Whether you have federal, private or both types of student loans, consolidating or refinancing them might help you reduce your student debt, better manage payments and work toward other financial goals. Too much student debt can hamper your ability to save for retirement or qualify for other loans, such as a mortgage. This guide explains the differences between refinancing private student loans and consolidating federal student loans, the pros and cons of each, and the best options for different situations. Keep in mind that federal student loan payments are paused through Aug. 31, as this may influence your decision to refinance or consolidate.
No student loan refinance company is perfect for every borrower. These lenders are a good starting point for most people, but you should read reviews and research each company on your own.
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Find the Best Student Loan Refinance Lenders
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Splash Financial is a student loan refinancing marketplace that uses its network of banks, credit unions and other lenders to match borrowers with refinancing options. Splash Financial is based in Cleveland and can help U.S. citizens and permanent residents refinance federal, private and Parent PLUS loans. Splash Financial also offers a specialized refinance program for doctors and dentists completing residencies and fellowships.
Laurel Road offers refinancing for undergraduate and certain associate degrees, but is not offering graduate loans for the 2022-2023 academic year. Parent loan refinancing through Laurel Road allows refinancing of federal parent and private parent loans, and offers qualifying students the opportunity to assume the debt. In 2019, Laurel Road became part of KeyBank, which offers community and corporate banking services. Laurel Road’s student loans are serviced through the Higher Education Loan Authority of the State of Missouri, also known as MOHELA, and the company is headquartered in New York City.
Earnest is an online lender offering private student loans to college and graduate students, as well as student loan refinancing. The company was founded in 2013. Borrowers can choose their own loan terms to fund up to the full cost of their education.
Citizens Bank was founded in the late 1800s in Rhode Island. Today, it’s one of the largest commercial banks in the U.S. Branches are concentrated in the New England, mid-Atlantic and Midwest regions.
SoFi is an online lender founded by Stanford business school students in 2011. SoFi offered student loan refinancing as of May 2012, and the San Francisco-based company added private student loans in 2019. Choose from undergraduate, graduate, law, MBA, health profession or parent loans with no fees.
Education Loan Finance, also known as ELFI, is a student loan program offered by Tennessee-based SouthEast Bank since 2015. The company provides private student loans and refinancing options for private and federal student loans.
PNC offers student loans in all 50 states for students at all stages of postsecondary education, including professional training loans and refinancing. The bank is also engaged in a number of community efforts, including financial literacy programs and PNC Grow Up Great, which supports early childhood education. For eligible undergraduate students, PNC offers opportunities to win $2,000 scholarships toward education expenses.
Nelnet Bank, founded in 2020 by Nelnet – one of the largest servicers of federal student loans – offers private student loans and refinance options. Private student loans feature co-signer release, plus a choice of several repayment plans and interest rate savings if you set up automatic payments. Nelnet Bank can refinance a Parent Direct PLUS Loan into a student’s own name.
College Ave exclusively offers student loans. Founded in 2014 and based in Wilmington, Delaware, College Ave offers undergraduate, graduate and parent loans for students enrolled at schools affiliated with College Ave in all 50 states and the District of Columbia. College Ave’s advantage is speed, with applications that take a few minutes to complete and instant decisions.
Credible is a loan comparison marketplace that allows would-be borrowers to shop around for student loans and student loan refinancing that meet their needs. The company was founded in 2012 in San Francisco as a tool to empower borrowers to shop rates and products.
Several top-scoring student loan refinance companies in the U.S. News database recently increased their APRs.
Among student loan refinance companies that earned a U.S. News score of 4.5 stars or more, four out of six increased their minimum fixed APRs, and one of those increased its maximum fixed APR. The same four lenders also increased their minimum variable APRs, and one also increased its maximum variable APR.
That said, one lender decreased its maximum fixed and maximum variable APRs.
Make sure you shop around to get the best rate possible. Good credit also can help you secure a more competitive rate, so pay your bills on time and keep your credit card balances low.
