Student Loan Refinance vs. Consolidation

By Kayla Albert on in Category Student Loan
Student Loan Refinance vs. Consolidation

The common person searching to get help online will most likely assume that Student Loan Refinance and Consolidation are the same.  This is not necessarily true in the student loan realm.

Important Differences:

  • Student loan debt has reached an high of $1.3 trillion in the USA.
  • 80% of that consists of Federal student loans leaving the remaining 20% to be all private student loans.
  • Federal Student Loans are acquired by filling out your FAFSA forms and obtaining Direct Student Loans for the Department of Education.
  • These federal loans usually make up the majority of you total student loan balance. Whatever extra money is needed beyond your federal loans will need to come in the form of a Private loan if not borrowed from family.
  • Private loans are taken out from private banks or lenders typically with the use of a co-signer.
  • Federal loans need to be CONSOLIDATED through the Department of Education via the William D. Ford Act.
  • Private loans can be consolidated by way of refinancing with a private lender. Few lenders now offer the option to consolidate your federal loans via a re-fi, but that new loan is now private. Thus losing any and all federal benefits those loans originally had. This is usually an option for these high income earners that do not qualify for the lower Income Driven repayment options offered by the federal student loan servicers and the DOE.
  • For those that contain both Federal and Private student loans, they can consolidate all of them together by refinancing with a private lender should they offer funding on federal student loans.

The reason I explained all of this – which you may have already known, is because the majority of people that go online and search these terms will end up at a private lender looking to acquire a new refinanced private loan to pay it all off. Few of these people will actually meet the credit and income requirements to obtain private lending.  And of those that do – will still need to have a cosigner to do so.

We are looking to educate the ones that have mostly federal loans and don’t meet those very high requirements that they can still consolidate their federal loans via Payoff Pilot or on their own.

The Federal consolidation process has Zero credit requirements and was put in place to help the 80% of student loan debt that makes up the $1.3 trillion of student loans in the USA.

The people searching online are typically looking for a lower payment and believe they can obtain this with a lower rate. Even though this is partially true the lower rate will not help them reach the lower payment they are seeking.  This is usually only offered by way of the above mentioned Income Driven Payment plans offered.

If you are feeling overwhelmed by the student loan consolidation process, call in to speak with a friendly student loan expert. Or, complete and submit the short Student Loan Consolidation Review web form.

About the Author

Bio: Kayla Albert is a writer and content strategist committed to helping others build a solid financial foundation in order to live their best life possible. You can read more of her writing at

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