CommonBond Student Loan Boot Camp Day 5: Student Loan Refinancing Versus Student Loan Consolidation

The content below is from, explaining all the need-to-know information for us students taking out loans! We will post each day of the 10 days of Student Loan Boot Camp once a week.

Welcome back to Day 5 of the CommonBond Student Loan Boot Camp! Over the past four days, we learned the basics of student loans. Now we will move on to a more advanced topic: The difference between student loan refinancing and student loan consolidation.

Day 5: Student Loan Refinancing Versus Student Loan Consolidation

You can consolidate your student loans into one monthly payment, which can simplify your repayment.

There are two ways to consolidate your student loans:

With the federal government through a Direct Consolidation Loan

With a private lender through student loan refinancing

The key difference between federal student loan consolidation and private student loan refinancing is that refinancing can actually save you money by lowering your interest rate while student loan consolidation can only simplify your payments.

Let's discuss the benefits and risks of each option.

Federal Direct Consolidation Loan


Consolidates all your federal student loans into one federal loan letting you pay one monthly payment instead of many.Provides the option for an income-driven repayment plan, which can lower your monthly payments.Offers the option for public service loan forgiveness which forgives the remaining balance on your loans after you have made 120 monthly payments if you work for a qualified employer. (You'll learn more about this option on Day 7 of the boot camp.)Allows you to defer payments if you lose your job or go back to school.


May pay more in interest over the life of the loan, compared to student loan refinancing from a private lender.May increase the cost of your loans if you select income-based repayment programs.

Student Loan Refinancing


Consolidates all your student loans, including federal and private loans, into one federal loan letting you pay one monthly payment instead of many. 

With a federal Direct Consolidation Loan, you can only consolidate federal student loans.Provides a new interest rate, which could be lower than the interest rates you currently pay on your student loans. 

With a federal Direct Consolidation Loan, your interest rate will be a weighted average of the rates on all the federal student loans you consolidate.

May allow you to defer payments if you go back to school or lose your job. (Only some private lenders, including CommonBond, offer this option.) 

Additionally, if you find yourself between jobs, CommonBond provides support through our CommonBridge program.

Only with CommonBond: Contributes to the education of a child in need. We call it our Social Promise.


Does not include income-based repayment options.Does not include public service loan forgiveness.

Student loan consolidation with a Federal Direct Consolidation Loan will add convenience, but is not in and of itself a money-saving option.

Student loan consolidation with a private lender that refinances your student loans can actually save you money. At CommonBond, you could save thousands, on average, over the life of a loan. How? We offer lower rates on student loans than the federal government.

In Day 6 of the CommonBond Student Loan Boot Camp, we will discuss whether refinancing your student loans with private lenders is right for you. If you want to learn more about student loan refinancing right now, CommonBond created a quick guide to walk you through your decision.

Interested in saving money on your student loans? CommonBond offers student loan refinancing. The average CommonBond member saves $14,581 over the life of their loan by refinancing their student loans to a lower interest rate. Learn more about our rates and terms.

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