Navigating Student Loan Options: Consolidation vs. Refinancing

This week’s Financial Myth: Consolidation and refinancing are the same thing.

These terms are most commonly seen when talking about student loans. While they seem similar, and are sometimes (incorrectly) used interchangeably, they have key differences.

Consolidation combines multiple federal student loans into a single federal loan, simplifying payments. It maintains access to federal loan options like forbearance, income-driven repayment plans, and Public Service Loan Forgiveness (PSLF).

Refinancing replaces existing loans with a new one, ideally at a lower interest rate. This can reduce monthly payments and total interest paid. However, it typically involves private lenders, meaning losing federal protections if you had federal loans before.

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