Federal and private student loan consolidation are the two types available. The government provides federal consolidation loans, whereas banks and other lending institutions provide private consolidation loans.
The primary distinction between the two loan types is that if you combine federal loans with the government, you’ll keep benefits like student loan forgiveness and income-driven repayment plans. If you combine or refinance federal loans with a private lender, you will forfeit those loan benefits.
Note from the editor: This article’s interest rates are current as of the date of publication. They may fluctuate (up or down) as rates change. We’ll update as changes are made public.
6 Federal Student Loan Consolidation Companies
The Education Department outsources federal consolidation to private companies called student loan servicers. You can consolidate your loans into the Direct Loan Program for free on the Federal Student Aid website, studentaid.gov.
You can choose one of the companies listed below to handle your application for consolidation once you log in.
Are you employed by the government or a nonprofit? MOHELA replaced FedLoan Servicing as the manager of the Public Service Loan Forgiveness Program and PSLF Waiver for the Education Department. If you want your payments to count toward loan forgiveness, choose MOHELA as your new servicer.
As the servicer for federal loans held by the U.S. Treasury, Aidvantage replaced Navient last year. S. Department of Education.
Learn More: Aidvantage Student Loan Forgiveness
Learn More: EdFinancial Loan Forgiveness
Learn More: Great Lakes Student Loan Forgiveness
If you select MOHELA as your loan servicer, Aidvantage will manage the consolidation process. Aidvantage will send the loan to MOHELA for servicing after the consolidation is finished.
Learn More: MOHELA Student Loan Forgiveness and PSLF
Learn More: Nelnet Student Loan Forgiveness
Learn More: OSLA Student Loan Forgiveness
What is the best student loan consolidation company?
Great Lakes and Navient are the most accurate at processing consolidation applications out of all the federal student loan servicers. As a student loan attorney, I’ve discovered that both of them have specialized consolidation departments with knowledgeable staff who are skilled at accurately consolidating loans and outlining obstacles preventing the consolidation from being funded.
Despite the fact that no business is faultless, both servicers have the least number of complaints filed with the Consumer Financial Protection Bureau in relation to the number of student loan borrower accounts they are responsible for.
Learn More: Read CFPB Report on Student Loan Complaint
Private student loan consolidation
If your new loan has a lower interest rate, you may be able to save money by consolidating your student loan debt with a private lender. If you have a strong financial history, including a high credit score, educational background, employment history, and income, you’ll receive the best loan terms and the lowest rates.
Consider refinancing your current loans if you have:
If your creditworthiness isn’t the best, a cosigner can help you get the best rates. Learn more about obtaining a cosigner release for student loans.
Although federal loans can be refinanced into private consolidation loans, I generally advise borrowers not to. What they will gain in the short term—a lower rate and lower monthly payments—is not worth what they will lose in the long run—access to student loan forgiveness programs like Public Service Loan Forgiveness and the IDR Waiver.
Learn More: How to Refinance Federal Student Loans
Best student loan refinance companies
Credible is an online marketplace that offers personalized quotes from banks, credit unions, and online lenders for private student loans and student loan refinancing. By enabling you to submit a single application and receive offers from several lenders at once without subjecting you to a hard credit check, it facilitates your search for the best student loan refinance rates. Student loan refinancing rates range from 1. 86% to 8. 73% APR.
They don’t charge loan application fees, origination fees, disbursement fees, or prepayment penalties through any of their partners.
Earnest is an online lender that has been providing borrowers with existing loans with student loan refinancing.
Online lender SoFi has been providing borrowers with existing loans with student loan refinancing options.
Similar to Credible, Splash Financial is a marketplace for refinancing student loans that connects borrowers with refinancing options through its network of banks, credit unions, and other lenders. It also provides specialized programs for doctors looking to refinance their student loan debt.
Should I choose a variable or fixed interest rate?
There is no right or wrong decision regarding whether to choose a variable or fixed interest rate. Variable rates frequently begin lower but will change over the course of the repayment period. This indicates that they might rise above the fixed rate you’ve been given. Fixed rates are constant for the duration of the loan.
Does student loan consolidation or refinance hurt your credit score?
Consolidating federal student loans doesn’t hurt your credit score. Your credit report is not checked by the Education Department during the application process. After you accept a preapproval offer and submit a full loan application, private lenders run a hard credit check. Read more: Will refinancing student loans hurt my credit?.
Can you refinance after you consolidate a student loan?
After consolidation, you can refinance student loans, but you won’t be able to take advantage of federal benefits like flexible repayment options and forgiveness programs.
Can you refinance student loans with bad credit?
Work on raising your credit score if you want to refinance your student loan but have bad credit before applying. If you pay off debt, pay your bills on time, pay off credit card debt, and put off applying for other loans, you will have a better chance of being approved.
Is it possible to refinance defaulted student loan debt?
While the majority of lenders won’t refinance defaulted student loans, Yrefy only works with borrowers who have missed payments.
UP NEXT: How to Lower Student Loan Payments
FAQ
Is it best to consolidate student loans?
If you choose a Standard or Graduated repayment plan, consolidation can lower your monthly payment by giving you up to 30 years to repay your loans. Any variable-rate loans you currently have can be changed to fixed-rate loans.
What does Dave Ramsey say about consolidating student loans?
Here’s the deal: Dave Ramsey only advises consolidating student loans, and even then, only in special circumstances. It isn’t right for everyone. (If consolidation is not right for you, there are a number of other student loan relief options that may be able to assist you. ).
Can my student loans be forgiven if I consolidate?
If you consolidate debts other than Direct Loans, you might gain access to forgiveness programs like Public Service Loan Forgiveness (PSLF) or income-driven repayment. Any variable-rate loans you have can be converted to fixed-rate loans if you consolidate.
Is MOHELA better than Nelnet?
MOHELA. The Higher Education Loan Authority of the State of Missouri (MOHELA), which barely beat Nelnet to the top spot on our list of nonprofit federal student loan servicers.