Whether you have federal, private or both types of student loans, consolidating or refinancing them might help you reduce your student debt, better manage payments and work toward other financial goals. Too much student debt can hamper your ability to save for retirement or qualify for other loans, such as a mortgage. This guide explains the differences between refinancing private student loans and consolidating federal student loans, the pros and cons of each, and the best options for different situations.
No student loan refinancer is perfect for every borrower. These lenders are a good starting point for most people, but you should read student loan reviews and research each company on your own.
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Methodology: U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. For student loan refinance companies, we consider each company’s customer service ratings, refinancing fixed APR, refinancing variable APR, refinancing minimum and maximum loan terms, refinancing maximum loan amounts, refinancing minimum FICO score, product availability, and online features.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
Find the Best Student Loan Refinance Lenders
Earnest is an online lender offering private student loans to college and graduate students, as well as student loan refinancing. The company was founded in 2013.
Borrowers can choose their own loan terms to fund up to the full cost of their education.
Laurel Road originates graduate student loans and offers refinancing for undergraduate, graduate and certain associate degrees. In 2019, Laurel Road became part of KeyBank, which offers community and corporate banking services.
Laurel Road’s student loans are serviced through the Higher Education Loan Authority of the State of Missouri, also known as MOHELA, and the company is headquartered in New York City.
Splash Financial is a student loan refinancing marketplace that uses its network of banks, credit unions and other lenders to match borrowers with refinancing options. Splash Financial is based in Cleveland and can help U.S. citizens and permanent residents refinance federal, private and Direct PLUS loans. Splash Financial also offers a specialized refinance program for doctors and dentists completing residencies and fellowships.
SoFi is an online lender founded by Stanford business school students in 2011. Originally focused on student loan refinancing, the company added private student loans in 2019. Its student loans for undergraduates, graduates and parents start at $5,000 and charge no fees.
Nelnet Bank, founded in 2020 by Nelnet – one of the nation’s largest student loan servicers – is based in Utah and offers student loan refinancing. This product transitioned from U-fi From Nelnet, and private student loans will make the same shift in the coming months. Borrowers typically use Nelnet Bank to refinance private loans rather than federal student loans, according to the lender.
Citizens Bank was founded in the late 1800s in Rhode Island. Today, it’s one of the largest commercial banks in the U.S. Branches are concentrated in the New England, mid-Atlantic and Midwest regions.
Purefy is a student loan comparison site, and it also originates refinanced student loans and parent loans via a partnership with Pentagon Federal Credit Union. Purefy was founded in 2014, and began working with PenFed in 2016. Since then, the company has originated more than $1 billion in loans.
Founded in 2012, CommonBond has funded more than $2 billion in student loans. The lender offers undergraduate, graduate, medical, dental, MBA and student loan refinance loans.
LendKey’s digital platform connects borrowers who need private student loans or refinancing loans with credit unions and community banks. Since 2009, LendKey has helped more than 120,000 people by funding $4 billion in loans. The company offers fixed- and variable-rate loans for undergraduate and graduate students.
PenFed Credit Union originates refinanced student and parent loans via a partnership with financial services company Purefy. PenFed does not offer other kinds of student loans, but it does refer customers to student loans issued by Ascent Funding.
Established in 1935, PenFed – which is short for Pentagon Federal Credit Union – has 2.5 million members and serves customers in all 50 states, Washington, D.C., Guam, Puerto Rico, and Okinawa, Japan.
Refinancing means getting a new (lower) interest rate on an existing loan. Consolidating student loans means combining multiple loans into one monthly payment. Federal loans can only be consolidated. Private loans can be consolidated and refinanced together.
You can consolidate federal loans through the U.S. Department of Education. The consolidation will give you one monthly payment with a new loan term and fixed interest rate that is the weighted average of your previous rates.
When you refinance student loans, a private lender repays your loans and issues a new loan based on your creditworthiness. If you can qualify for a better interest rate, you could save money and get lower monthly payments when you refinance student loans.
