Best Student Loan Refinancing and Consolidation
Student loan debt can be overwhelming, especially if you’re dealing with multiple lenders. We looked at the pros and cons of consolidation and refinancing and researched 13 companies that offer these services — some of which have been rated and reviewed by consumers — to help you make an informed financial decision. Read our guide to discover the best student loan refinancing companies for you.
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Student Loan Refi and Consolidation Companies | ||||||
|---|---|---|---|---|---|---|
Student loan refinancing marketplace with an online application process. A $5,000 minimum for refinancing is common. Terms vary from company to company. No application or origination fees. No prepayment penalties. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
Select from a variety of student loan options. Available for international students. Variable rates 2.99% to 13.99% APR; fixed rates 5.49% to 14.99%. No fees. Cash rewards available for good grades. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
College Ave Student Loans
Partner DisclosuresCollege Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. 1. Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. 2. As certified by your school and less any other financial aid you might receive. Minimum $1,000. 3. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 08/01/2023. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term. | Provides loans for undergraduates, graduates and parents. Career training and trade school loans available. Undergraduate rates start at 4.42%, including a discount for automatic payments. Refinances up to $300,000. |  | View Rates | |||
Offers private and co-signed student loans plus refinancing. Has programs for MBA, medical and law school funding. Not available for international students or associate degree seekers. Requires a credit score of 650 or above. |  | Get Started | ||||
Works with over 13,000 local banks and credit unions to provide private student loans and refinancing. Charges interest rates starting at 1.49% for variable-rate loans and 3.99% for fixed-rate loans. No origination fees. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
Offers undergraduate, graduate, MBA, dental and medical student loans. Refinancing loans are also available. Undergraduate rates start at 3.74% APR. Automatic payment discount. Five-, 10- and 15-year loan options available. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
Helps find personalized rates from multiple lenders in minutes. Over 100 lending partners. Free to search and view loan and refinancing options. Inquiries don’t impact credit score. Allows co-signers. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
Services federal student loans. Manages your loan status and payments. Multiple repayment plans available. Helps with loan consolidation. Also offers scholarships, grants and college advising services. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
Offers private student loans and student loan refinancing. No loan maximums. Multiple repayment term lengths. Interest rate discounts available. Doesn’t charge fees. Unemployment protection available. |  | View Rates | ||||
Specializes in personal and business banking. Offers mobile and online services for checking and savings accounts. Home loans, student loans and refinancing, auto loans, investing and retirement services available. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
Offers federal loan consolidation assistance by helping former students through the application process and by selecting the best repayment or loan forgiveness plans for their unique situation. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
Free online resource for student loan information and guidance. Refinancing, prepayment and loan forgiveness calculators available. Tools designed to help users get better student loan rates. |  | Chat with a ConsumerAffairs decision guide Live agent | ||||
| Read Author Review | Nonprofit state authority offering student loan refinancing to borrowers nationwide. Qualifying loans include federal loans, private loans and parent PLUS loans. Annual income of $40,000 required to qualify. $7,500 minimum loan. |  | Chat with a ConsumerAffairs decision guide Live agent | |||
What is student loan refinancing?
Student loan refinancing means taking out a new loan and using it to pay off your existing student loan(s). The goal of refinancing is to qualify for a new, lower interest rate and/or negotiate new loan terms.
As a borrower, you may have one or both of the two main types of student loans: federal and private.
- A federal student loan is administered by the U.S. Department of Education.
- A private student loan is administered by a bank, credit union or other financial institution.
The type of loan you have matters because you can’t refinance a federal student loan into another federal student loan; you can only refinance it into a private student loan. However, all private loans can be refinanced by a private lender.
Pros and cons of refinancing student loans
Refinancing student loans into a private loan has a few advantages, but there are also potential disadvantages you should be aware of.
Pros
- You can consolidate multiple payments into one, which is easier to manage.
- You might be able to get a lower interest rate.
- Refinancing allows you to choose a new repayment term.
- Refinancing allows a student to assume responsibility for a parent PLUS loan.
Cons
- You forfeit eligibility for federal income-driven repayment, forbearance and deferment programs.
- Private loans aren’t eligible for federal student loan forgiveness programs.
- You must meet the private lender’s requirements to refinance.
- There may be fees involved, such as origination fees.
