Although most people use refinancing and consolidation interchangeable, there is a difference. Know the difference because choosing one option may cause you to lose some federal repayment benefits.
A student loan consolidation is a process of combining one or more federal student loans into a single new federal consolidation loan. Consolidation can simplify the repayments by combining multiple payments into one. With a federal student loan consolidation, the average interest rate of all loans consolidate becomes your new interest rate.
You cannot consolidate private student loans into a federal student loan consolidation program.
Don’t confuse Federal student loan consolidation with student loan refinancing options through a private lender.
A private lender can “consolidate” both private and federal loans by refinancing into a new loan. The new loan will have new terms, interest rates, and conditions. Unlike the consolidation of federal loans into the federal consolidation program, private lender refinancing requires credit approval.