When you refinance student loans, a private lender repays your existing loan, or loans, and issues a new loan based in part on your creditworthiness that can help you get a lower interest rate. If you can qualify for a better rate, you could save money and get lower monthly payments. The federal government does not offer refinancing for federal student loans, and refinancing these loans with a private lender will leave you ineligible for federal benefits you may have had.
Consolidating student loans means combining multiple loans into one monthly payment. You can consolidate federal loans through the U.S. Department of Education. With a Direct Consolidation Loan, you will have one monthly payment with a fixed interest rate that is the weighted average of your previous rates, rounded up to the closest one-eighth of a point.
Find the Student Loan That’s Right for You
Refinancing student loans can save you money, but it can be difficult to decide whether you should refinance. Note that these pros and cons apply to refinancing student loans and may not be relevant to borrowers considering consolidating their federal loans.
- Could get a lower interest rate. If your credit history has improved since you took out your loans, you may be well-positioned to get a lower rate if you refinance.
- Fewer payments per month. Refinancing makes it possible to combine multiple loans into one, so you’ll have fewer payments to worry about each month.
- Co-signer could be removed. Refinancing is one way to remove your co-signer if you want your student debt to be your responsibility alone.
- Won’t be able to use federal loan forgiveness programs. If you are hoping to get forgiveness on a federal loan, you’ll no longer be eligible for any relevant federal loan forgiveness programs if you refinance that loan.
- Lose access to federal income-driven repayment programs. If you are using a federal income-driven repayment plan for a federal loan, you’ll lose access to it if you refinance that loan.
Student Loan Refinance
Many factors, including your income, debt, employment and credit can determine whether you are able to refinance a private student loan. You’ll want to prequalify with more than one lender so you can compare offers before submitting an official application.
You can refinance federal student loans through private lenders, but it’s not always a good idea. That’s because you can lose access to benefits including federal income-based repayment plans and student loan forgiveness programs.
Federal Student Loan Consolidation
Eligible borrowers can apply for a Direct Consolidation Loan online or by mail. Consolidating your federal college loans requires no hard credit check and could offer you access to more flexible repayment options and Public Service Loan Forgiveness.
Rather than consolidate your college loans, you could consider changing repayment plans to extend your loan terms and get lower monthly payments. But this also won’t reduce the total cost of borrowing.
U.S. News Survey
U.S. News Survey: Student Loan Payments Can Hinder Retirement Savings and Personal Goals
Many borrowers don’t regret their student loans and haven’t explored refinancing them for savings, according to a U.S. News survey of consumers with federal or private student loans. They revealed how much they borrowed, whether their payments are affordable and other details about how their student loans have affected their lives.
Additional Survey Insights
More than 11% of respondents have student loan balances more than $50,000.
Seventy-three percent of respondents have had to postpone significant life goals, including 37.9% of people who have put off buying a house. Only 27% of respondents haven’t had their plans significantly delayed because of student loans.
U.S. News Survey Methodology
- U.S. News ran a nationwide survey in July 2021 through PureSpectrum.
- This survey sampled 1,171 people in the general American population who visit desktop and mobile sites where PureSpectrum conducts surveys.
- The survey asked 11 questions related to student loans.
Survey Results
Before you proceed with consolidating or refinancing, check that your loans are eligible and make sure your choice is the right fit.
Federal Student Loan Consolidation Eligibility
Private Student Loan Refinance Eligibility
Eligibility can vary by lender, but many private student loan refinancing companies often look at these factors:
- Minimum credit score. You may need a credit score in the mid-600s or higher to qualify for refinancing. But even if you qualify for refinancing, you may not qualify for a lower interest rate than you have now.
- Credit history. The length of your credit history and any derogatory marks, such as late payments, can inform a lender’s evaluation of your creditworthiness. You can order free copies of your credit reports – now weekly through the end of 2022 – at AnnualCreditReport.com to monitor for and dispute any errors.
- Proof of income. Lenders may have minimum annual income requirements.
- Debt-to-income, or DTI, ratio. This is the percentage of your total monthly income that goes toward debt payments, and it can help lenders determine if you’ll have trouble making your loan payments. A lower DTI ratio is better because it indicates that you have more room in your monthly budget. You can reduce your DTI ratio by switching to longer repayment plans, says Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com, a resource for saving and paying for college.
Also, lenders may require you to meet other conditions for refinancing student loans. If you can’t qualify on your own, some lenders might approve you with a creditworthy co-signer.
Lenders could also restrict refinancing to those who:
- Complete degrees.
- Live in certain states.
How soon can you refinance student loans? You’re not likely to get approved for refinancing while still in school. Once you graduate and find a job, you should be able to refinance, and there are also refinancing options for borrowers who did not graduate.
Parent PLUS Loan Refinance Eligibility
Parents can refinance student loans, too. When you refinance Parent PLUS loans or private parent loans, you could lower your interest rate, transfer the debt to your child or both.
“You don’t lose as many benefits when refinancing a federal Parent PLUS loan into a private loan since parent borrowers are not eligible for income-driven repayment plans and Public Service Loan Forgiveness,” Kantrowitz says.
Use this chart to compare consolidating federal student loans with private student loan refinancing.
| Federal Direct Consolidation Loan | Private Student Loan Refinancing | |
| Are federal loans eligible? | Yes | Yes |
| Are private loans eligible? | No | Yes |
| Can you lower your monthly payments? | Yes | Yes |
| Is a hard credit check needed? | No | Yes |
| Can you lower your interest rate? | No | Maybe, if you have good credit |
| Can you use a federal repayment plan? | Yes | No |
| Can you qualify for federal student loan forgiveness programs? | Yes | No |
Consolidation does nothing for your interest rate, but it does make your loans easier to manage, says Travis Hornsby, founder of Student Loan Planner, a consulting firm that helps borrowers with at least $20,000 in student loan debt.
Student loan consolidation could make sense if:
- You’re having trouble making payments. Consolidating and increasing your student loan’s term could give you a lower monthly payment. You’ll keep access to federal loan repayment plans as well as deferment or forbearance, which can offer a safety net.
- You’re struggling to manage multiple loans. By consolidating, you will combine all of your federal student loans into one new loan and one monthly payment.
- You plan to work in a profession eligible for student loan forgiveness. If you have federal loans that aren’t eligible for a federal student loan forgiveness program, consolidating those loans could make them eligible. But don’t consolidate loans if you have been working toward forgiveness on them with an income-driven repayment plan, because that will restart the clock on forgiveness.
- You have a loan in default. You may be able to consolidate your loan and bring it out of default.
On the other hand, student loan refinancing makes sense “if you’re trying to reduce your interest rate and you need to pay off your balance in full,” Hornsby says. Refinancing your student loans with a private lender could be a good idea as long as:
- You qualify for better terms. If you have good credit and meet the loan refinance lender’s minimum income and other requirements, you may qualify for a better interest rate that can decrease your monthly payment and the cost of the loan.
- You want to combine your federal and private student loans. You’ll have to refinance student loans with a private lender to combine private and federal loans.
- Your income is stable. Refinancing federal student loans means you’ll no longer be eligible for income-driven repayment plans or federal hardship programs.
- You don’t plan to use federal student loan forgiveness options or alternative payment plans. Private loans aren’t eligible for these federal loan programs.
If you’ve decided that student loan refinancing is the right strategy for your financial situation, you may be ready to begin the loan shopping and application process. Here’s what that looks like:
- Review your credit score. Since private lenders determine your interest rate and eligibility based on your credit history, you should know where you stand before you apply. The lowest rates are typically reserved for applicants with very good to excellent credit, defined by the FICO scoring model as 740 or higher. If you have fair or bad credit, you may need to refinance your student loan debt with the help of a creditworthy co-signer.
- Check your existing loan terms. Review the loan agreement for your current student loans to find the remaining loan balance, interest rate and payoff date. If you can’t find this paperwork, get in touch with your student loan servicer. Use the rate on your current student loan debt as a baseline – you’ll want to find a lender that offers you a lower rate to reduce your monthly payment and overall interest charges. You’ll also need to add up your existing loan balances if you plan on consolidating multiple loans.