How to refinance a student loan
Refinancing through a private lender involves a few steps, including:
- Comparing multiple lenders and checking rates and repayment terms
- Choosing a lender based on your preferences
- Submitting the necessary documents and information, which generally include a government-issued ID, a Social Security number, proof of income and official federal and private loan statements
- Continuing to make your loan payments while awaiting a decision
What is student loan consolidation?
Although the terms are sometimes used interchangeably, student loan refinancing and consolidation are two different concepts. Loan consolidation is when you simply combine several loans into one loan.
Types of student loan consolidation
Depending on which type of student loan you have (federal or private), consolidating will follow a different process.
Federal loan consolidation
Government-issued student loans can be consolidated through the federal government with a Direct Consolidation Loan. These consolidation loans take multiple government-issued student loans and combine them into one new loan.
Only federal student loans qualify for this program. You cannot consolidate private student loans via a Direct Consolidation Loan.
The new loan’s interest rate will be a weighted average of the loans you’re consolidating. For example, if you’re consolidating two equal federal loans, one with an 8% interest rate and one with a 6% interest rate, the interest rate on your new, consolidated loan will be 7%. However, things get more complicated when your loans aren’t the same size.
Here’s an example of how to calculate the new interest rate of two unequal loans consolidated with a Direct Consolidation Loan. Let’s say you have a total federal student loan debt of $100,000 across two loans: one for $75,000 at 7% interest and one for $25,000 at 5% interest. First, divide the total balance owed on each loan (including principal and interest) by your overall amount of student loan debt. Next, multiply that value by the loan’s interest rate.
Loan A ($75,000 at 7% interest)
- $75,000 / $100,000 = 0.75
- 0.75 x 7 [interest rate] = 5.25
Loan B ($25,000 at 5% interest)
- $25,000 / $100,000 = 0.25
- 0.25 x 5 [interest rate] = 1.25
Add together the result for each loan (rounding up to the nearest one-eighth of a percent if necessary) to get the interest rate of your new loan.
So, your Direct Consolidation Loan would have an interest rate of 6.5%.
Private loan consolidation
Private loan consolidation is the act of consolidating student loans through a private lender. If you choose to consolidate your federal loans with a private lender, you will lose any federal borrower protections you currently have on your government-issued student loans. These include options like:
- Deferment and forbearance: Deferment temporarily pauses your loan payments for up to three years without interest accruing; forbearance pauses or reduces payments for up to 12 months, though interest continues to accrue.
- Income-driven payment plans: Programs like Pay As You Earn (PAYE) calculate loan payments based on your discretionary income.
- Other loan forgiveness programs: These include government plans for public service workers and teachers.
There is no government forgiveness program for private student loans.
Private loan consolidation is also where the terminology can get tricky. Through private loan consolidation, you also have the opportunity to refinance the loans you’re consolidating. Some sources online may use these terms interchangeably and make it more complicated than it needs to be.
The bottom line is that consolidating is simply the act of turning multiple loans into one loan; refinancing is done to get a better interest rate or new loan terms.
Pros and cons of consolidation
“Of course, there are considerations for borrowers weighing this option. For instance, if you consolidate federal and private student loans into a new private student loan, you will lose any benefits associated with the loans you are consolidating — like income-based repayment options,” said Rich Finn, vice president of marketing and product for Discover Student Loans.
“Also, if you extend your repayment term to lower your monthly payment, it will increase your total loan cost. As with any financial decision, borrowers should weigh the pros and cons.”
Pros
- It’s easier to manage one payment instead of multiple payments.
- Consolidating variable rates into a fixed interest rate gives you a consistent monthly payment amount.
- You can choose a new loan term.
- There’s no credit check for a Direct Consolidation Loan.
Cons
- Consolidating won’t always reduce your interest rate.
- You might not save money over time by consolidating.
- You may have to pay origination fees for private consolidation loans.
- Consolidating via a private loan forfeits federal loan benefits.
How to consolidate a student loan
Consolidating federal student loans can be done online with a guided application and should take about 30 minutes to complete.
To consolidate your federal student loans:
- Complete the Direct Consolidation Loan application. You will need to create a Federal Student Aid (FSA) ID if you do not already have one.
- Select which loans you want to consolidate.
- Choose your repayment plan. You’ll have the option to select a time- or income-based repayment plan.
- After you complete the application, you should hear back within 30 to 60 days. You’ll need to keep making your regular student loan payments as scheduled while you wait.
