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About 44.5 million Americans live with student loans, and many among them struggle to keep up with multiple payments, high-interest rates and the overall burden of student debt. If that sounds familiar, student loan consolidation may be a great option to improve your monthly cash flow and save money on interest.
Student loan consolidation means combining your existing student loans into one, new loan. This is a guide primarily for private student loans, though many of the same concepts hold true for Federal loans. For Federal student loans, you go through the Department of Education at StudentLoans.gov.
There are two primary reasons to consolidate student loans. First, and most important, is to save money. If you can consolidate at a lower interest rate, you are effectively refinancing your student loans. If you can lower your interest rates, you will save money over the life of the loan.
The second reason to consolidate is to lower and simplify your monthly payments. If you have multiple student loans and have to juggle multiple monthly payments, you can simplify your life by merging the loans into one new loan with one monthly payment. Depending on how you refinance, you may end up with a lower total monthly payment as well.
Some things to consider before consolidating student loans are: Lower interest rates (never, ever, under any circumstance, should you refinance or consolidate at a higher interest rate) and fees (some student loan consolidation companies charge fees at the start of a loan, for certain activities during the life of the loan, and even early payment penalties if you pay off the loan early). Y
Also, layoffs and other job loss scenarios happen, so you want to look at consol consolidation lenders that give you some level of flexibility or deferment when you experience a temporary loss of income. And finally, you want a trusted lender with good customer service. While you hopefully won’t ever have any need for customer service, it is good to know someone is standing by to help when you do have questions.
The field can be difficult to navigate, so to make sure you're getting the most bang for your buck we put together a list of the Best Student Loan Consolidation lenders:
- LendKey: Best for Undergraduate Loans
- SoFi: Best for High Income Borrowers
- Education Loan Finance: Best for Low Interest Rates
- CommonBond: Best for Unemployment Protection
- Citizens Bank: Best from a Traditional Bank
- PenFed Credit Union: Best from a Credit Union
- Earnest: Best for Low Credit Borrowers
- Laurel Road: Best for Medical Residents
LendKey is a top-rated student loan company and ranks as our best overall option, particularly for undergraduate student loans. LendKey offers low-interest rates and flexible options for repayment, including options to make interest-only payments and an interest rate reduction after reaching a 10 percent principal payoff.
As of this writing, the lowest fixed rate available is 3.49 percent, including a 0.25 percent automatic payment discount. LendKey charges no origination fees and offers loans from $5,000 to $125,000 for undergraduate loans, up to $250,000 for graduate loans, as well as $300,000 for medical student loans.
LendKey operates in all but five states (Maine, North Dakota, Nevada, Rhode Island and West Virginia) for borrowers with a credit score of 680 or above. You’ll need a minimum $24,000 per year income to qualify, but if you run into trouble with money you can tap into up to 18 months of unemployment protection and four years of interest only payments.
SoFi, short for Social Finance, is a top lender for those with advanced degrees, high incomes and serious career trajectory. They look at a range of indicators outside of your credit score, including your degree and university, when approving new loans. While there is no minimum credit score, most approved borrowers have good or excellent credit.
SoFi operates in all 50 states and offers loans from $5,000. There is no limit to what you can borrow. SoFi offers competitive low rates, currently starting at 3.899 percent with automatic payments. There are no application, origination, or prepayment fees or penalties.
Some SoFi borrowers are more excited by the ancillary benefits of SoFi than the loans themselves. SoFi borrowers are called members and get access to exclusive events, career coaches, wealth management services and more.
Education Loan Finance, or ELFI, offers fixed rates starting at 3.09 percent, making them one of the lowest interest rate refinance options available today, depending on your credit. Because interest rates are the number one factor in refinancing or consolidating student loans, make sure to check your rate here.
Education Loan Finance offers loans with no application, origination, or prepayment fees or penalties with loans available from $15,000. There is no limit to how much you can borrow. Borrowers get a little bonus through a referral program that rewards you with $400 for each friend you refer.
You’ll need a 680 credit score or better and $35,000 annual income to qualify, but if you do qualify you may get the best interest rate around. Coupled with no fees and up to 12 months of forbearance due to economic hardship, you can’t go wrong at ELFI.
CommonBond is a transparency-focused student lender with a community focus. For every new student loan approved at CommonBond, the company funds the education of a child in need through a partnership with Pencils of Promise. That is something any borrower can feel good about.
But in terms of “what’s in it for me,” borrowers with the best credit may get a low 3.21 percent fixed interest rate. Loans are available from $5,000 to $500,000 for borrowers with credit scores of 660 or above. Borrowers in 46 states can work with CommonBond to refinance their loans - ID, Lousiana, Mississippi, Nevada, South Dakota and Vermont are not supported.
CommonBond offers one of the best unemployment protection features of any lender (up to 24 months). During unemployment protection, you don’t have to make any payments but interest continues to accrue. So even if you do need it, you are better off keeping up with monthly payments if possible.
Citizens Bank has been around since 1828, making it by far the oldest lender on this list. However, it jumped into the student loan market in 2014, making its student loan products some of the newer lending products available in the student loan consolidation industry today.
Interest rates vary based on your degree. Fixed rate undergraduate loans start at 6.45 percent APR, making them more expensive than some others. However, Citizens approves loans for non-graduates, which is not common in private student loan consolidation, as long as you have the required 680 credit score to qualify.
Want to learn more? Check out our full review of Citizens Bank.
Pentagon Federal Credit Union, or PenFed, is a great credit union for mortgages, credit cards and other accounts regardless of location and military connections. For student loans, PenFed offers great rates through a partnership with Purefy. Rates current start at 2.96 percent.
You’ll need an income of at least $42,000 to qualify on your own and loans are available from $7,500 to $300,000. There are no origination, application or prepayment fees, but you do need a credit score of 670 to qualify.
Earnest offers student loans to borrowers with a minimum 660 credit score, tying for the lowest required credit score for student loans. Rates currently start at 6.99 percent for loans starting at $5,000. There is no maximum you can borrow.
Earnest operates in all but six states: Alaska, Delaware, Kentucky, Mississippi, Nevada and Rhode Island. There are no origination or prepayment fees at Earnest and no minimum income requirement. Earnest also offers huge flexibility in choosing your loan duration and resulting monthly payment.
Laurel Road offers student loan options for any graduate, but have special options for medical residents and fellows and those with an M.D. after their name. Laurel Road recognizes that residents get a much more modest income today than they will have at the end of their residency, which offers $100 monthly payments during your program.
Laurel Road offers loans starting at 3.50 percent interest with a 660 minimum credit score and no minimum income requirement. There are no origination fees or prepayment penalties, so once you get that big doctor salary you can pay off your loans quickly with no extra costs.