How to Determine if You Qualify for Student Loan Consolidation

Jon O'Donnell Updated on May 14, 2019

If you’re juggling multiple student loans, you’ve probably thought about how much easier it would be if you only had one payment to make each month. That’s possible through consolidation, which many lenders offer. It can make paying off student loan debt faster and more convenient. But do you qualify? We can help you find out.

NSLU-article-title-bg-how-lower-loan-payments-1-062409-edited-271497-edited.jpg

What kind of loans do you have?

There are two types of student loan consolidation – federal and private. Which path you pursue is largely determined by the kind of loans you have. Almost everyone qualifies for federal consolidation, but it’s only available for federal loans and doesn’t lower your interest rate. In fact, it can actually increase your rate.  With federal consolidation, your credit score doesn’t matter. You can bundle your federal loans together, shorten or lengthen your payback time frame, choose a new servicer, and remain eligible for many federal benefits. However, the new interest rate would be a weighted average of the underlying loan rates, rounded up to the nearest eighth of a percent. And the clock starts over for any loan forgiveness programs that require a certain number of on-time payments.

Private consolidation is more selective, but if you qualify, you could potentially lock in a much lower interest rate and save thousands of dollars over the life of your loans. With private consolidation, a lender pays off your private and/or federal student debts and issues you a new loan with new terms. The interest rate is determined by your credit history and economic conditions. Consolidating federal loans with a private lender makes you ineligible for benefits like income-based repayment and loan forgiveness. However, the savings are often well worth it. A recent review by Comet found that people who consolidated with private lenders saved an average of $259 a month and $19,231 over the life of their loans.

What are the advantages of private consolidation?

There are many advantages to private consolidation. You can combine federal and private loans, choose a fixed or variable interest rate, add or release a co-signer, and change the length of your loan term to pay it off faster or slower. With only one payment to make each month, it’s much easier to track progress toward being debt-free. But of all the benefits, getting a lower interest rate is the most valuable. Private lenders can offer significantly lower rates than the federal government. Shaving even a few percentage points off your rate can add up to thousands of dollars a year in savings.

Who is eligible for private consolidation?

Consolidation requirements vary by lender, but there are some common themes. Most lenders want to work with people who have graduated and are now employed. It’s important to have a good credit history, with a FICO score of 650 or higher and a low debt-to-income ratio. Your monthly debt payments should not be more than 36% of your gross monthly income. The minimum amount of debt to consolidate is usually $5,000. For more information about specific requirements, see our reviews of the best banks for loan consolidation.

Are there any disadvantages?

Private lenders generally have fewer forbearance and deferment options if you experience job loss or economic hardship. Consolidating federal loans with a private company would make those loans ineligible for income-based repayment and loan forgiveness programs.  If you work in the public service sector and could eventually qualify for loan forgiveness, it’s important to consider how much could potentially be written off, and how that compares with the savings from a lower interest rate. Some borrowers strategically consolidate certain loans but leave others out, to cut costs but retain some benefits.

Other considerations when consolidating apply to any type of loan. Variable interest rates are generally lower than fixed rates and can look very attractive, but they can go up significantly over time. Consider the length of your loan and assess your risk tolerance before choosing a variable rate. And with any consolidation – federal or private – if you lengthen the term, you will likely pay more, even with a lower interest rate.

Imagine Life Without a Student Loan Payment... Start Saving Now!

How do you find the best rate?

Now is a great time for borrowers interested in consolidating. In the past few years, new lenders have revitalized the industry and created a much more consumer-focused market. Most companies have online applications that take less than 5 minutes and give you personalized quotes that you can compare side by side. The inquiry is considered a “soft pull” and does not impact your credit score.

We highly recommend that you shop around and get quotes from at least three lenders before making a decision. The following companies are a great place to start. They topped our 2017 rankings, based on their interest rates, transparency, product offerings, ease of applying, and customer service.

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

Refinance and Save Today With These Lenders

#1 - Comet Recommended View More Details

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

  • APR: 2.41% - 7.82%
  • Minimum credit score: 650
  • Refinance up to $500K
View More Details
Visit Earnest View Loan Disclosure

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.

  • Commitment-free 2 minute rate check
  • Client Happiness can be reached via in app messaging, email, and phone 
  • No fees for origination, prepayment, or loan disbursement
  • Flexible terms let you pick your exact monthly payment or switch between fixed and variable rates
  • Skip a payment and make it up later
  • Online dashboard is designed to make it easy to apply for and manage your loan

Click here to apply with Earnest and to see how much you can save.

#2 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
View More Details
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.

Education Loan Finance (ElFi) review

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.
  • Student Lending Experience: Education Loan Finance isn't a start-up company - we have a longstanding history and expertise in serving student loan borrowers.

Attractive Bonus and Referral Programs:

  • 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!
#3 View More Details

Works with 275+ not-for-profit community lenders for higher approval chances

  • APR: 2.38% - 7.50%
  • Minimum credit score: 660
  • Refinance up to $300K
View More Details
Visit LendKey View Loan Disclosure

LendKey operates student loan programs for over 275 not-for-profit and community lenders across the country. 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.

LendKey Student Loan Refinance review

  • Lightning fast rate check - 2-minute rate check with no impact on your credit score
  • More lenders, more options - see the best offers from over 275 not-for-profit and community lenders for higher approval chances
  • 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.

Get a personalized quote from LendKey now.

#4 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
View More Details
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.

Get your personalized, pre-approved rates in less than 5 minutes.

#5 View More Details

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

  • APR: 2.48% - 6.25%
  • Minimum credit score: 660
  • Refinance up to $500K
View More Details
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.

CommonBond Student Loan Refinance review

  • 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.

#6 View More Details

Offers unemployment protection and career/coaching/networking

  • APR: 2.430% - 8.074%
  • Minimum credit score: 650
  • Refinance up to 100% of student debt
View More Details
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.

SoFi Student Loan Refinancing Review

  • 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.

#7 View More Details

Special offers for medical resident and fellow refinance products

  • APR: 3.02% - 7.76%
  • Minimum credit score: 670 w/cosigner
  • Refinance up to $350K
View More Details
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.

Comments

I reduced my student loan payment by $152 per month, by refinancing thru Nitro:

Save Money Now