Posted: Jordan Grimmer | April 29, 2016


Student Loans: Consolidation vs. Refinancing

What Is Student Loan Consolidation?  

Consolidation is the process of combining multiple loans into a single loan at a fixed rate. This rate is calculated using the weighted average of the interest rates you pay on your different loans.

Most federal student loans can be consolidated; however, private education loans are not eligible.

Who is it for?  

Consolidation is primarily for individuals who have taken out multiple loans at varying interest rates, and would like to simplify their repayment process.

If you want to consolidate student loans, you must wait until after you've graduated college, left school, or your enrollment status is less than half-time.


Consolidation usually comes with more flexible repayment terms (sometimes up to 30 years) and lower monthly payments. You may also qualify for alternative repayment plans.

Consolidation will also prevent you from having to pay higher interest on variable-rate loans; you're assigned one fixed rate for life.


While consolidation can provide you with a lower monthly rate over a longer period of time, you may find yourself making more payments as well as paying more in overall interest.

You might also forfeit certain borrower benefits that came with your original loans, including interest rate discounts, principle rebates, or loan cancellation benefits.

What Is Student Loan Refinancing?  

Similar to consolidation, refinancing is the process of applying for a loan under new terms, and use the money from that loan to pay off your existing loans; however, unlike consolidation, refinancing allows borrowers to seek out better interest rates/repayment terms.

Both federal and private student loans can be refinanced.

Who is it for?  

Refinancing is best for those who pay high interest rates, have steady income, and enjoy good credit.

If you want more say in the interest rate you pay, as opposed to accepting a weighted average, refinancing may be right for you.


Refinancing enjoys all the benefits of consolidation; you can also reduce the time spent paying of your loan, and have more control over the rate you pay.

With good credit and a steady income and by selecting a lower rate, you are more likely to lower the amount you pay overall.


The refinancing process can be difficult to navigate, as it's determined by a number of factors (e.g., financial status, income, credit score, and more). There are also several student debt refinancing providers to choose from, so it's important to do your research before selecting a company to go with.

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Written by Jordan Grimmer

Jordan Grimmer is the head content manager, editor, and writer at He oversees all on-site content production, the Medium page, as well as his own personal blog. You can follow Jordan on Twitter.

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