Consolidate vs. Refinance

What’s the difference between student loan consolidation and refinancing?
And which option is better? Find out below.

Student Loan Consolidation

  • Direct consolidation loan is a government program that allows you to combine multiple federal education loans into a single loan.
  • The resulting interest rate is a weighted average of your prior loan rates.
  • If your monthly payment decreases, it’s likely the result of lengthening the term, which can mean paying more interest over time.
  • Because the interest rate is not reduced, federal student loan consolidation is generally not a money-saving option.

Student Loan Refinancing

  • SoFi will consolidate and refinance both federal and private student loans.
  • When a private lender consolidates your student loans, what they are really doing is refinancing your loans.
  • Through private student loan consolidation, you will receive new (hopefully lower) interest rate, based on your current financial picture.
  • If you have good credit and a strong financial picture, you could get a lower interest rate and see substantial savings through refinancing.

Direct Student Loan Consolidation Student Loan Refinancing
Are federal loans eligible?
Many private lenders only refinance private loans, but SoFi accepts both federal and private loans.
Are private eligible?
Is a credit check required?
Can I lower my interest rate?
Your interest rate is simply the weighted average of the original loans’ rates.
Your interest rate will be a new (hopefully lower) rate based on your credit score and other relevant finance data.
Will I save money?
Generally, you won’t see any savings since you are not getting a new interest rate. If you extend your term, you may see your monthly payment decrease, but your total interest payment will increase.
Reducing interest rate can lower total interest costs and may lower monthly payments, depending on the term you choose.
Will I get one bill?

Refinancing your student loans sounds great. But it's not for everyone.

Consolidating student loans via refinancing is best for people whose financial position - in terms of employment, cash flow, and credit - has improved since they graduated from school. People who are working in the public sector or taking advantage of federal debt relief programs such as income-based repayment or public service forgiveness may not want to refinance, as these programs do not transfer to private refinance loans.

Learn more about when to consolidate and refinance federal and private loans.

Questions? Call us 7 days a week at 855-456-7634

Find My Rate

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

✝ To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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