Consolidating Sallie Mae student loans with a Direct Consolidation Loan is off the table, even if you have federal student loan debt. Student loan consolidation is exclusive to borrowers looking to bundle their federal loans into a new loan from the Education Department.
It’s no surprise why borrowers want this option. They would get federal benefits and protections such as deferment, forbearance, and income-driven repayment plans without damaging their credit score. The federal student loan consolidation process doesn’t require a credit check. Borrowers can simply log in to their StudentAid.gov account and apply within minutes.
Refinancing student loans, however, does not offer those forgiveness and repayment options. Plus, there’s a credit check, which means your creditworthiness plays a vital role in determining the new interest rate. Where you went to school, the loan amount you’re looking to refinance, and your current debt payments (e.g., credit cards, mortgage, auto loan, etc.) also matter. You’ll need a cosigner to get the loan if you don’t meet the criteria.
But student loan refinancing does offer a unique benefit that consolidation doesn’t: the ability to receive a lower interest rate. While consolidation will give you a fixed interest rate for the life of the loan based on the weighted average of your current loans, refinancing can provide a lower interest rate, provided you have good credit.
Related: Best Student Loan Refinance Lenders