- Get prequalified through multiple lenders. Most lenders let you see your estimated loan terms, such as your interest rate, with a soft credit inquiry. This lets you compare student loan refinance rates across multiple private lenders before you make a decision. Also be sure to consider a lender’s fees, loan discounts and economic hardship programs.
- Fill out a formal loan application. Once you’ve chosen the right student loan refinancing lender for your needs, you’ll need to formally apply for the loan. This requires a hard credit check, which will have a temporary but minimal impact on your credit score. The lender may also request other financial information, like proof of income and identification, as well as your current loan information.
- Continue making payments while the disbursement is finalized. If you’re approved for a new student loan at a lower rate, the refinancing process may take a few weeks to complete. Be sure to keep making payments through your current loan servicer during this time to avoid missed payments and late fees.
Congratulations! You just graduated and were hired for your first job earning $65,000 a year in San Francisco.
Say you have three federal direct subsidized loans: one for $10,000, one for $6,000 and the other for $5,000, and the interest rates on those loans are 3.73%, 2.75% and 4.53%, respectively (these are the three most recent fixed interest rates for direct subsidized loans for undergraduates – the rate updates each year). To pay down your student debt under the standard repayment plan, you will spend 10 years and roughly $25,000, including interest.
Here’s how this scenario could change by either consolidating your federal loans or refinancing them with a private lender. All amounts are rounded to the nearest dollar.
| New APR | New monthly payment | Interest paid | Total paid | |
| Consolidate with a 20-year term | 3.75% | $125 | $8,882 | $29,882 |
| Refinance with a five-year term | 4.99% | $396 | $2,772 | $23,772 |
| Refinance with a 10-year term | 5.25% | $225 | $6,038 | $27,038 |
| Refinance with a 15-year term | 5.5% | $172 | $9,886 | $30,886 |
Be sure to compare the monthly payment with the total cost when you are considering consolidating or refinancing student loans, Kantrowitz says. Your monthly payment could be lower – sometimes much lower – but you could pay thousands of dollars more in interest.
Of course, you’ll want to compare more than just your monthly payment and interest rate to determine whether consolidating or refinancing your student loans might make sense.
You can select the right student loan refinance company for your needs by reviewing eligibility requirements and these key factors:
Student loan refinance rates
Low interest rates are key. When you compare student loan refinance companies, look for competitive interest rates so you can pay the lowest APR possible. You can choose between fixed rates and variable rates, depending on the student loan refinance lender.
- Fixed-rates range. Student loan refinance rates will vary based on your lender and credit, as well as loan terms and market rates. Fixed-interest-rate loans have a rate and monthly payment that don’t change over the life of the loan.
- Variable-rates range. Variable-rate loans may initially have lower interest rates than fixed-rate loans, but your monthly payments and rate may change while you repay the loan. If your interest rate rises unexpectedly, you’ll be on the hook for higher monthly payments.
Student loan refinance companies usually advertise interest rate ranges on their websites, so that’s a good place to start. Some lenders offer a rate check option. This allows you to prequalify or see estimated student loan refinance rates and terms using a soft credit check, which won’t hurt your credit. It’s a good idea to check rate options before you formally apply.
Loan and refinancing terms
Make sure a student loan refinancing company offers terms that meet your needs. Compare loan amounts and repayment terms to determine a good fit.
- Maximum loan amount. The average borrower won’t need to worry about maximum loan amounts. In some cases, lenders don’t have maximums at all. But this could be a concern for some borrowers with an exceptionally high student loan balance.
- Minimum loan amount. Student loan refinancing companies may require you to refinance at least $5,000, and some may expect you to refinance more. If you have a small amount of student debt, you might not be able to refinance it.
- Loan repayment term. Refinancing lenders may offer loan repayment terms as short as five years or as long as 25 years. Choosing a shorter repayment term could increase your monthly payment but reduce the interest you pay and get you out of student debt sooner.
- Autopay deduction. Many lenders offer borrowers a 0.25-point APR discount if you sign up for automatic payments through your bank.
Repayment and hardship options
If you need flexible repayment or want hardship options available in case of emergency, find out what lenders offer. Some student loan refinance companies may have flexible repayment options, perhaps allowing you to make interest-only payments for a certain period of time. Deferment, forbearance and other hardship options may be available, too.
