Refinancing or Consolidation?

Americans owe roughly $1.87 trillion in student loans, according to the Federal Reserve's 2026 data. Do you have hefty student loans that you're still working on repaying? Are you wondering if there's a smarter way you could be repaying them, either through refinancing or consolidation?

Repaying student loan debt is a huge stressor for many, and it's no secret that millions of Americans are burdened with student loan debt. The rules have also changed a lot since 2023: the SAVE plan ended, the new Repayment Assistance Plan (RAP) began on July 1, 2026, and federal collections on defaulted loans resumed in May 2025. That makes it worth comparing student loan refinancing lenders and revisiting whether to refinance or consolidate.

It's also worth knowing where broad forgiveness landed: the Biden administration's one-time student loan forgiveness plan was struck down by the U.S. Supreme Court in a 6-3 decision on June 30, 2023, and is permanently ended.

If you just want to get a better handle on your student loans, now is a great time to consider refinancing or consolidation.

Which option is best for you? Read this guide to learn how to choose between student loan refinancing and consolidation.

Several federal rules changed in 2025 and 2026 that directly affect whether you should refinance or consolidate.

• SAVE ended and RAP launched. The SAVE repayment plan was terminated, and the new Repayment Assistance Plan (RAP) launched on July 1, 2026. Income-Based Repayment (IBR) remains available, while PAYE and ICR are scheduled to close in 2028. You can review the current income-driven options on Federal Student Aid's income-driven repayment page.

• Collections resumed. Federal collections and wage garnishment on defaulted loans resumed in May 2025 after a multi-year pause.

• Broad forgiveness ended. The Biden administration's one-time forgiveness plan was struck down by the U.S. Supreme Court in a 6-3 decision on June 30, 2023, and is permanently over.

If you want a refresher on managing what you owe, see our guide to steps to shedding student loan debt.

Consolidation merges your federal loans into one loan through the government, while refinancing replaces your loans with a new loan from a private lender.

Student loan refinancing is when a private lender pays off your existing loans and replaces them with a single new private loan.

To pay for college, you likely used a mix of loans from the federal government and private lenders. The balances, interest rates, and terms of each of these loans likely vary.

Some of your loans may have fixed interest rates, while others may have variable interest rates. Student loan refinancing, which can only be done through a private lender, allows you to combine all of your student loans (both federal and private) into a single, more affordable loan. The newly refinanced loan will come with a new interest rate, which, if you have a good credit score, could be much lower, saving you a considerable amount on interest payments in the long term.

Here are some of the biggest benefits of refinancing your student loans.

• Lower monthly payments. Lower monthly payments means more cash in your pocket at the end of each month. This could result in thousands of dollars of savings over the life of your loan.

• Faster repayments. With a lower interest rate, you may be able to select a shorter repayment term. This can allow you to repay your loan sooner without increasing your monthly payments.

• Predictable, fixed monthly payments. If your current loans have variable interest rates, they're subject to rise or fall at any given moment. This can make it difficult for you to predict what your monthly payments will be. Refinancing allows you to switch to a fixed-term loan so you'll have the exact same interest rate throughout the loan's life.

• Term options. If you want to lower your payments, you can extend the life of your loan from the standard 10-year repayment period to 15 or 20 years.

• Easier payments. With refinancing, you only have to deal with one monthly payment.

The benefits of refinancing are pretty significant. However, before you jump into the refinancing process, it's important to understand the drawbacks.

One of the biggest things to keep in mind is that you need to have a good credit score or a co-signer to qualify for a lower interest rate. If your credit score is average or poor and you can't find someone to cosign you, lenders likely won't offer you lower rates, and you therefore won't save anything by refinancing.

Additionally, refinancing isn't a good idea if you're trying to take advantage of federal loan forgiveness programs, such as public service loan forgiveness (PSLF), which forgives your remaining balance after you've made 120 qualifying payments (10 years), according to Federal Student Aid. This is because refinancing always results in combining your various loans into private loans, and the government cannot forgive private loans. Refinancing federal loans into a private loan permanently forfeits access to these programs — the CFPB describes this loss as a certainty, not a possibility.

You'll also lose access to income-driven repayment programs, which give you access to specific loan repayment terms based on your income and personal economic situation.

Student loan consolidation involves combining all of your existing federal student loans into one federal loan.

One thing to understand before you consolidate: a Direct Consolidation Loan's fixed interest rate is the weighted average of your existing federal loan rates, rounded up to the nearest one-eighth of a percent. Because of that formula, consolidation generally won't lower your rate or save you money — it's designed to simplify your payments, not reduce them. You can read more in Federal Student Aid's guide to the 5 things to know before consolidating federal student loans.

Consolidating comes with some great benefits, including the following.

• Easier payments. The main benefit is that you don't have to worry about making multiple payments per month. Consolidating means you only have to manage one loan, and, therefore, only deal with one monthly payment.

• Extended terms. Consolidating allows you to extend your loan term, which can result in lower monthly payments. However, this means you'll end up paying more interest over time, so think carefully before you make this decision.

• Predictable payments. When you convert your variable-rate loans into one loan with a fixed interest rate, you'll always know exactly how much you'll be paying each month.

