Consolidating your student loans allows you to streamline two or more federal student loans into a single payment. So instead of having to log onto your student loan accounts and make multiple payments each month, consolidation simplifies the process. 

You can achieve similar results by refinancing your federal and private loans. But because of these permanent changes, it’s important to fully understand the impact of consolidating and refinancing so you can make choices that benefit you both now and in the future. 

Here’s what to know about consolidating private and federal student loans together:

Not exactly.  First, it’s important to understand the distinction between consolidating and refinancing. Consolidation only applies to federal student loans, whereas refinancing can apply to both federal loans and private student loans. 

When you consolidate, you streamline multiple federal loans into one new payment. The new interest rate is averaged based on the rates you had on each loan. You can also extend your repayment term to lower your monthly payments, but that means you may also pay more interest over time. 

When you refinance your student loans with a private lender, you could qualify for a lower interest rate if your credit score has improved. You can also choose how many loans you choose to refinance; you can even just refinance one to get different loan terms.

While it’s possible to include federal loans in a refinance, borrowers will lose access to benefits that come with those programs, such as forbearance, deferment, and income-driven repayment plans.

You can expect a few potential benefits of choosing to consolidate your federal student loans. While you won’t directly lower your interest rate, you can make it easier to manage your loans with fewer payments. If you end up consolidating all of your federal loans, you could have just one payment to worry about each month.

You could also make payments easier on your wallet by drawing out your repayment term to up to 30 years. They’ll cost more in the long run, but may help your current financial situation. Plus, any payments made towards a loan forgiveness program don’t count, essentially resetting the clock on your forgiveness timeline.

Finally, if you have at least one Direct loan along with others that are not Direct loans, consolidating gives all of your federal student loan debt access to income-driven repayment plans and Public Service Loan Forgiveness. 

You can apply online to consolidate your federal loans through the U.S. Department of Education for free. The process takes about 30 minutes and needs to be completed in one session. 

Here’s what you’ll need to have on hand for your application:

The following federal student loans are eligible for consolidation: 

Refinancing your student loans involves taking out a new loan with a private lender. It can be the same lender you initially borrowed money from, or a completely different one. The original loan is completely paid off and you start with fresh loan terms with your new lender.

You might choose to refinance for a couple of reasons. You may qualify for a lower interest rate, especially if your credit score has increased since you took out the original loan. 

And if your original loan had a variable rate that’s starting to rise, you can refinance into a fixed rate loan to stabilize your monthly payment amount. You can also refinance in order to remove a cosigner from the loan (like your parents).

Both private student loans and federal student loans can be refinanced; however, remember that you’ll lose all the benefits associated with federal loans as soon as they’re refinanced with a private lender.

Related: Learn more about refinancing your student loans on Credible.com

For starters, consolidation only applies to federal student loans — private student loans are not included. With consolidating, you’re taking two or more federal loans and turning them into one single loan. 

Instead of getting a new interest rate based on your credit score, the new rate is calculated from the weighted average of the current loans. Additionally, when you consolidate Direct loans with other federal loans, all of them gain access to your Direct loan benefits. Finally, consolidation applications go directly through the U.S. Department of Education.

Refinancing, on the other hand, is done through private lenders. You can refinance one or more loans to change the terms based on your current income, debt, and credit score. That means you could potentially lower your rate, and your overall payments.

Consolidating loans with your spouse is no longer possible with federal student loans. They were once allowed starting in the early 1990s, but Congress revoked joint consolidation in 2006. There was no way to split the joint loans if the couple divorced or changed their minds about sharing the loans.

It’s also difficult to refinance together with a private lender, with limited options available. Instead of refinancing into a single loan, you can instead have one spouse serve as a cosigner on the refinanced loan, which could help meet credit and income requirements for better loan terms. 

Both consolidating and refinancing your student loans takes a lot of thought and strategy. Think about your short-term and long-term financial goals to make sure you’ll be happy with your decisions in the next few years or even decades.

Related: Learn more about refinancing your student loans on Credible.com