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Congratulations, you’re here because you’re ready to take charge of your student loans.

We can help you understand the difference between consolidating and refinancing student loans—and figure out what option is best for your future.

What is student loan consolidation?

Consolidating your federal student loans with a Direct Consolidation Loan from the government, for example, involves gathering all your loans under one new loan. With consolidation, you now have only one bill due each month.

While this can make your life easier from a payment perspective, you will not save any money as your new interest rate with a consolidation loan is a weighted average of your existing rates. 

How does a weighted average work? If you have a $10,000 loan with a 6% interest rate and another $5,000 with 5%, and you’re planning to pay them off in 10 years. Your new rate would be 5.67%. The calculation works like this: As $10,000 is ⅔ of your total loan balance and $5,000 is ⅓, you’d multiply each interest rate by that fraction and add the results: (⅔ * 6% + ⅓ * 5% = 5.67%).

Consolidating your loans may be a good option if you’re happy with your rates, you are planning to use an income-based repayment program, or refinancing is not the right fit for you at this time. You can stretch your term out with a consolidation loan, and that may lower your monthly payment even though you may pay more over time.

You can always refinance your consolidated loans at a later point in time.

What is student loan refinancing?

When refinancing your student loans, you get a new loan with a private lender such as Earnest and pay off your existing loans. You will only have one bill to pay each month when you refinance all your loans.

However, it’s different than consolidation because you also get a new interest rate—and your new interest rate can help you save money over the life of the loan.  At Earnest, our clients save an average of more than $21,000 by refinancing their student loans. (You can learn more about Earnest calculations in disclaimers available at

You can also change the length of your repayment to be shorter or longer, according to what you can afford to pay each month with Earnest’s Precision Pricing feature. You also have the option to pick between a variable and a fixed rate for your new loan.

With refinancing, you are not only consolidating your loans, but you are also getting a new loan with improved terms.

Here’s a checklist of things you’ll need to get ready to refinance.

Which loans are eligible for refinancing?

You can refinance both federal and private student loans. This includes all types of federal loans, including Direct Loans, Stafford Loans, PLUS Loans, as well as private loans.

It’s important to note that when you refinance, you can decide which loans you want to refinance and which, if any, you’re happy to keep at their current terms. Some people may want to refinance all their loans, and for other it may make sense to only refinance some of them.

When you refinance federal loans and private loans into a one new private loan you will no longer be eligible to use one of the government’s income-based repayment programs.

To decide, you should look at the terms for each of your current loans—and whether refinancing can help you do better. You can get an estimated rate from Earnest in just two minutes.

What should I choose?

You should consolidate if: You should refinance if:
You do not have a steady income currently. You do have a steady income or full-time job offer in hand.
You will be using an income-based repayment program. You will not be using an income-based repayment program.
You are satisfied with your current loans. You want to customize the term of your repayment according to your budget and save money through lower interest rates.

Learn more about refinancing your student loans

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