Find the Student Loan That’s Right for You
Refinancing terms for your new private student loan are based on many factors, including your annual income, debt, employment and credit.
You can refinance federal student loans through private lenders, but it’s not always a good idea. That’s because you’ll lose access to flexible repayment options, including federal income-based repayment plans and student loan forgiveness programs.
Student Loan Consolidation
Consolidating your federal student loans neither changes the interest that accrues on them nor your ability to get more federal student loans. Consolidating your federal college loans requires no hard credit check and could offer you access to more flexible repayment options or forgiveness programs.
Rather than consolidate your college loans, you could consider changing repayment plans to extend your loan terms and get lower monthly payments. But this also won’t reduce the cost of borrowing.
U.S. News Survey
U.S. News Survey: Student Loan Payments Can Hinder Retirement Savings and Personal Goals
Many borrowers don’t regret their student loans and haven’t explored refinancing them for savings, according to a U.S. News survey of consumers with federal or private student loans. They revealed how much they borrowed, whether their payments are affordable and other details about how their student loans have affected their lives.
Additional Survey Insights
More than 11% of respondents have student loan balances more than $50,000.
Seventy-three percent of respondents have had to postpone significant life goals, including 37.9% of people who have put off buying a house. Only 27% of respondents haven’t had their plans significantly delayed because of student loans.
U.S. News Survey Methodology
- U.S. News ran a nationwide survey in July 2021 through PureSpectrum.
- This survey sampled 1,171 people in the general American population who visit desktop and mobile sites where PureSpectrum conducts surveys.
- The survey asked 11 questions related to student loans.
Survey Results
Before you proceed with consolidating or refinancing, check that your loans are eligible and make sure your choice is the right fit.
Federal student loan consolidation eligibility
Private student loan refinance eligibility
Eligibility can vary by lender, but many private student loan refinancing companies look at these factors:
- Minimum credit score. You’ll usually need a minimum credit score of 670 or higher, which falls in FICO’s good range. But even if you qualify for refinancing, you may not get a lower interest rate than you have now.
- Credit history. Lenders typically review your credit history for derogatory marks, such as late payments, and consider this information to determine your creditworthiness. You can order free copies of your credit reports – now weekly through April 2022 – at AnnualCreditReport.com to monitor for errors and dispute them, says Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com, a resource for saving and paying for college.
- Proof of stable work and income. Some lenders may have minimum annual income requirements.
- Debt-to-income, or DTI, ratio. This is the percentage of your total monthly income that goes toward debt payments, and it can help lenders determine if you’ll have trouble making your loan payments. A lower DTI ratio is better because it indicates that you have more room in your monthly budget. The maximum DTI ratio is typically 40% to 50%, according to the lenders that disclose it. You can reduce your DTI ratio by switching to longer repayment plans, Kantrowitz says.
Also, lenders may require you to meet other conditions for refinancing student loans. If you can’t qualify on your own, some lenders might approve you with a creditworthy co-signer.
Lenders could restrict refinancing to those who:
- Complete degrees.
- Have certain types of degrees, such as law or medicine.
- Live in certain states.
How soon can you refinance student loans? You’re not likely to get approved for refinancing while still in school, unless you have income. Once you graduate and find a job, you should be able to refinance.
Parent PLUS loan refinance eligibility
Parents can refinance student loans, too. Parent PLUS refinancing is available with private lenders. When you refinance Parent PLUS loans or private parent loans, you could lower your interest rate, transfer the debt to your child or both.
Kantrowitz says, “You don’t lose as many benefits when refinancing a federal Parent PLUS loan into a private loan since parent borrowers are not eligible for income-driven repayment plans and Public Service Loan Forgiveness.”
Use this chart to compare consolidating federal student loans with refinancing private student loans.
| Federal Direct Consolidation Loan | Private Student Loan Refinancing | |
| Are federal loans eligible? | Yes | Yes |
| Are private loans eligible? | No | Yes |
| Can you lower your monthly payments? | Yes | Yes |
| Is a hard credit check needed? | No | Yes |
| Can you lower your interest rate? | No | Maybe, if you have good credit |
| Can you use a federal repayment plan? | Yes | No |
| Can you qualify for federal student loan forgiveness programs? | Yes | No |
Consolidation does nothing for your interest rate, but it does make your loans easier to manage, says Travis Hornsby, founder of Student Loan Planner, a consulting firm that helps borrowers manage student loans.
