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Student Loans Student Loan Repayment

Student Loan Consolidation: The Ultimate Guide

Feeling overwhelmed with multiple student loan payments? You’re not alone. As many borrowers brace for the resumption of federal student loan payments in October 2023, the challenge of juggling different loans, each with its own due date, seems even more daunting. 

But there’s a lifeline: student loan consolidation. The potential to merge multiple debts into one monthly payment could give you a much-needed breather. But is it right for you? 

We’ll dive deep into the ins and outs of federal and private consolidation options. Whether you’re looking for clarity, hoping for savings, or simply aiming for a streamlined loan management process, this guide is here to help. 

What is student loan consolidation?

At its core, student loan consolidation refers to the process of combining multiple student loans into one. By doing this, you end up with a single monthly payment instead of juggling multiple due dates. 

The main reasons people choose to consolidate student loans include:

  • Making payments more manageable.
  • Streamlining finances with just one monthly payment.
  • Potentially securing a more affordable repayment term.

When you consolidate, you essentially use one new loan to pay off your existing loans. This process can offer you the peace of mind that comes with simplified financial management and student loan repayment.

Ask the expert

Chloe Moore


When clients have a mix of federal and private student loans, I suggest they prioritize paying off the private loans first. If they’re good candidates for refinancing to a private lender, we’ll compare interest rates and see if it makes sense to refinance them all together. Otherwise, we develop a strategy to pay off the private loan while simultaneously reviewing the options available for the federal loans and determining the best repayment plan for them. 

Private vs. federal student loan consolidation

Student loan consolidation can come in two forms: private or federal. Both offer the advantage of simplifying repayments, but they come with their distinct features and considerations. 

Private student loan consolidation

Often referred to as refinancing, private student loan consolidation aims to combine multiple loans, both federal and private, into a single private loan. But before you leap into this, consider:

  • Refinancing means lost benefits: Once you refinance federal loans into a private loan, you forfeit specific federal benefits.
  • You have many choices: The private sector offers numerous lenders with a variety of refinancing choices for borrowers. You will need to choose the one that best fits your needs and apply to refinance your student loans with that lender.
Image showing an example of consolidating three private student loans into one to show how private student loan consolidation, or student loan refinancing, works.

Federal student loan consolidation

This consolidation brings together multiple federal loans into a new, single federal loan—the Direct Consolidation Loan. Distinct features of federal consolidation include:

  • A set interest rate: The government determines your new interest rate as the weighted average of all consolidated loans’ rates, rounded up slightly. As a result, don’t expect significant savings here.
  • Other potential benefits: Beyond the simplicity of one monthly payment, consolidating federal loans can make you eligible for income-driven repayment plans or student loan forgiveness programs that were out of reach.
An example of how federal student loan consolidation works with hypothetical calculations.

What’s the difference between private and federal consolidation?

Here’s a breakdown of how federal and private student loan consolidation compare.

Federal consolidationPrivate consolidation
What student loans are eligible?FederalFederal and private
What options are available?Direct Consolidation LoanRefinancing options available through numerous banks and institutions
What will my new interest rate be?Weighted average of included loans, rounded to nearest 1/8th percentRates vary based on creditworthiness; possibility for lower rates
Will I pay less on my loan?Savings are not anticipated due to the weighted average interest calculationPossible savings with lower interest rates, contingent on loan term
Can I take advantage of federal benefits?Retains protections for income-driven plans and forgivenessRefinancing federal loans relinquishes associated federal protections
Do I have to consolidate all of my student loans?No, you don’t have to consolidate all of your federal loans if it doesn’t make sense. No, you don’t have to consolidate all of your loans if it doesn’t make sense. 

Let’s examine how to go about consolidating each loan type and choose the right method.

How to consolidate private student loans

Consolidating private student loans can offer you a clearer financial picture. By merging multiple student loans, you might streamline your payments and lock in better interest rates. 

Here’s what to expect when it comes to eligibility requirements, the consolidation process, and the lenders we recommend for private student loan consolidation. 

Eligibility requirements 

Eligibility is your first step. Each lender has its nuances, but these are common criteria:

  • Credit score: A score of 680 is a typical benchmark. A higher score might yield a lower interest rate, and a lower one could limit your options.
  • Income: Lenders review your income and its ratio to your debt. For example, Citizens Bank has a minimum annual income of $12,000, but ELFI sets it at $35,000.
  • Loan status: Loans should be in good standing with a history of on-time payments. Lenders won’t approve you for refinancing if you’re behind on payments or in default.
  • Loan amount: A minimum loan amount for refinancing is common. This is often around $10,000, although some lenders have a starting threshold of $5,000 or lower.
  • Graduation status: Some lenders may require at least a bachelor’s degree to refinance. If you took out student loans but didn’t graduate, it could disqualify you from refinancing with some lenders.

