Consolidating Federal Student Loans

Jon O'Donnell Updated on May 14, 2019

It’s common for college students to graduate with multiple federal loans – which usually means making multiple payments to multiple servicers each month. To help grads cut through the clutter and simplify their bills, the U.S. Department of Education has a free loan consolidation program that is user-friendly. However, it has some drawbacks.


If you’re thinking about consolidating your student loans through the government’s Direct Consolidation Loan program, here’s what you need to know:

  • Consolidating through the federal government does not lower your interest rate. A Direct Consolidation Loan can bundle your federal debts into a single bill, but it does not lower your interest payment. In fact, your interest rate might go up a bit. The Dept. of Education uses a weighted average of the underlying interest rates, and rounds up to the nearest eighth of a point. There are tools to help you determine what the interest rate would be. ( or
  • Private loans cannot be consolidated under the federal program. Most federal student loans are eligible for consolidation through the government, but private loans do not qualify.
  • Federal consolidation enables borrowers to remain eligible for most income-based repayment and loan forgiveness programs. Most federal loans retain their benefits after consolidation, but be careful about incorporating parent PLUS loans. Adding those to the mix eliminates some benefits. Also, consolidation resets the clock toward becoming eligible for loan forgiveness. In the case of teachers or other public service workers who must make regular payments for 10 years to have their student loans forgiven, consolidation would wipe away past payment history. Borrowers would have to start the 10-year cycle again from the beginning. It’s a good idea to calculate the potential value of any debt forgiveness against potential savings from refinancing to a lower interest rate.
  • Federal consolidation is an option for borrowers who have fallen behind on their loan payments and are at risk of wage garnishment. It does not require a credit check and can be used to rehabilitate loans that are in default status. Federal consolidation can be a good option for borrowers who are unlikely to qualify for better interest rates with a private bank.

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For college graduates who have good credit, a better option might be private student loan consolidation (also known as refinancing). Private consolidation can dramatically decrease the interest rate on student loans, lowering both monthly payments and the overall cost of student debt.

Here’s what you need to know about private loan consolidation:

  • Both federal and private student loans can be bundled into a single monthly payment through a private lender. All of your loans can be consolidated with private refinancing, and you might be able to get a lower interest rate. But borrowers who are eligible for loan forgiveness or who need income-based repayment plans should use caution. Refinancing federal loans with a private lender disqualifies borrowers for those programs. It’s important to weigh the value of any sum that might be forgiven against the savings from lower interest rates
  • Private consolidation is the only way to lower interest rates. People often assume that federal loans are the best deal available. But most federal programs charge everyone the same interest rate – a one-size-fits-all percentage, regardless of the borrower’s financial profile. The rate has to account for high-risk applicants who are more likely to default or not finish their degrees. Private lenders can be selective about who they approve. If you’ve built up your credit in the years since graduation, you might qualify for a much lower rate by refinancing with a private lender.
  • Private lenders offer a variety of term lengths, types of interest, and repayment plans. New competition from innovative start-up firms has transformed the student lending industry in recent years. The result is more options and better customer service for borrowers. People who consolidate their loans with private lenders can choose fixed or variable interest rates. Many lenders allow custom term lengths, and some companies offer interest-only payments for two years.
  • Many companies offer networking events, happy hours, career counseling, and other customer service benefits. Private lenders offer a lot of perks that the federal government does not. Some of these can help you land a better job, negotiate salary increases, or find new clients.
  • Application process is very fast - under 5 minutes in many cases. Innovation in the student lending industry has included leveraging technology to make the application process much faster. The initial inquiry takes a little as 2-3 minutes with most lenders. It is considered a “soft pull,” which does not impact credit, and applicants can get an instant answer about whether they qualify and what their rate would be.

How to get the best deal when consolidating student loans

Consolidating student loans can be very appealing if you’re juggling multiple bills each month, but be sure to explore all of your options - both federal and private - before signing on the dotted line. The best course of action is to shop around and compare the results side by side.

There are many lenders that offer student loan consolidation, but based on our research and reviews, we consider the following to be the best based on their interest rates, transparency, ease of applying, and customer service.

To get the best deal on your consolidation, we recommend that you start with the top-rated lenders listed below...

Published in: Consolidate

About the Author
Jon O'Donnell

Jon is a writer and marketer for Nitro who is passionate about bringing transparency to the student loan process along with providing families with the information needed to make smart financial decisions. He also just recently refinanced his student loans allowing him to pay them off 5 years faster all while saving an additional $152/month. As he continues to pay them off himself, he strives to help others do the same. Jon also has a long history of connecting people with educational opportunities to help them improve their careers and their overall personal finances. In his free time you can find him reading travel blogs and researching destinations around the world in search of his next adventure. Read more by Jon O'Donnell

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#1 - Nitro Recommended View More Details

Earnest empowers people with the financial captial they need to live better lives.

  • APR: 2.27% - 7.59%
  • Minimum credit score: 650
  • Refinance up to $500K
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Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.

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#2 View More Details

Operates in all 50 states; 2nd largest student loan refinancing lender

  • APR: 2.43% - 7.02%
  • Minimum credit score: 660
  • No refinancing amount maximum
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Visit Laurel Road View Loan Disclosure

Laurel Road is a national online lender with customers in all 50 states, the District of Columbia, and Puerto Rico. Many of our non-bank competitors are not able to lend in all 50 states.Laurel Road has grown to be the second largest player in the student loan refinancing space in large part because of our reputation as the go-to low rate provider.

