App version: 0.1.0

Refinancing Your Student Loans After Consolidation

Refinancing Your Student Loans After Consolidation
Rebecca Safier
Rebecca SafierUpdated June 27, 2022
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
You can refinance a student loan after consolidation, as long as you are able to meet a lender’s requirements for credit and income. But before you apply, it’s important to understand the difference between refinancing and consolidation. While people often mix up these terms, they’re not interchangeable. Refinancing involves restructuring your student loans with a private lender, whereas consolidation may be a federal or private process that usually involves combining multiple loans into one. Fortunately, there’s no rule that says you can’t refinance your student loans after you’ve consolidated them. In fact, there’s no rule preventing you from refinancing multiple times. Read on to learn about how to consolidate and refinance student loans.

What Is Student Loan Refinancing?

Student loan refinancing involves exchanging one or more of your existing loans for a new loan with a new lender. Your new lender will pay off your old loan(s) and issue a new one in its place. It could be worth refinancing student loans if you can qualify for better interest rates than you have currently. Lowering your interest rate can reduce your monthly payment and interest charges over the life of your loan. Plus, you’ll get the chance to select new terms for paying off your student loans that fit your budget. Finally, refinancing can often be a form of loan consolidation, as it allows you to combine multiple loans into one. That said, you can choose to refinance a single loan if you prefer. You don’t have to take an all-or-nothing approach, but rather can cherry-pick which loans you want to refinance, if any, to reap the greatest financial benefit. 

What Is Student Loan Consolidation?

Student loan consolidation generally refers to combining multiple student loans into one to make repayment easier. You have two options for consolidation:

Direct Loan Consolidation 

Direct Loan consolidation allows you to combine multiple federal student loans into a single consolidation loan. You can apply for loan consolidation on the Federal Student Aid website. When you consolidate, you can also select new repayment terms up to 30 years. Unlike refinancing, Direct Loan consolidation cannot result in a lower interest rate. Instead, your new interest rate will be the weighted average of your previous rates rounded up to the nearest one-eighth of a percent. The main benefit of Direct Loan consolidation is simplifying repayment. Plus, consolidating is a requirement to make some loans eligible for certain repayment plans. For example, you need to consolidate a Parent PLUS Loan before you can get it on the Income-Contingent Repayment planConsolidating your debt is also one of two ways to get federal student loans out of default and back into good standing, along with loan rehabilitation. Note that private student loans are not eligible for Direct Loan consolidation; only federal loans are. Recommended: How Much Interest Should You Expect to Pay on Student Loans?

Student Loan Refinancing 

As mentioned, you can also consolidate multiple student loans by refinancing them with a private lender. Both private and federal loans are eligible, as long as you can meet a lender’s underwriting requirements for credit and income. If you can’t qualify on your own, you could apply with a creditworthy cosigner. Adding a cosigner to your refinancing application can help you get approved or access lower rates, but your cosigner will be equally responsible for the student loan debtMake sure your cosigner understands how refinancing student loans works, specifically the consequences of sharing debt. If you choose this route, you might also explore whether your new lender offers cosigner release after a certain period of on-time payments. Whether you apply on your own or with a cosigner, refinancing federal loans with a private lender means they’ll no longer be eligible for federal plans and programs, including Direct loan consolidation, income-driven repayment, and Public Service Loan Forgiveness. If you want to retain access to federal programs, it wouldn’t make sense to refinance your federal loans. 

Can you Refinance a Student Loan After Consolidation?

Whether you consolidated your loans through a Direct Consolidation loan or private refinancing in the past, you can still refinance your student loan as long as you pass a lender’s credit check and other requirements for approval. In other words, consolidation does not make your student loan ineligible for refinancing, whether your loan is federal or private. But as mentioned, refinancing a federal consolidation loan will make it private and therefore ineligible for federal protections. If you want to retain access to federal plans and programs, it may not make sense to apply for refinancing. Even if you don’t need those federal protections now, think carefully about whether you might need them in the future. The process of refinancing is irreversible. You can’t turn your loan federal again once it’s private, so make sure you’re comfortable forfeiting federal benefits before you apply. 

Consolidating Student Loans

Consolidating student loans can be helpful if you owe multiple loans to different lenders. Juggling all those payments and due dates can be a difficult balancing act. And the last thing you want to do is fall behind on payments, since late payments can lead to late fees and damage to your credit. Consolidating your student loans can help eliminate the confusion and streamline repayment. And whether you opt for federal consolidation or private refinancing, neither disqualifies you from refinancing your loans. It is possible to consolidate and refinance student loans.In fact, you can apply for refinancing multiple times. Just make sure the benefits of refinancing outweigh the cons before you make irreversible changes to your student loans. 

The Takeaway

It is possible to refinance student loans after consolidation. In fact, consolidating your loans has no effect on their eligibility for refinancing. That said, you will still need to meet a lender’s criteria for credit and income. Borrowers with the strongest credit tend to get the lowest rates. Because of this, consider working on your credit before you refinance so you can qualify for a low rate. It’s also a good idea to shop around with multiple lenders to find the best offer.Lantern can help you find and compare student loan refinancing offers.

Frequently Asked Questions

What does it cost to consolidate student loans?
Can my student loans be forgiven if I consolidate?
Photo credit: iStock/blackCAT

About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
Share this article: