When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%.

So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.

This means refinancing isn’t an option for graduates who are struggling to pay their student loan bills.

To answer the question of which is best for you – a refinance or a consolidation loan – it helps to first understand the primary benefits of each and the main difference between refinancing and consolidating student loans. When you refinance a student loan, you take out a brand new loan.

You have to complete the application in a single session, so do your research before you start. You can consolidate all your federal loans or just some of them.

Federal student loan consolidation basics How to consolidate federal student loans Benefits of federal consolidation Drawbacks of federal consolidation Private student loan consolidation (student loan refinancing) When you consolidate federal loans, the government pays them off and replaces them with a direct consolidation loan.

In broad terms, federal student loan consolidation can help create payment flexibility and forgiveness options (provided the borrower enrolls in the correct program) while private student loan consolidation is typically done to get a lower interest rate, thereby lowering your payments (and the total amount paid) as a result.

This usually, depends on the rate the borrower got when they first took out their loans and the current interest rates offered for refinancing student loans.

At a minimum, lenders want to see that you have a stable job and a steady income, that you use credit responsibly and that you’ve been in the workforce for a little while.

Some lenders also prefer customers who have graduate degrees, especially if you have a lot of debt.