Laurel Road Student Loan Refinance Review

  • National reach - Online lender that is available in all 50 US states, the District of Columbia and Puerto Rico.
  • No fees & the lowest rates in the space - Laurel Road is the most transparent about the rates they provide customers, and offer the lowest rates where it counts. Our customers will save more than $20,000 over the life of their loans on average. 
  • Customer service reputation - Laurel Road's customer service representatives are no rookies. With 19 years of experience on average, Laurel Road’s Customer Service team delivers an experience that is best in the industry. They work to build meaningful, life-long relationships with our valued customers to improve their overall financial wellness.
  • The stability & security of a bank - They are a division of Darien Rowayton Bank, a stable and secure FDIC-insured bank, regulated by the FDIC and the Connecticut Department of Banking.

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#3 View More Details

For every loan they fund, they contribute to the education of a child in need

  • APR: 2.27% - 8.24%
  • Minimum credit score: 660
  • Refinance up to $500K
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Visit CommonBond View Loan Disclosure

CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.

Of all the companies we reviewed, CommonBond has some of the best customer service. The company prides itself on being easy to reach by email, phone, or live chat. It offers networking events, expert panels, insider newsletters, and even has a program help borrowers who lose their jobs to find new ones. CommonBond also makes you feel good about choosing to refinance with them by donating money to an education nonprofit for each loan they write.

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  • Unemployment protections - If you lose your job or decide to go back to school, you can delay your payments for up to 24 months.
  • Social promise - For every loan they fund, they also contribute to the education of a child in need.
  • Hybrid loan option - Offerings include a 10-year hybrid loan with fixed interest for the first five years, and variable interest for the final five.
  • Referral bonus - For every friend you refer who refinances their loans with CommonBond, you’ll earn a $200 cash bonus.
  • Qualification - Borrowers must have graduated at least 2 years prior if they want to apply without a co-signer. And borrowers in 6 states – Idaho, Louisiana, Mississippi, Nevada, South Dakota, and Vermont – cannot currently refinance through CommonBond.

Get a personalized review of your refinancing options with CommonBond today.

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Offers unemployment protection and career/coaching/networking

  • APR: 2.27% - 7.94%
  • Minimum credit score: 650
  • Refinance up to 100% of student debt
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Visit SoFi View Loan Disclosure

SoFi, which stands for “Social Finance,” was created by a group of Stanford business students who found themselves with a mountain of debt after graduation. They set out to change the student loan industry and help borrowers like themselves to get lower interest rates. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, it has no maximum amount you can finance. However, Nevada residents can’t currently refinance with SoFi. Minimum loan balances are higher in Arizona, Massachusetts and Pennsylvania due to state laws. Additional state restrictions may apply.

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  • Low interest rates - For well-qualified borrowers, SoFi offers some of the lowest rates we have found.
  • Strong customer service - It has more than 350 customer service reps available to help applicants through process.
  • Career coaching and networking - Perks include career services representatives who can help you find a job or negotiate a higher salary. SoFi also hosts networking events, happy hours and educational lectures on topics like buying a home in major cities around the country.
  • Unemployment protection - Borrowers who lose their jobs through no fault of their own may apply for Unemployment Protection. If approved, SoFi will suspend their monthly SoFi loan payments and provide job placement assistance during the forbearance period. These benefits are offered in three month increments, and are capped at 12 months, in aggregate, over the life of the loan. Note that interest will still accrue while loans are in forbearance.

Find out what interest rate SoFi can offer you here.

#5 View More Details

Works with 300+ community lenders for higher approval chances

  • APR: 2.24% - 7.50%
  • Minimum credit score: 660
  • Refinance up to $300K
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Visit LendKey View Loan Disclosure

Connecting student borrowers to a network of over 300 community lenders with low interest rates. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

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  • Life of loan relationship - With LendKey, your personal information will never be sent or passed on to third parties. Their customer service team is with you from the moment you land on their website until you've completely repaid your loan.
  • Unmatched benefits- Community lenders put people over profits and offer unique benefits like cosigner release after 12 on-time payments, interest only repayment options to keep monthly payments low, the largest unemployment protection period in the market, and more.

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#6 View More Details

Many ELFI customers save hundreds per month month and thousands over the length of the loan term.

  • APR: 2.80% - 6.69%
  • Minimum credit score: 680
  • No refinancing maximum amount
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Visit ElFi View Loan Disclosure

Education Loan Finance is designed to assist borrowers through consolidating outstanding education loans into one single loan that effectively lowers your costs of education and/or makes repayment very simple. Education Loan Finance - backed by the strength of SouthEast Bank - combines the benefits of traditional education loan refinancing with the superior products, service, and support found in the private market.

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Check out their low rates today to see how much you can save.

  • Get Your Rate. With Education Loan Finance's Find My Rate tool, you can complete a short application to receive a preliminary quote on your eligible rates and terms, all without affecting your credit score.
  • Apply in Minutes. Education Loan Finance's online application is fast and simple.
  • Outstanding Personalized Service. Our Personalized Loan Advisors specialize in student loan refinancing and help busy professionals find the option that's right for them.
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  • Education Loan Finance Fast Track Bonus**: Education Loan Finance's application process is streamlined and simple, and you can earn a $200 bonus just for closing your loan within 30 days of your initial application.
  • Education Loan Finance Referral Program**: Earn $400 for each new Education Loan Finance Client referred by you!
#7 View More Details

Special offers for medical resident and fellow refinance products

  • APR: 2.43% - 7.60%
  • Minimum credit score: 660
  • No Maximum when refinancing
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Visit Splash View Loan Disclosure

Splash Financial is a leader in student loan refinancing with new rates as low as 3.25% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

  • Low interest rates – especially for graduate students
  • No application or origination fees. No prepayment penalties.
  • Co-signer release program - you can apply for a cosigner release form your loan after 12 months of on-time payments
  • Specialty product for doctors in training with low monthly payment

Click here to see more of Splash's offerings and to see how you can save money.


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