Student loan consolidation could make sense if:
- You’re having trouble making payments. Consolidating and increasing your student loan’s term could give you a lower monthly payment. You’ll keep access to federal loan repayment plans as well as deferment or forbearance, which can offer a safety net.
- You’re struggling to manage multiple loans. By consolidating, you will combine all of your federal student loans into one new loan and one monthly payment.
- You plan to work in a profession eligible for student loan forgiveness. If you have federal loans that aren’t eligible for a federal student loan forgiveness program, consolidating those loans could make them eligible. But don’t consolidate loans that are eligible for forgiveness if you’ve been making payments on them, because that will restart the clock on forgiveness.
- You have a loan in default. You may be able to consolidate your loan and bring it out of default.
On the other hand, student loan refinance makes sense “if you’re trying to reduce your interest rate and you need to pay off your balance in full,” Hornsby says. Refinancing your student loans with a private lender could be a good idea as long as:
- You qualify for better terms. If you have good credit and meet the loan refinance lender’s minimum income and other requirements, you may qualify for a better interest rate that can decrease your monthly payment and the cost of the loan.
- You want to combine your federal and private student loans. You’ll have to refinance student loans with a private lender to combine private and federal loans.
- Your income is stable. Refinancing federal student loans means you’ll no longer be eligible for income-driven repayment plans or federal hardship programs.
- You don’t plan to use federal student loan forgiveness options or alternative payment plans. Private loans aren’t eligible for these federal loan programs.
Congratulations! You just graduated and were hired for your first job earning $65,000 a year in San Francisco.
You have three federal direct subsidized loans: one for $10,000, one for $6,000 and the other for $5,000. To pay down your student debt under the standard repayment plan, you will spend 10 years and roughly $24,000, including interest.
Here’s how this scenario could change by either consolidating your federal loans or refinancing them with a private lender.
| New APR | New monthly payment | Interest paid | Total paid | |
| Consolidate with a 20-year term | 5.53% | $145 | $13,755 | $34,755 |
| Refinance with a five-year term | 4.99% | $396 | $2,772 | $23,772 |
| Refinance with a 10-year term | 5.25% | $225 | $6,038 | $27,038 |
| Refinance with a 15-year term | 5.5% | $172 | $9,886 | $30,886 |
Be sure to compare the monthly payment with the total cost when you are considering consolidating or refinancing student loans, Kantrowitz says. Your monthly payment could be lower – sometimes much lower – but you could pay thousands of dollars more in interest.
Of course, you’ll want to compare more than just your monthly payment and interest rate to determine whether consolidating or refinancing your student loans might make sense.
You can select the right student loan refinance company for your needs by reviewing eligibility requirements and these key factors:
Student loan refinance rates
Low interest rates are key. When you compare student loan refinance companies, look for competitive interest rates so you can pay the lowest annual percentage rate possible. You can choose between fixed rates and variable rates, depending on the student loan refinance lender.
- Fixed-rates range. Student loan refinance rates will vary based on your lender and credit, as well as loan terms and market rates. Fixed-interest-rate loans have a rate and monthly payment that doesn’t change over the life of the loan.
- Variable-rates range. Variable-rate loans may initially have lower interest rates than fixed-rate loans.
The best student loan refinance companies usually advertise interest rate ranges on their websites, so that’s a good place to start. Some lenders offer a rate check option. This allows you to prequalify or see estimated student loan refinance rates and terms using a soft credit check, which won’t hurt your credit. It’s a good idea to check rate options before you formally apply.
Loan and refinancing terms
Make sure a student loan refinancing company offers terms that meet your needs. Compare loan amounts and repayment terms to determine a good fit.