• No credit requirements. Unlike refinancing, you don't need to have a certain credit score or a cosigner to qualify to consolidate your loan. You just need to fill out a form through a government website.

• Maintain Federal protection. Perhaps the biggest benefit of consolidating your loan is that it allows you to hang onto any federal protection benefits that you qualify for, such as the public service loan forgiveness program. So, if you're currently pursuing or are planning to pursue a career that would qualify you for loan forgiveness, then consolidation is the way to go.

While refinancing allows you to combine federal and private loans into one loan, you can only consolidate federal loans. Additionally, your interest rate won't lower when consolidating.

Keep in mind that you can always refinance your consolidated loan with a private lender at a later date if you realize you no longer need federal protection benefits. However, once you refinance, you lose these federal protection benefits, so think carefully before doing so.

The processes for consolidation and refinancing loans are different. If you wish to consolidate your loans, you'll need to fill out an application via the government's student loan consolidation application.

Log into the platform and select "Complete Consolidation Loan Application and Promissory Note." You'll need to finish the application all in one session, so make sure you've gathered all of the required documents. You can find these listed on the website's "What do you need" section.

Then, you'll enter the loans you want to consolidate and choose a repayment term. Read the terms before submitting your application, and continue to make your payments as usual until you've been notified that you've been approved for consolidation.

The refinancing process is a bit more complicated than the consolidation process, as you'll need to do some shopping around before getting your loan. There are dozens of private loan companies out there, and you'll need to request quotes from a handful of them to find the best rate for your needs. The good news is, requesting a quote is free and doesn't affect your credit score, so you can get quotes from as many companies as you want.

Once you've found a private lender to work with, you'll need to follow that company's individual instructions for refinancing. Luckily, the process can usually be completed in a few short weeks. As is the case with consolidation, make sure you continue with your loan payments until you've been officially approved for refinancing.

Now that you know the benefits and drawbacks of refinancing and consolidating, it's time to determine which option is best for you. In simple terms, refinancing is best if you want to save money, while consolidating is best if you want to maintain your federal protection benefits.

However, the option that's best for you really depends on a number of factors, including the types of loans you have, their interest rates, your goals, your income, and your creditworthiness. For a closer look at how these choices compare, see our guide to a personal loan versus refinancing. You should have the tools now to do more research and figure out the right choice for your situation.

This guide is for borrowers weighing how to restructure student debt in 2026. It's especially useful if you fall into one of these groups:

• Borrowers juggling multiple federal loans who want a single monthly payment.

• Borrowers with private loans (or good credit) who want to try for a lower rate.

• Borrowers pursuing PSLF or income-driven repayment who need to keep federal protections.

• Borrowers deciding whether their priority is saving money or simplifying repayment.

Your next step depends on your goal: lowering costs or keeping federal protections.

• If you want to potentially lower your rate and don't need federal benefits, start by reading student loan lender reviews to see how providers compare.

• If you want to simplify federal payments while keeping protections, start a Direct Consolidation application at StudentAid.gov.

• Either way, gather your current loan balances, rates, and servicers first so you can compare your options accurately.

Does consolidating student loans lower your interest rate?

No. The new rate is the weighted average of your existing federal rates, rounded up to the nearest one-eighth of a percent, according to Federal Student Aid.

Will you lose forgiveness if you refinance federal student loans?

Yes. Refinancing converts federal loans into a private loan and permanently forfeits PSLF and income-driven repayment, a loss the CFPB describes as a certainty.

How many payments does PSLF require?

PSLF requires 120 qualifying monthly payments (10 years) on a qualifying repayment plan while you work for an eligible employer, according to Federal Student Aid.

Can you refinance a loan after you consolidate it?

Yes. A consolidated federal loan can later be refinanced with a private lender, though doing so again forfeits your federal benefits.

What replaced the SAVE plan?

SAVE ended, and the Repayment Assistance Plan (RAP) launched July 1, 2026. Income-Based Repayment (IBR) also remains available, according to Federal Student Aid.

This article relies on primary and authoritative government sources rather than proprietary data. For the current rules on repayment, forgiveness, consolidation, and refinancing, we drew on the CFPB's Supervisory Highlights on student lending, Federal Student Aid (StudentAid.gov), and the U.S. Department of Education. For total student loan debt figures, we referenced Federal Reserve and Federal Reserve Bank of New York household debt data. Where a claim depends on a policy that is still subject to change, we noted the source and date so readers can verify the latest guidance.

• Consumer Financial Protection Bureau (CFPB), Supervisory Highlights: Student Lending, Issue 36 (Winter 2024).

• Federal Student Aid (StudentAid.gov): Direct Consolidation Loan program; "5 Things to Know Before Consolidating Federal Student Loans"; income-driven repayment plan FAQ; federal loan forgiveness and cancellation.

• U.S. Department of Education: SAVE plan wind-down and 2026 repayment plan changes.

• Federal Reserve and Federal Reserve Bank of New York: total US student loan debt figures (2026).

• U.S. Supreme Court, Biden v. Nebraska (June 30, 2023).