Credit Score

Does not disclose

Check Rates

on Credible’s website

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Overview

Citizens offers student loan refinancing to qualifying borrowers who refinance at least $10,000 in student loan debt.

Undergraduate borrowers can refinance up to $300,000 in student loans, while those who borrowed for graduate or professional degrees have higher limits of $500,000 or $750,000. Citizens offers fixed and variable rates and repayment terms between five and 20 years.

If you’re a medical resident, you can refinance your student loans and only pay $100 per month for up to four years while completing your residency or fellowship.

Interest rates

Fixed or variable

Minimum credit score

700

Minimum income

Does not disclose

Loan terms

5, 7, 10, 15, or 20 years

Loan amounts

$10,000 minimum, with a maximum of $300,000 for bachelor’s degree or below; $500,000 for graduate degrees; and $750,000 for professional degrees

Cosigner release

36 months

Eligibility

Must refinance at least $10,000 in student loans and be a U.S. citizen, permanent resident, or resident alien with a valid U.S. Social Security number. Must have earned at least a bachelor's degree to qualify.

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Step 2: Gather your information

Once you choose a lender, gather the required documentation for your refinancing application, which typically includes:

A government-issued ID, such as a driver’s license or passport
Your Social Security number
Proof of income and employment
Most recent loan statements

If you can’t locate your loan statements, contact your current lender or loan servicer or log in to your account online to pin down the information you need, including your loan balance, loan number, and interest rate. Having this information ready will streamline the application process.

Step 3: Complete a loan application

Once you have everything you need, complete a refinancing application with your chosen lender.

After submitting your application, you'll receive formal loan offers from the lender if approved. Make sure you choose the offer that best fits your financial situation and goals by reviewing the terms, interest rates, and repayment options carefully.

Once you accept an offer, the lender will guide you through the remaining steps to finalize the refinancing process. Keep in mind that the steps and requirements may vary slightly between lenders, so it's essential to follow the specific instructions provided by the lender you choose.

FAQ

Does consolidating student loans hurt your credit?

Consolidating federal student loans in itself doesn't cause a credit score decrease. However, closing out old loans and opening a new one can result in a decrease in the average length of your credit history, causing a slight drop in your score. But consolidation allows for reduced loan accounts and simplified payments, so it can help you make your payments consistently. This history of on-time payments can eventually raise your credit score.

Refinancing, on the other hand, usually causes a temporary dip in your credit score. This is because applying for a refinance loan involves a hard credit check. Each credit inquiry can take up to five points off your FICO score, according to FICO.

Is it smart to consolidate student debt?

Consolidating student debt can be a smart financial move as it can simplify repayment by combining multiple loans into one, potentially leading to lower monthly payments and access to more flexible repayment plans. However, you should carefully weigh the pros and cons before consolidating as you might risk paying more interest over the life of your loan.

Can you be denied student loan consolidation?

Yes, you can be denied student loan consolidation if your loans are in default status. If your loans have defaulted and you want to consolidate, you need to either:

Contact your loan servicer to discuss repayment arrangements, and make three on-time consecutive payments, or
Agree to repay your new Direct Consolidation Loan under an income-driven repayment (IDR) plan.

You can also enroll in the Fresh Start program (until September 2024) to get your loans out of default status.

How much does it cost to consolidate student loans?

Consolidating federal student loans through the U.S. Department of Education is free of charge. However, if you're considering refinancing private student loans with a private lender, there may be costs involved. These can include origination fees, application fees, and potential prepayment penalties.

Meet the contributor:

Janet Berry-Johnson