- Maximum loan amount. Most people won’t need to worry about maximum loan amounts. Loan amounts range from $75,000 to $500,000. In some cases, lenders don’t have maximums. But this could be a concern for some borrowers with an exceptionally high student loan balance.
- Minimum loan amount. Many student loan refinancing companies will require you to refinance at least $1,000, and some may expect you to refinance more. If you have a small amount of student debt, you might not be able to refinance it.
- Loan repayment term. Most refinancing lenders offer loan repayment terms of 10, 15 and 20 years. Choosing a shorter repayment term could increase your monthly payment but reduce the interest you pay and get you out of student debt sooner.
- Autopay deduction. Many lenders offer borrowers a 0.25-point APR discount if you sign up for autopay.
Repayment and hardship options
If you need flexible repayment or want hardship options available in case of emergency, find out what lenders offer. Some student loan refinance companies may have flexible repayment options, perhaps allowing you to make interest-only payments for a certain period of time. Deferment, forbearance and other hardship options may be available, too.
Fees
Interest rate isn’t the only cost you’ll face. Refinanced student loans may come with origination, late or returned payment fees.
Customer service
Learn about how well a student loan refinance company does with customer service by reading reviews. You’ll want to know what experts and other consumers have to say about a lender before you sign on the dotted line.
Overall, interest rate and ease of refinancing are the most important considerations when refinancing your college loan, Hornsby says, and that can guide your decision-making. Also, take a look at how generous the forbearance terms are and which servicer the student loan refinance company uses.
“That said, student loan refinancing is really a commodity,” Hornsby says. “You’re looking for the lowest interest rate with the least amount of pain in the application process. Luckily, that process is generally pretty fast and easy.”
College Ave exclusively offers student loans. Founded in 2014 and based in Wilmington, Delaware, College Ave offers undergraduate, graduate and parent loans for students enrolled at schools affiliated with College Ave in all 50 states and the District of Columbia. College Ave’s advantage is speed, with applications that take a few minutes to complete and instant decisions.
Sparrow is an online marketplace where students and parents can fill out a single application to see if they prequalify for loan offers from a variety of lenders. Though Sparrow is not a lender itself, potential borrowers can use the free service to see the rates for which they qualify. The company is based in New York City, and its lending partners issue loans in all 50 states and the District of Columbia. International students from countries that are not sanctioned by the Office of Foreign Assets Control also can use Sparrow’s services.
Sparrow was founded in 2020.
PNC Bank offers loans in all 50 states for students at all stages of postsecondary education, including professional training loans and refinancing. The bank is also engaged in a number of community efforts, including financial literacy programs and PNC Grow Up Great, which supports early childhood education. For undergraduate students, PNC offers opportunities to win $2,000 scholarships toward education expenses.
Education Loan Finance, also known as ELFI, is a student loan program offered by Tennessee-based SouthEast Bank since 2015. The company offers private student loans and refinancing for private and federal student loans.
Best for comparing rates on student loan refinancing from local lenders
Lend-Grow is an online lending marketplace founded in 2019 that matches borrowers with local lenders in its network. The Reston, Virginia, business partners with small and midsize banks and credit unions that compete to give borrowers low student loan refinancing rates. Private and federal loans from $5,000 to $500,000, including Parent Direct PLUS loans, can be refinanced.
Credible is a loan comparison marketplace that allows would-be borrowers to shop around for loans that meet their needs – including mortgages, mortgage refinancing, student loans, student loan refinancing and personal loans. The company was founded in 2012 in San Francisco as a tool to empower borrowers to find the best rates and products.
Best for co-borrowers
The Massachusetts Educational Financing Authority offers private student loans to undergraduate and graduate students nationwide. The lender also offers education refinancing loans across the country.
Best for fixed APR
The Rhode Island Student Loan Authority is a nonprofit quasi-state authority that provides college financing to students and parents. The lender specializes in providing loans to Rhode Island residents and students, though not all loans have residency requirements.
Best for small loan amounts
EDvestinU is a nonprofit student loan lending and refinancing organization. Undergraduate and graduate loans and student loan consolidation are available.
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