Actively managing your student loans by consolidating or refinancing can help you save money, free up your monthly budget, and/or pay off your loans faster. If you’ve already federally or privately consolidated your student loans, you might be wondering, “can I refinance my student loans after a consolidation?”
In short, the answer to that question is “yes.” As long as you meet the eligibility criteria for refinancing, you can refinance your consolidated student loan.
Below, we’ll explain more about the differences between consolidation and refinancing, show you how to refinance consolidated student loans, and give you a heads up about a few things to know before you refinance.
What is the Difference between Student Loan Refinancing and Consolidation?
Let’s take a look at the differences between consolidation and refinancing.
Federal Student Loan Consolidation
Consolidation is the act of taking separate loans and putting them into one new loan with a similar interest rate.
The federal government offers a simple way to consolidate all of your federal student loans through a Direct Consolidation Loan. If you’ve already consolidated, this is likely how you did it.
A Direct Consolidation Loan combines all of your federal student loans together into a new loan with an interest rate equal to the weighted average interest rate of the loans being consolidated rounded up to the nearest 1/8 of one percent. Instead of making multiple payments to different loan servicers, you make one payment each month. Consolidating can also make your loans eligible for income-driven repayment options and Public Service Loan Forgiveness (PSLF).
Federal consolidation is a free program, but it does extend your loan term. In other words, you’ll be making payments for a longer time and paying more in interest over the life of the loan. That’s one reason why you might consider refinancing after you consolidate.
Private Student Loan Refinancing
Private student loan refinancing is similar to consolidation. It’s a way to combine all of (or just part of) your student debt into a single loan. However, refinancing gives you more flexibility. You can shop around for a lower interest rate, choose your loan term, and choose which company to work with. The process is competitive too, so whether you qualify and what terms you get depend on your credit score, credit history, and income.
How Do I Refinance Consolidated Student Loans?
Refinancing a consolidated student loan works the same way that refinancing any student loan works. Here’s a brief overview:
1. Apply for Rates Online
Compare rates from our top student loan refinance companies, your bank, and local credit unions. Apply for preapproval and a quote. To apply, you’ll at least need to know your current consolidated loan amount, loan term, and annual income.
Some companies will ask you to choose your desired loan term
2. Receive and Compare Offers
See how the different offers compare. Pay close attention to words like fixed and variable. A fixed interest rate stays the same throughout the life of a loan, but a variable interest rate changes as the market changes.
If you receive similar offers from different companies, look to their perks to make your decision. These might include:
- Autopay interest rate deduction
- Cosigner release
- Biweekly autopay
- Academic and military deferment
- Economic hardship forbearance
- Death and disability discharge
- Award-winning customer service team
- Flexible loan terms
3. Compare the Refinance Loan with Your Consolidated Loan
Finally, you need to make sure that the offer is financially beneficial. Use our refinance calculator to compare your old loan terms to the new loan terms. It will populate a chart that shows you how much money and time you’ll save by refinancing.
For a more detailed overview of refinancing, read our article, Learn How to Refinance Student Loans.
Top Student Loan Refinance Companies
We partner with top-rated private lenders who help borrowers like you refinance their federally consolidated student loans. All of our partners offer perks like an AutoPay deduction, deferment and forbearance options, and easy-to-use websites.
How Often Can I Refinance My Student Loans?
There’s no limit to how often you can refinance your student loans. However, applying to refinance too often could jeopardize your other financial goals. When you officially apply, a company will run a hard credit pull. The hard credit pull stays on your credit report for up to two years, and it can negatively affect your credit score. That could make getting approved for a credit card, a car lease, or a mortgage more difficult.
Refinancing your student loans also closes one loan account on your credit report and opens a new one. This can negatively affect your length of credit, a factor that makes up 15% of your credit score. Keep that in mind too.
Fortunately, just getting a quote from most companies usually only requires a soft credit check. Requesting quotes every so often won’t do your credit score any harm. It’s an easy way to keep track of available rates so that you know when it’s worth it to refinance again.
Is There Any Reason Why I Shouldn’t Refinance My Consolidated Loan?
Refinancing is a great financial tool that helps borrowers manage their student loans. But it’s not the right move for every borrower, especially if you’re thinking about refinancing a consolidated federal student loan.
Here are some reasons why you might want to hold off on refinancing:
Your Credit Score Isn’t Good
The best student loan refinance companies want to see a good or excellent credit score on your application. That’s the only way you’ll get approved and get a good enough rate to make refinancing worth it. If your credit score isn’t good, take some time to build up your credit score.
Another option is asking a creditworthy loved one to cosign your loan. This can complicate your personal relationship, so if this is an option you need to explore, make sure the refinancing company offers cosigner release.
You Can’t Meet Your Goals with the Available Offers
It only makes sense to refinance if it’s going to help you achieve your financial goal. For example, if you want to refinance to lower the overall cost of your student loan, don’t accept a refinance offer that makes your loan more expensive.
Depending on your financial circumstances and the market, you might not get any worthwhile offers that help you achieve your goal. In that case, you can just wait and try again at a later date. In the meantime, work on improving your credit score.
You’ll Lose Federal Borrower Protections You Might Need
When you refinance your consolidated federal student loans, you’re giving up federal borrower protections. These protections help you during times of financial hardship by letting you switch to an income-based repayment plan. They give you flexibility if you’re undergoing cancer treatment. They even forgive your student loans after a set number of years of on-time payments.
Make sure you fully understand what you’re giving up before you choose to privately refinance. It’s more important now than ever, given the uncertain economic times we’re experiencing amidst the COVID-19 pandemic.
You’re Working Toward Federal Student Loan Forgiveness
Federal student loan forgiveness programs like Public Service Loan Forgiveness and Teacher Loan Forgiveness cancel your student loans after a set number of on-time payments and years of service. If you refinance, you lose access to those programs.
Refinancing your consolidated federal student loan doesn’t make much sense if you’re on the way to student loan forgiveness. Another option would be to leave your consolidated loan as is and only refinance your private student loans.
So, Can I Refinance My Student Loans After a Consolidation?
Yes, you can refinance your student loans after consolidation. Just make sure the new loan helps you meet your financial goals. And, that you understand what federal borrower protections you’re giving up
For more information on student loan refinancing and consolidated loans, read these articles: