Private student loan consolidation means combining multiple private student loans into a single new loan with one monthly payment. The new loan often comes with a new interest rate — which could be lower or higher than your current rates, depending on your creditworthiness.
Unlike federal consolidation, which uses a weighted average of your existing rates, private consolidation can lower your rate if your credit has improved since you took out your original loans.
Private consolidation is best for borrowers who:
These terms are often used interchangeably, but there's a subtle difference — especially when it comes to private loans:
| Feature | Consolidation | Refinancing |
|---|---|---|
| Primary Goal | Combine multiple loans into one | Lower your interest rate |
| Rate Change | May stay the same or improve | Usually lowers |
| Number of Loans | Multiple → One | Multiple or single → One |
| Capitalization Impact | May trigger on federal loans | Stops capitalization |
| Best For | Borrowers with multiple payments | Rate shoppers with good credit |
For private loans, consolidation and refinancing are essentially the same thing — you take out a new loan to pay off old ones. The main difference is why you're doing it: consolidation = simplify payments; refinancing = lower your rate. Many lenders use the terms interchangeably.
Here are the top lenders for private student loan consolidation. Rates are updated regularly, so always check current offers.
Credible lets you compare prequalified rates from multiple lenders at once — including SoFi, Earnest, Laurel Road, and more. Your credit score won't be affected by checking your rates.
Compare My Rates| Lender | Best For | Fixed Rates From | Action |
|---|---|---|---|
| Credible | Comparing multiple lenders | Varies by lender | Compare All |
| SoFi | Large balances / high earners | 4.99% APR | Check Rate |
| Earnest | Customizable payment terms | 5.24% APR | Check Rate |
| Laurel Road | Medical / dental professionals | 4.89% APR | Check Rate |
| Discover | No fees / strong customer service | 5.49% APR | Check Rate |
Consolidating private loans is a straightforward process. Here's what to expect:
Collect details on all your private loans: current balance, interest rate, monthly payment, and servicer name. You'll need this to apply.
Most lenders require a minimum credit score of 650. Check your score before applying so you know where you stand.
Use Credible or apply to 3–4 lenders individually. Compare rates, terms, fees, and customer reviews to find the best fit.
Complete the application with your personal and financial information. You'll need proof of income, employment, and identity.
Once approved, review the loan terms carefully. If you accept, the new lender will pay off your old loans, and you'll start making one monthly payment.
This is where the difference between federal and private consolidation matters.
When you consolidate private loans, interest does not capitalize. The new lender pays off your old loans — including all accrued interest — and you start fresh. This is the same as refinancing: the accrued interest is paid off, not added to your principal.
Federal consolidation is different. When you consolidate federal loans through a Direct Consolidation Loan, any unpaid interest on the underlying loans capitalizes into the new balance. This can increase your principal by thousands of dollars.
Bottom line: If you're consolidating private loans, you don't have to worry about capitalization. If you're consolidating federal loans, proceed with caution — and consider refinancing or the SAVE plan instead.
If you have both federal and private loans, you need to understand the difference before consolidating.
| Feature | Private Consolidation | Federal Consolidation |
|---|---|---|
| Lender | Private bank or credit union | U.S. Department of Education |
| Interest Rate | Can be lower (based on credit) | Weighted average of existing rates |
| Federal Protections | None | Kept (IDR, PSLF, deferment, etc.) |
| Capitalization Risk | None | Yes — triggers capitalization |
| Credit Check | Required | Not required |
| Best For | Private loans only | Federal loans + want to keep federal benefits |
Do not consolidate them together. If you combine federal and private loans into a private consolidation loan, you will lose all federal protections on your federal loans. Instead, consolidate your federal loans separately (through the federal program) and your private loans separately (through a private lender).
If you have 2+ private loans with different servicers, consolidation can simplify your life with one monthly payment.
Good CandidatePrivate consolidation is not for you. Look into federal consolidation or the SAVE plan instead.
Consider Federal OptionsConsolidate federal loans separately (federal program) and private loans separately (private lender). Never mix them.
Separate ConsolidationYes, but you shouldn't. If you consolidate federal and private loans together through a private lender, you lose all federal protections on your federal loans. Consolidate them separately — federal through the federal program, private through a private lender.
Temporarily, but it usually helps in the long run. The hard credit check may lower your score by a few points. However, paying off multiple loans and having one loan with a lower utilization ratio can improve your credit over time.
Most private lenders require a credit score of 650 or higher. If your credit is below that, consider applying with a co-signer who has good credit. Some lenders also specialize in loans for borrowers with lower credit scores, but rates will be higher.
No. Private consolidation does not trigger capitalization. The new lender pays off your old loans — including all accrued interest — so that interest never gets added to your principal. This is different from federal consolidation, which does trigger capitalization.
Most consolidation applications take 2–4 weeks from application to funding. The process includes credit checks, income verification, and document review. Some lenders can close in as little as 7–10 business days.
For private loans, they're effectively the same thing. Both involve taking out a new loan to pay off one or more existing loans. "Consolidation" is typically used when you're combining multiple loans, while "refinancing" is used when you're focused on lowering your rate. Many lenders use the terms interchangeably.