Fees
Interest may not be the only cost you’ll face. Read the fine print to see if you’ll have to pay fees, such as late or returned payment fees. But importantly, lenders don’t charge upfront origination fees to refinance student loans.
Customer service
Learn about how well a student loan refinance company does with customer service by reading reviews. You’ll want to know what experts and other consumers have to say about a lender before you sign on the dotted line.
Overall, interest rate and ease of refinancing are the most important considerations when refinancing your college loan, Hornsby says, and that can guide your decision-making. Also, take a look at how generous the forbearance terms are and which servicer the student loan refinance company uses.
“That said, student loan refinancing is really a commodity,” Hornsby says. “You’re looking for the lowest interest rate with the least amount of pain in the application process. Luckily, that process is generally pretty fast and easy.”
Before you commit to refinancing your student loans, you can consider some alternatives. Depending on your situation, you could:
- Make bigger payments. If you are able to put more money toward your loan each month, you may pay it off faster and owe less interest over the life of the loan.
- Check for a co-signer release. You may not need to refinance your student loan to get rid of your co-signer if your lender offers a co-signer release option. However, keep in mind that it can be difficult to get a co-signer release approved.
- Take advantage of federal loan benefits. If you are considering refinancing federal loans because you can’t afford monthly payments, for instance, first check to see if income-driven repayment or another option may be available and work better for you.
- Contact your lender. You can get in touch with your lender to see if they offer options such as financial hardship forbearance.
- Talk to a student loan counselor. If you’re not sure how to best manage your student debt, you can look for assistance from a nonprofit financial counseling agency.
U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. For student loan refinance companies, we consider each company’s customer service ratings, refinancing fixed APR, refinancing variable APR, refinancing minimum and maximum loan terms, refinancing maximum loan amounts, refinancing minimum FICO score, product availability, and online features.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
Sparrow, founded in 2020, is an online marketplace where students and parents can fill out a single application to see whether they qualify for loan offers from a variety of lenders. Although Sparrow is not a lender, the free service allows you to compare rates across lending partners. Sparrow is also available to international students.
LendKey’s digital platform connects borrowers who need private student loans or refinancing loans with nonprofit credit unions and banks. Since 2009, LendKey has helped more than 135,000 people by funding $5 billion in loans. The company offers fixed- and variable-rate loans for undergraduate and graduate students.
MPower Financing offers private student loans to undergraduate and graduate students within two years of earning a degree or starting a one- or two-year program at an eligible U.S. or Canadian school. The lender specializes in working with international students and Deferred Action for Childhood Arrivals recipients.
NaviRefi, established in 2018, offers student loan refinancing to borrowers looking for better interest rates or simplified payments. The loans are made by the online lender Earnest, which is part of student loan servicer Navient in Wilmington, Delaware. Borrowers must meet the lender’s eligibility criteria and receive an invitation to apply.
Note: After years of legal battles, Navient agreed in January 2022 to cancel $1.7 billion in student loan debt owed by more than 66,000 borrowers. Navient has not admitted to any wrongdoing under the settlement.
Best for fixed APR
The Rhode Island Student Loan Authority is a nonprofit quasi-state authority that provides college financing to students and parents. The lender specializes in providing loans to Rhode Island residents and students, though not all loans have residency requirements.
Best for co-borrowers
The Massachusetts Educational Financing Authority is a state-chartered not-for-profit organization established in 1982 to offer low-cost financing options to college students and their families. You can live anywhere in the U.S. and access MEFA’s private student loans, including undergraduate, graduate or refinancing options.
Best for small loan amounts
EDvestinU is the nonprofit student loan lending and refinancing organization of the New Hampshire Higher Education Loan Corp. Undergraduate and graduate loans and student loan consolidation are available to borrowers with both fixed and variable rates available in select states and Puerto Rico.
Best for no fees
Discover Bank has been operating for more than 100 years, and since 2010, it has offered private student loans to students attending more than 2,400 colleges and universities. Loans of up to 100% of education costs with fixed or variable rates are available.
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