How it works 

Next, private student loan consolidation generally follows a step-by-step plan.

An image showing the steps involved in the student loan refinance process

1. Gather your documents

Arm yourself with information including current balances, rates, and account numbers. Always compare current rates to potential new ones before applying with a lender. Many private lenders will offer you two types of interest rates: variable and fixed.

2. Research lenders

Find lenders fitting your needs. Some offer prequalification, which is ideal for checking rates without hurting your credit score. Also consider how much you need to refinance, whether the lender’s loan amounts match those needs, and whether the repayment options fit your financial situation.


Variable rates could be lower to start but can fluctuate over the life of the loan, meaning you could end up paying more than you expected. Fixed rates might be higher than the variable rates, but they are secured for the life of the loan, meaning you know exactly how much your loan will cost.

3. Choose a lender and apply

After identifying the best match, complete the application. This often requires a hard credit pull, which can lower your credit score by a few points.

4. Sign and wait

Once you agree to the lender’s terms, it typically pays off the loans you’re refinancing.

5. Begin repayments

You begin repaying your refinanced loan according to the terms agreed with your new lender to pay off your student loan debt.

Top lenders for private student loan consolidation 

Choosing a lender means looking beyond the basics to understand each lender’s unique requirements and benefits. Here are five of our highest-rated recommendations.


Best skip-a-payment benefit

  • A wide range of loan amounts available
  • Unique repayment flexibility—including skipping a payment once per year
  • Competitive rates

Earnest offers competitive rates, wide-ranging loan amounts, and multiple term options, catering to debts as low as $5,000 to highs of $500,000. 

Earnest also provides forbearance options, the chance to skip one payment annually, flexibility in repayment dates, and the ability to autopay on a biweekly basis to pay your loan off early.

  • Variable rates (APR): Starting at 5.32%
  • Fixed rates (APR): Starting at 4.96%
  • Loan amounts: $5,000 – 105% of the total eligible student loan amount listed on your credit report (California: $10,000 minimum and New Mexico: $10,001 minimum) 
  • Loan terms: 5 – 20 years 
  • Minimum credit score: 650 
  • Minimum income: Not stated, but Earnest requires applicants to have a job and a steady income 
  • Autopay discount: 0.25% 


Best online refinancing lender

  • Access to career coaching and networking
  • Loans start at $5,000
  • No minimum income threshold

With loans starting at $5,000, a range of terms, and no minimum income requirements, SoFi caters to a broad spectrum of borrowers.

The most significant bonus of refinancing with this lender is its borrower benefits. When you refinance with SoFi, you gain access to career coaching and invitations to exclusive member events, where you can network and further build your career.

  • Variable rates (APR): 5.29%% – 9.19%
  • Fixed rates (APR): 4.74%% – 8.99%
  • Loan amounts: $5,000 – total outstanding loan balance 
  • Loan terms: 5, 7, 10, 15, or 20 years 
  • Minimum credit score: 650 
  • Minimum income: No minimum, but you need free cash available after paying monthly expenses 
  • Autopay discount: 0.25%


Offers the best personalized support

  • Each applicant gets a student loan advisor 
  • Options to consolidate parent and student loans
  • Interest rate automatically reflects autopay discount

ELFI is known for its stellar customer service by assigning each applicant a dedicated student loan advisor to walk you through the process and answer any questions you may have. 

Its refinance loans also accommodate both parents and students. Parents can transfer their federal Parent PLUS loans to their child, and the child can further consolidate their private or federal loans using their parent as a cosigner if needed. 

  • Variable rates (APR): 5.28% – 9.95
  • Fixed rates (APR): Starting at 5.08
  • Loan amounts: From $10,000 
  • Loan terms: 5, 7, 10, 15, and 20 years 
  • Minimum credit score: 680 and at least 36 months of credit history 
  • Minimum income: $35,000 
  • Autopay discount: Integrated into the approved interest rate 


Great for comparing multiple offers

  • Compare real offers with one application
  • Receive $200 if you don’t get your best rate
  • No impact on your credit

Credible is not a lender but an online marketplace where you can submit an application to see real offers from multiple lenders in one place. All lenders in its marketplace allow you to consolidate your student loans.

