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Should I Consolidate My Student Loans?

Do you know the difference between consolidating and refinancing your student loans? If you don’t, you’re not alone. 

The two words are often used interchangeably and, we admit, they have somewhat similar meanings. However, they can have a very different impact on your student loans. 

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Let’s talk about what these terms mean, and then discuss whether consolidation is right for you. 

Consolidation v. refinancing: what’s the difference?

If you have multiple student loans, consolidating or refinancing can allow you to go from several monthly loan payments down to one. 

When you consolidate your student loans, you join multiple monthly loan payments into a single payment. 

When you refinance, you replace your existing loan or loans with a new one. Often, refinancing allows you to get a better interest rate as well.

When consolidation is refinancing in disguise

Federal and private student loans are consolidated in different ways.

For private student loans, consolidating basically means refinancing multiple student loans into one new loan with a private lender. You’ll have one monthly payment and, as we stated above, you’ll probably be able to snag a better interest rate if your credit is good. 

Learn more about the pros and cons of private student loan consolidation.

Federal loans can also be consolidated by refinancing through a private lender, but it’s important to be aware that by doing so, you could lose some benefits that come along with federal loans. For example, you may lose access to income-based repayment plans, loan forgiveness, or forbearance and deferment options. 

However, there is another option. You can consolidate federal loans through a federal Direct Consolidation Loan and still retain the flexible payment options. A Direct Consolidation Loan does not take your credit score into account and it doesn’t lower your interest rates. However, you may still end up with a lower monthly payment.

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How federal loan consolidation works

It's important to know that federal loan consolidation with a Direct Consolidation Loan may slightly increase your interest rate. That’s because all of your loans’ interest rates will be averaged together and rounded up the nearest one-eighth percent. 

However, that slight bump might be worth the tradeoff. 

Consolidating may allow you to extend your loan term and lower your monthly payment amount. With one lower monthly payment, it will be easier to stay current on your loan. If you can manage to pay a little extra every month, you may also be able to get out of debt even earlier. 

How much could you save by consolidating your student loans?

See our Student Loan Consolidation Calculator to find out. 

Additional Nitro Recommended Student Loan Lenders

Lender Rates (APR) Loan Types Terms Eligible Degrees Eligible Loans  

Sallie Mae

3.37% - 13.72%1 Variable & Fixed
10 - 15 years

Undergrad Students Learn More

View Disclosure

Ascent

3.04% - 14.75%1 Variable & Fixed
5 - 15 years

4

Undergrad & Graduate Students Learn More

View Disclosure

Earnest

2.70% - 12.78%1 Variable & Fixed
5 - 15 years

3

Undergrad & Graduate Student & Parent Learn More

View Disclosure

SoFi

2.99% - 13.60%1 Variable & Fixed
5 - 15 years

Undergrad & Graduate Student & Parent Learn More

View Disclosure

FundingU

6.99% - 12.99%1 Variable & Fixed
10 years

Undergraduate No-Cosigner Student Loan Learn More

View Disclosure

MPowerFinancing

7.52% - 14.98%1 Fixed
10 year only

Undergrad & Graduate Student Learn More

View Disclosure

Rates (APR) 3.37% - 13.72%1
Loan Types Variable & Fixed
Terms 10 - 15 years

Eligible Degrees Undergrad
Eligible Degrees Students
Rates (APR) 3.04% - 14.75%1
Loan Types Variable & Fixed
Terms 5 - 15 years

4

Eligible Degrees Undergrad & Graduate
Eligible Degrees Students
Rates (APR) 2.70% - 12.78%1
Loan Types Variable & Fixed
Terms 5 - 15 years

3

Eligible Degrees Undergrad & Graduate
Eligible Degrees Student & Parent
Rates (APR) 2.99% - 13.60%1
Loan Types Variable & Fixed
Terms 5 - 15 years

Eligible Degrees Undergrad & Graduate
Eligible Degrees Student & Parent
Rates (APR) 6.99% - 12.99%1
Loan Types Variable & Fixed
Terms 10 years

Eligible Degrees Undergraduate
Eligible Degrees No-Cosigner Student Loan
Rates (APR) 7.52% - 14.98%1
Loan Types Fixed
Terms 10 year only

Eligible Degrees Undergrad & Graduate
Eligible Degrees Student

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