Student Loans - Part Three: Consolidation vs. Refinancing


Refinancing is taking an outside loan to pay off your existing loans. This is typically done in the private sector, often through banks or credit unions. One thing to keep in mind is that refinancing is based on your credit score!

Refinancing makes sense when you have high interest rates on your loans and a good credit score.

Here is a calculator to help you see how much you could save by refinancing:


Consolidation is taking all your federal loans (only federal loans) and combining them into a single federal loan. This can be a good option when you are paying to a variety of loan servicers and would rather just pay one.

A few things to keep in mind:

  • You can only do this once!

  • Any unpaid interest is added to the original balance & you also start paying immediately after consolidating.

  • They will take a weighted average of your loans' interest rates and round up 1/8%.

  • You WILL lose any benefits you receive currently, like student loan forgiveness, deferment, and forbearance.

How to apply for consolidation:

Additional Resources:


"Money Tip of the Week"

Write down your goals (financial or not) and give them to 3-5 people that are important to you. Your chances of achieving those goals goes up dramatically because they can help keep you accountable!

Consolidation - Taking all your federal loans and combining them into one.

Refinancing - Taking an outside loan to pay off your existing loans, hopefully at a lower interest rate.