Student Loan Consolidation vs Refinancing Calculator

In the student loan world, consolidation refers to the act of combining multiple student loans into one. Consolidating student debt can be done through a federal Direct Consolidation Loan or a private student loan refinance.

Consolidation is the act of combining multiple student loans into one loan. Consolidating federal student loans is possible through a Direct Consolidation Loan or a student loan refinance, but consolidating private loans is possible only through student loan refinancing. You can also consolidate private loans with your federal loans by refinancing.

Federal student loan consolidation is a method of managing federal loans through a Direct Consolidation Loan. With this type of loan, multiple federal loans are streamlined and combined into one big loan and payment. Direct Consolidation Loans have fixed interest rates, meaning the interest rate will stay the same for the length of the loan. The interest rate is determined by using the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent.

Refinancing allows you to take out a loan from a private lender that covers the cost of your current debt. The new loan is completely different from your old ones — with a new repayment term, interest rate, and monthly payment. And, if you had multiple student loans before, refinancing gives you just one loan and one monthly payment going forward.

Student loan consolidation usually refers to the federal Direct Consolidation Loan, which can be used to combine all your federal loans into one. Your loan remains federal, and your new interest rate is based on the weighted average of your old rates, rounded up to the nearest one-eighth of a percent. Student loan refinancing includes the same consolidation aspect – combining many loans into one – but also gives borrowers a chance to lower their interest rate, which is not an option with the federal student loan consolidation program.

Student loan refinancing can mean lower rates, big savings, and easier repayment. When you apply to refinance student loans, you can choose which of your federal student loans and private student loans to include. If some of your federal loans have great rates already, you don’t have to include those — you can decide to only refinance the ones with higher interest. But keep in mind — your federal student loans come with valuable benefits that you will lose by refinancing including access to income-driven repayment plans, the chance to enter into federal forbearance or deferment, and the ability to qualify for loan forgiveness programs. It’s important to keep these in mind when considering whether to refinance your student loans.