Consolidating can also be done through private lenders, but the processes for that vary by lender.
Student loan consolidation vs. refinancing
The chart below provides a snapshot of student loan refinancing versus consolidation.
| Federal student loan consolidation | Private student loan consolidation | Student loan refinancing | |
|---|---|---|---|
| Qualifying loans | Federal loans | Private and federal loans | Private and federal loans |
| Purpose | Combine multiple loans into one loan | Combine multiple loans into one loan | Reduce interest rate and combine multiple loans into one loan |
| Will I save money? | Maybe | ||
| Will I lower my interest rate? | Maybe | ||
| Will I maintain federal borrower protections? |
Alternatives to student loan refinancing
Student loan refinancing and consolidation are not the only options for borrowers. You might consider these alternatives.
Personal loans
A personal loan is another type of consumer loan, often referred to as an “installment loan.” A personal loan provides a lump sum of money upfront, and you pay it back (with interest) over a period of time in equal installments. They’re available through banks, credit unions or other financial institutions and are most often unsecured (which only requires a signature as a guarantee and not collateral).
Personal loans differ from student loans in that they can be used for a variety of purposes aside from education.
Student loan forgiveness programs
Loan forgiveness is when any part (or all) of your debt is eliminated, which means you’re no longer obligated to pay the forgiven amount. There are multiple student loan forgiveness programs, but perhaps the most well known is the Public Service Loan Forgiveness (PSLF) program.
The PSLF program forgives any federal student loan debt remaining after you’ve made 120 payments toward your federal loans while working for a qualifying employer. Qualifying employers may be U.S. government or not-for-profit organizations.
Deferment or forbearance
A major benefit of federal student loans is the option of deferment or forbearance. Deferment gives the borrower a temporary pause on payments for up to three years, and it may be granted to those who are unemployed or enrolled in school. Interest doesn’t accrue on subsidized federal student loans and Perkins loans during the deferment period.
Forbearance is similar, but it is granted for a wider variety of reasons than deferment. Interest continues accruing when a loan is in forbearance, no matter what type of loan it is. Both scenarios typically require approval from the loan servicer.
Income-driven repayment plans
Federal student loans offer income-driven repayment plan options. These plans allow payment modifications based on your current income, which can offer much-needed relief in the early years of your career. There are multiple repayment plans available, including PAYE, Saving on a Valuable Education, Income-Based Repayment and Income-Contingent Repayment. Each has its own unique repayment period and payment formula.
FAQ
Am I eligible for student loan refinancing?
Generally speaking, you need a good or excellent credit score when applying for student loan refinancing. Although each lender has its own criteria, most have minimum credit score, income and debt-to-income ratio requirements. Also, there may be minimum refinancing amounts and a degree requirement from the lender.
What types of student loans are eligible for refinancing?
Borrowers can generally refinance any federal student loan or private student loan. Some lenders restrict which types of federal loans they will refinance, so it’s a good idea to confirm loan eligibility before submitting an application.
Can I refinance my student loan if I didn’t graduate?
Some lenders impose a degree requirement on borrowers for refinancing. However, this is up to each lender, so you’ll definitely want to shop around. Some lenders also allow refinancing if you’ve met a certain threshold of hours as an enrolled student, even if you haven’t earned your degree.
How often can I refinance my student loans?
You can refinance your student loans as often as needed; there’s no limit as long as you meet a lender’s eligibility criteria. Before refinancing your loans, evaluate your financial situation and potential savings to make the best decision.
Guide sources
- Education Data Initiative, “ Average Student Loan Debt .” Accessed Aug. 30, 2023.
- Federal Student Aid, “ What are loan deferment and forbearance? ” Accessed Aug. 30, 2023.
- Federal Student Aid, “ If your federal student loan payments are high compared to your income, you may want to repay your loans under an income-driven repayment plan .” Accessed Aug. 30, 2023.
- Federal Student Aid, “ Public Service Loan Forgiveness (PSLF) .” Accessed Aug. 30, 2023.
- Consumer Financial Protection Bureau, “ What is a debt-to-income ratio? ” Accessed Aug. 31, 2023.
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Information in this guide is general in nature and is intended for informational purposes only; it is not legal, health, investment or tax advice. ConsumerAffairs.com makes no representation as to the accuracy of the information provided and assumes no liability for any damages or loss arising from its use.
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