Federal vs. private student loan consolidation

By Christy Bieber

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Christy Bieber has been working full-time as a freelance writer since 2008. She has written blogs, news articles, textbooks, and online courses on the topics of law, finance, and history. She lives with her husband, two children, and beagle.

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 2, 2024, 3:58 PM EDT

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Student loan consolidation is the process of combining multiple student loans, with different rates and repayment terms, into one. Consolidating private student debt has proven to be beneficial for many. In fact, USA Today reported that nearly 70% of borrowers who consolidated their private student loans said they were able to improve their financial situation.

Here’s what you need to know about private student loan consolidation and whether it’s the right move for you.

Federal vs. private student loan consolidation

Private student loan consolidation is very different from federal student loan consolidation, and it’s important to understand their differences before making this financial decision

	Federal consolidation	Private consolidation (refinancing)
Lender	The U.S. Department of Education	Private lenders such as banks and credit unions
Eligible loans	Federal student loans	Federal and private student loans
Key benefit	Combines loans into one monthly payment; grants access to federal benefits	Combines loans into one monthly payment; potential to lower your interest rate
Interest rate	A weighted average of the rates on your current loans, rounded up to the nearest one-eighth of 1%	Based on your credit and market conditions
Credit requirements	None	Generally requires a FICO score of 670 or higher
Repayment options	Up to 30 years	5 to 25 years
Cosigner allowed?	No	Yes

Important:

While It’s possible to refinance federal and private student loans together, it’s generally not encouraged. Refinancing federal loans means you’ll lose access to benefits like federal forgiveness programs and income-driven repayment plans.

How does private student loan consolidation work?

Private student loan consolidation involves applying for a refinance loan with a private lender. Your ability to qualify for a refinance loan will depend on your income and credit score, among other factors. If you can’t qualify on your own, you may need to refinance with a cosigner.

Private lenders also typically offer a choice between fixed- or variable-rate options for a refinance loan. Variable rates may start lower, but they’re tied to a financial index and can fluctuate over time. Fixed rates provide more certainty, as your rate and payment will not change.

If you’re approved for a refinance loan, the loan funds are used to pay off all the student loans you wish to consolidate. Once the process is complete, you can then begin making payments on the new loan. You’ll have a choice of loan terms, with lenders typically offering repayment timelines between five and 25 years.

If you’re able to reduce your rate or extend your repayment period, your monthly payments should be lower. Just remember that extending the timeline to repay your debt often means you’ll pay more in interest over the life of the loan.

4.44.4

Fox Money rating

Fixed (APR)

5.48% -

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.

4.64.6

Fox Money rating

Fixed (APR)

5.49% -

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.

3.93.9

Fox Money rating

Fixed (APR)

5.85% -

Loan Amounts

$5,000 - $250,000

Min. Credit Score

670

Check Rates

on Credible’s website

View Details

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.

3.83.8

Fox Money rating

Fixed (APR)

6.00% -

Loan Amounts

$7,500 - $200,000

Min. Credit Score

700

Check Rates

on Credible’s website

View Details

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.

Fox Money rating

Fixed (APR)

6.20% -

Loan Amounts

$10,000 up to the total amount

Min. Credit Score

670

Check Rates

on Credible’s website

View Details

Overview

Not-for-profit lender 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% -

Loan Amounts

$7,500 - $250,000

Min. Credit Score

680

Check Rates

on Credible’s website

View Details

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% -

Loan Amounts

$10,000 - $750,000

Min. Credit Score

Does not disclose

Check Rates

on Credible’s website

View Details

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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Pros and cons of private student loan consolidation

Pros

Potentially save money: If you qualify for a refinance loan with a lower interest rate, you can reduce the amount you pay in interest over the life of your loan.
Simplify repayment: By combining multiple loans into one single loan,, you have only one monthly payment to manage.
Lower your monthly payment: If you need to free up room in your monthly budget, consolidating private loans can offer relief by extending your repayment timeline.
Release a cosigner: You may be able to release a cosigner from their financial obligation, which can help their credit score and financial liability.

Cons

You may end up in debt for longer: If you choose to extend your repayment timeline when consolidating, it’ll take you longer to become debt-free.
You might increase your total interest costs: Depending on the repayment length you choose on the new consolidated loan, more interest may accumulate over time.
You might face the risk of rising interest rates: If you consolidate with a variable-rate loan, your interest rate may fluctuate, potentially increasing your monthly payments and overall loan costs.

Should I consolidate my private student loans?

Consider consolidating your private student loans through a refinance loan in the following situations:

You can qualify for a new refinance loan at a lower rate than your current loans.
You're financially stable and can comfortably afford your new payments.
You want to remove a cosigner from your loan and you can qualify for a refinance loan on your own.
You have several private student loans and want to simplify repayment by combining them into one monthly payment.

Good to know:

To consolidate private student loans, most lenders require a FICO score of 670, but a score in the 700s is generally needed to access the best rates. If you can’t qualify on your own, consider bringing on a cosigner with strong credit.

How to consolidate private student loans

To consolidate private student loans, you’ll need to take the following steps:

Determine which loans to include: It's generally less risky to refinance private student loans vs. federal debt. Refinancing federal loans results in losing access to perks like federal forgiveness programs and income-driven repayment plans.
Compare lenders: It’s a good idea to prequalify with multiple lenders to compare quotes and see which one offers the best refinance terms and rates. Note that prequalifying won’t impact your credit.
Select your rate and term: You can decide between a fixed-rate loan or a variable-rate loan, then choose a short or long payoff timeline. A shorter payoff term comes with higher monthly payments but lower total costs, while a loan with a longer payoff timeline will have lower monthly payments but higher overall costs.
Submit a loan application: Once you find the right lender, you must apply for a loan. You’ll generally need to provide information about your income and your current loans. If you can't qualify for a loan on your own, you’ll also need to submit your cosigner's information.
Sign the final paperwork: If you’re approved, you’ll also need to sign a promissory note, which is a legal document that asks you to formally agree to your refinance loan’s terms.
Wait for your current loans to be paid off: Your existing loans will be repaid and you will then owe your new lender. Be sure to keep making payments on your old loans until the process is finalized.

Meet the contributor:

Christy Bieber