Private Loan Consolidation - Is It Possible?

Making a number of payments each month towards your student loan is hard. Upon consolidation you will have to make a single payment each month making your debt more manageable. learn more on the difference between refinancing and consolidation, explore private refinancing lenders and much more.

Updated by Roopsi Gupta on 4th August 2020

When multiple Federal Loans are combined together into a single loan, it is termed as ‘consolidation of loans’. It is beneficial as you will have to make one payment every month, it helps in easily keeping track of the monthly payments to be made. The consolidated loan will give you new options on repayment, interest rates, and all the related terms. 

Refinancing of student loans is when a private lender will club more than two either private loans or federal loans or a combination of both. They will also provide new repayment terms, interest rates, and other options. The private lenders can be agencies, banks, educational institutions like SoFi, Laurel Road, Credible, Citizens Bank and many more.

Thus, consolidation and refinancing are two different terms. It is not possible for the consolidation of private student loans. Refinancing can be done for federal and private student loans but upon refinancing of federal student loans you will lose your eligibility for federal benefits like loan forgiveness.

Let us dig deeper into how refinancing and consolidation differ from each other. 

Table of contents

Consolidation Student Loans Vs. Refinancing of Student Loans

Though both of these words are used interchangeably they hold a difference in terms of what’s being offered. The US Department of Education performs consolidation of only federal student loans whereas refinancing can be done for the private student loans or federal loans or both

The table below is showing the basic features where these terms differ -

Basis Direct Student Loan Consolidation
Private Student Loan Refinancing
Are federal loans eligible?
Yes Yes
Are private eligible?
No Yes
Is a credit check required?
No Yes
Can I lower my interest rate?
No Yes
Will I save money?
No Yes
Will I get one bill?
Yes Yes
Can I take options like forgiveness or repayment programs?
Yes No

Direct Student Loan Consolidation 

Student loan consolidation is offered by the US Department of Education for direct student loans. This is generally clubbing all your federal loans into one so that you can feel an ease in keeping track of the payments. Generally, consolidation does not lead to lower your interest rates, maybe the interest will be minimized due to the change in the term of your loan. 

It offers you several benefits like you don’t have to go through any credit check, it is free to consolidate your loans as well. But sometimes you can be offered an interest rate which is higher than all the prevailing interest rates. Thus going for consolidation of your loan depends on how you want to take it. 

How to consolidate federal and private student loans.

Login to the Federal student Aid official site for student loans. Search and click for the option - Complete Consolidation Loan Application and Promissory Note. Gather the details needed to fill the online form. Enter the loans to consolidate, choose the repayment plan, and fill the respective form related to the same. Understand and agree to the terms and conditions before submitting them, continue making your payments till you receive the confirmation regarding your consolidation.

Worried about your college tuition? Learn more about student loans

Student Loan Refinancing 

Refinancing your student loan will happen only with a private lender. Actually, the private lenders can refinance any type of loan - federal loans, private loans or both together. To qualify for the loan, different lenders have different conditions to qualify for, in general, the basic requirement for all the lenders is that you should have a  good credit score of 650 or more. 

Refinancing student loans is a great way to manage your debt, but it is advised to have an in-depth understanding of what you are getting yourself into.In order to go for refinancing, you will be offered comparatively lower interest rates which will be based on your creditworthiness or on your cosigner’s creditworthiness (if you have one). In case if your credit score has improved, then refinancing can give you better options while going for it.

Private Lenders offering Refinancing

Following are few best rated private lenders who provide options for refinancing with private student loans- 

1) Earnest 

Fixed: 3.45% - 7.49%

Variable: 2.14% - 6.79%

2) SoFi

Fixed: 3.46% - 7.94%

Variable: 2.14% - 7.94%

3) CommonBond

Fixed: 3.46% - 8.24%

Variable: 2.14% - 8.01%

4) Education Loan Finance

Fixed: 3.29% - 6.69%

Variable: 2.39% - 6.01%

5) LendKey

Fixed: 3.49% - 8.36%

Variable: 2.06% - 8.93%

6) Laurel Road

Fixed: 3.5% - 7.02%

Variable: 2.43% - 6.65%

7) PenFed Credit Union

Fixed: 3.48% - 6.03%

Variable: 2.67% - 7.41%

8) Citizens One

Fixed: 3.45% - 9.49%

Variable: 2.25% - 9.24%

Process to consolidate 

The process to consolidate federal loans are as follows:

  1. Login to the federal student aid page, click on the option complete consolidation loan application.

  2. Gather the details to complete the form.

  3. Enter the loans you want to consolidate.

  4. Choose your repayment plans for example income-driven repayment plan.

  5. After agreeing to terms and conditions submit the form online.


Private student loans cannot be consolidated by any chance but they can be refinanced with federal student loans through private lenders who are there in the market. By refinancing your federal loans you may be on the advantageous side for repayments but you will lose the benefits of taking any public service loan forgiveness program, chances of getting options for forbearance or deferment will also get minimized and the borrower will no longer be eligible for any income-driven payment program.

Also, you should refinance both types of loans separately so that you can enjoy the benefits altogether. Although, the interest rates after refinancing may get low based on your credit score and it can help you in saving in the long run. But going for any of the respective options is dependent upon your perspective and financial ability towards it.