Should I Refinance My Student Loans Or Should I Consolidate Them?

Flickr user Tom Small

When it comes to managing your student loans, there is no one option that is right for everyone. Whether refinancing or consolidation is the best choice for you will depend on your unique circumstances and your short and long term financial goals.

When to Consolidate Your Loans

Consolidation is the right choice if your main goal is to make your payments more manageable.

By the time you graduate, you may have taken out several loans, each of which has a different amount to be paid back on a different date. Dealing with this every month can be stressful, made worse by the fact that if you miss a payment it will hurt your credit history. One way to simplify your monthly payments on your federal loans is by opting for federal loan consolidation.

When you consolidate your federal student loans, you are simply combining multiple existing loans into a single, new loan. This new consolidated loan will have a new rate of interest, which is calculated as the weighted average of the interest rates of your old loans.

While you may not save money with student loan consolidation, having fewer payments to keep track of every month will go a long way in lowering your stress levels and minimizing the risk of late payments, missed payments, and a black mark on your credit history.

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Variable rates from 2.50% - 6.30% APR with auto-debit

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When to Refinance Your Student Loans

Refinancing may be the choice for you if you are looking for a way to lower your monthly payments or to save on the total interest.

Contrary to what you may have heard, refinancing is completely different from consolidation. While both refinancing and consolidation involve combining multiple loans into a single new loan, the similarities end there.

If you are struggling to make your monthly payments, one way to ease the situation by choosing to refinance your existing loans. When you apply for a student loan refinance, you can request for a longer repayment term, which automatically reduces the amount you have to pay back every month. You should know that by extending the life of your loan, you will end up paying a larger amount by way of higher accrued interest. However, if you have no way of meeting your monthly financial obligations, this is one way to resolve your dilemma.

On the other hand, if your financial situation has improved and you want to shorten your loan term and pay off your debt sooner, this too can be accomplished by refinancing your existing loans. In this case, you commit to making larger monthly payments over a shorter period of time. Doing this can save you a significant amount of money on the total interest.

The drawback of refinancing is that it can only be done through private lenders. This means if you refinance your federal student loans you will no longer be able to take advantage of the benefits associated with those loans.

Use College Raptor’s free Student Loan Finder to compare lenders and interest rates side by side!



Lender Rates (APR) Eligibility
Earnest company logo.
Variable APR: 1.89% - 7.99%*
Fixed APR: 3.49% - 7.99%*
Undergraduate and Graduate
Lendkey company logo.
Variable APR: 2.05% - 5.25%*
Fixed APR: 2.69% - 7.93%*
Undergraduate, Graduate, Parent PLUS
Credible company logo.
Variable APR: 1.86% - 8.38%*
Fixed APR: 2.35% - 8.73%*
Undergraduate and Graduate
Laurel road company logo.
Variable APR: 2.50% - 6.30%*
Fixed APR: 3.99% - 6.40%*
Undergraduate and Graduate
Fixed APR: 3.94% - 9.08%*
Undergraduate, Graduate, Parent PLUS
VISIT ISL Education Lending
Variable APR: 3.44% - 7.99%*
Fixed APR: 3.99% - 7.99%*
Undergraduate and Graduate
VISIT College Ave
Variable APR: 1.86% - 7.98%*
Fixed APR: 3.99% - 6.99%*
Undergraduate and Graduate, Parent PLUS

*APR includes a 0.25% interest rate reduction for enrollment in automatic payments.

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