Since it’s not a lender, the terms you see will be customized to your credit profile based on the offers you’re eligible for.


Powered by Credible

Best hardship protections

  • Immediate and deferred repayment options available
  • Several hardship protections, including income-based repayment
  • $40,000 income requirement 

Though rooted in Rhode Island, RISLA caters to borrowers nationwide. Its standout feature is a specialized in-school option, allowing students to defer payments until post-graduation. 

But for those eyeing lower rates, immediate repayment is an option. RISLA is transparent in its requirements, expecting borrowers to pass a credit check and meet other related criteria.

We also rate RISLA as the student loan refinancing lender with the best hardship protections, offering income-based repayment plan for short-term assistance, military benefits, unfortunate incident benefit, and payment forbearance.

  • Fixed rates (APR): 5.79%8.24% 
  • Variable rates (APR): N/A
  • Loan amounts: $7,500 per year – $250,000 (based upon level and discipline of degree) 
  • Loan terms: 5, 10, or 15 years for immediate repayment; 15 years for deferred repayment 
  • Minimum credit score: Not disclosed 
  • Minimum income: $40,000 
  • Autopay discount: 0.25% 
  • Unique features: Rhode Island students and residents get lower rates

Ensure your choice aligns with your unique financial situation and future plans. A lender that suits one individual may not be the best for another. Consider rates, terms, and unique perks when making your decision.

How to consolidate federal student loans

While you can consolidate federal student loans into a private student loan (refinancing), if you have multiple federal student loans and want to consolidate them into one federal student loan, then understanding the Direct Consolidation Loan program is crucial. 

This program lets you combine these loans into a single payment, simplifying your finances and potentially optimizing repayment terms.

Eligibility requirements

To be considered for a Direct Consolidation Loan, you must meet specific requirements:

Loan types

Not all federal student loans qualify. Here are the eligible loans:

Other types of federal loans might be eligible. Check the federal student aid website for a comprehensive list.

Loan status

All your loans should be in their repayment phase or still within the grace period. Loans in default don’t qualify unless specific conditions are met.

If your loans are in default, you aren’t immediately eligible. However, the Department of Education provides a pathway. You can either:

Remember, consolidating federal student loans might reset the clock on forgiveness programs, meaning it will take longer until you qualify for that benefit. Be sure to evaluate all the pros and cons of consolidation before proceeding.

How it works

Federal loan consolidation can streamline your student loan experience, but it’s essential to understand the steps. Here’s a breakdown to help you navigate the process:

1. Gather necessary information

You’ll need:

  • Personal and financial details.
  • A verified Federal Student Aid (FSA) ID.
  • A list of the loans you want to consolidate and those you don’t.

Your loan servicer’s website should provide all details about your loans. The National Student Loan Data System is another excellent resource to view all your federal loans.

2. Start the application process

Apply for a Direct Consolidation Loan via Choose between completing the application online or downloading, printing, and mailing it.

3. Choose a repayment plan

This is a pivotal decision in the process. Examine the options available, such as:

For a comprehensive list, visit the Federal Student Aid website

When choosing a repayment plan, be sure to:

  • Understand the long-term impact: Remember, extending repayment terms or opting for plans with smaller payments increases the interest you’ll pay over time. This can make your loan more costly in the long run.
  • Commit to your plan: It’s crucial to stick to the repayment plan you choose. Failing to make payments can lead to severe repercussions. This includes loan defaults, loss of federal loan perks, increased fees, and a negative impact on your credit score. Choosing a plan that aligns with your current income and future financial projections ensures you remain in good standing.

Which student loan consolidation option is best for you?

Deciding on the ideal student loan consolidation path is crucial for your financial well-being and peace of mind. The goal is to tailor the choice to your individual needs.

When to consolidate your student loans with a private lender

Private student loan consolidation emerges as a solution for those with private loans, federal student loans, or a mix of both they wish to unify. The appeal is often the prospect of reduced interest rates, manageable monthly payments, and an overall smaller loan expense. 

However, consolidating federal loans into a private one comes with specific considerations. We recommend you consider consolidating with a private lender if the following two points apply to you:

You’re eyeing a lower interest rate 

A lower interest rate doesn’t just lead to manageable monthly installments—it also means you’ll end up paying less over the lifespan of a loan with the same term length. But your credit track record and earnings will play pivotal roles in the interest rate and terms you can secure.

