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Student Loan Refinancing Vs. Consolidation

Heading towards college or university many students have to think about their finances to pursue higher studies at top-rated college or university. Some bright students take the aid of scholarships while the others have to think about taking a student loan. Any loan is a financial burden on the borrower and wants to pay off the loan as soon as possible. There are some of the best options which must be considered if anyone is paying off multiple loans to ease the repayment of student loans.

There is always a confusion prevailing among students between student loan consolidation and student loan refinancing. Most of them don’t know which one to opt for to pay off their debt. And many think of both as the same one. But there is a difference between student loan consolidation and refinancing. Both of the options are suitable to alleviate some of the student loan burdens. We will try to clear the concept of both which will help you in choosing the right one to pay off your debts.

Student Loan Consolidation

The term loan or debt consolidation means gathering up multiple loans into a single loan. It is not lowering your loan but helps you to make one monthly payment rather than making multiple payments. Borrowers are tempted by loan consolidation because of reduced monthly payments and an extension of the loan term. But because of this extension, they have to pay higher interest rates per month which will cost a little more. 

Another disadvantage of loan consolidation is that the benefits given to you by previous lenders are not further applicable. For example, loan cancellation or interest rates discounts are cancelled by switching to the other lenders for consolidation purpose.

Student Loan Refinancing

Similar to consolidation, refinancing means taking a new loan to pay off all the previous existing loans and ultimately combining all of them into a single loan. The difference between the two comes in the way that in refinancing, the borrower can get better interest rates and repayment terms which ends up in lowering the monthly payments and total repayment amount. A borrower can refinance both types of student loans including federal and the private ones, while consolidation is only available for federal student loans.


The choice between loan consolidation and refinancing is based on every borrower's self-assessment which must be based mainly upon:

  • Income
  • Financial status
  • Credit score

We think that refinancing is better than consolidation as it can help you in saving many thousand dollars by saving you from paying higher interest rates. And the benefits of refinancing more than once is also available...

Refinancing is more favorable to the borrowers with steady income source, above average credit score and who has existing loans with higher interest rates. These all points can lower the interest rates, and you’ll save money refinancing rather than consolidation.

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