If you have a solid credit score coupled with a stable income, private student loan consolidation can be advantageous. Without these credentials, finding a favorable interest rate can be challenging.


Use our student loan refinance calculator to assess the savings you could realize through consolidation.

You’re ready to forgo federal benefits

Moving your federal loans to a private lender means you’ll relinquish unique benefits only available to federal borrowers. 

This includes income-driven repayment plans, which calibrate payments based on what you earn, Public Service Loan Forgiveness, and deferment choices. 

If these programs are in your arsenal or you might lean on them in future, it’s wise to reflect on the implications.

You have high income

Refinancing to a private lender can make sense if you have a high income and are sure you can handle the payments without the federal benefits mentioned above. 

A good rule of thumb is to consider refinancing if you earn more than what you owe in student loan debt. For example, if you earn $100,000 per year, and you owe $50,000 per year in student loan payments, refinancing with a private lender can make sense.

In cases in which you owe more than you earn, it is never advisable to move loans out of the federal system.

Ask the expert

Chloe Moore


When you refinance out of the federal system, it’s important to understand the federal protections you’re giving up. If you could possibly qualify for Public Service Loan Forgiveness in the future based on your career path or could not weather an economic hardship, it may be best to keep your loans in the federal system. Refinancing to a private lender makes the most sense when you have a high, stable income, a solid emergency fund, and no consumer debt.

When to consolidate your student loans through the government

Understanding when and why to consolidate your loans with the government—rather than a private lender—is also crucial. We advise looking into federal student loan consolidation to:

Consolidate federal loans only

Federal student loan consolidation is exclusive to federal loans. You cannot mix in private student loans with this option.

Maintain federal benefits

Through the Direct Consolidation Loan program, federal borrowers can hold on to valuable benefits while simplifying their loan repayments into one monthly commitment. It’s about having the best of both worlds: protection and convenience.

Qualify for income-driven repayment

If you possess Parent PLUS Loans, FFEL Program loans, or Perkins Loans, merging these through the Direct Consolidation Loan program can unlock doors to income-driven repayment plans that weren’t accessible before.

Overcome challenges with private consolidation

Federal loan consolidation sidesteps hurdles such as credit scores or employment history. If private lender consolidation isn’t feasible, this pathway offers a means to streamline repayments without these qualifiers.

Make payments more manageable, but not necessarily save money

If saving isn’t the primary goal, federal consolidation might be on the table. Your new interest rate post consolidation mirrors the weighted average of your previous rates, rounded up to the nearest eighth of a point. 

An extended repayment span might inflate the interest over the loan’s duration but can be worth considering if it makes your monthly budget more manageable.

Ask the expert

Chloe Moore

CFP® has a loan simulator that can be helpful to illustrate the impact of consolidating. Working with a certified student loan professional (CSLP) or a financial planner who has this designation is also a great way to go.


Navigating student loans comes with plenty of questions. Here are the answers to several common questions:

Can parents consolidate the loans they took out to finance their child’s education, or is student loan consolidation only for students?

Parents aren’t left in the cold. They can refinance or consolidate private parent or Parent PLUS loans. Whether it’s to simplify monthly payments or snag a better interest rate, parents have options to manage the loans they acquired for their child’s education.

How soon can you consolidate student loans after taking them out?

Consolidation is an option as soon as your loans enter their repayment period or grace period. However, it’s wise to consider the timing. Immediate consolidation might offer simplicity, but waiting could present more favorable interest rates due to building up more positive credit history and income, and changing market conditions.

Does it hurt your credit score to consolidate student loans?

Consolidating federal student loans means a soft inquiry on your credit report, which doesn’t affect your score. Most private loan refinancing companies offer prequalification with a soft credit inquiry, but applying usually does impact your credit slightly.

New credit accounts can also shorten your credit history’s average length, which can affect your score. But with on-time payments, your score should rebound.

Do I have to consolidate all my student loans?

No, consolidation remains your choice. It allows flexibility. You can consolidate some, none, or all of your loans. Tailor the process to your needs, whether it’s to keep particular federal benefits or optimize certain loan interest rates.

Should married couples consolidate student loans?

Tread with caution. While consolidating joint student loans might simplify payments, it can complicate the situation if the marriage ends or one partner dies because the other remains liable for the full loan amount. Always weigh the potential risks against the benefits.
In addition, only some private student loan lenders allow spouses to consolidate student loans. Federal consolidation does not allow this.