Carnegie Mellon University

Private Loan Consolidation/Refinance

Private Loan Consolidation

Private student loan consolidation can provide a great way to lower your private monthly student loan payments into one convenient payment each month. This can make your student debt much easier to manage and it can even allow you to pay off your obligations much earlier than you thought possible.

By reducing your student loan payments into just one monthly expense, you will also be better able to budget for other expenses as well, such as rent or mortgage, auto loan payments, and other new debt that you may be taking on after college graduation. Please keep in mind, however, that while your monthly payment may decrease, the total interest you pay over the lifetime of the loan may increase (unless your credit score significantly improves).


Eligibility for private loan consolidation varies by lender. Many lenders will require that you have a minimum balance ($5,000 or $7,500) to consolidate your loan.


  • You obtain a single monthly payment instead of several.
  • The consolidation resets the term of the loan, which may reduce your monthly payment.
  • Because the interest rates on private student loans are based on your credit score, you could get a better monthly interest rate if your credit score has improved significantly – by 50 to 100 points – since the time you first obtained the loan.
  • The current lender of your loans may be willing to lower your interest rate, rather than lose your loans to another lender.

Private Loan Refinancing

Refinancing is when you apply for a loan under new terms and use that loan to pay off one or more existing student loans. If your financial situation and credit score have improved since you first took out your loans, you may be able to refinance them at a lower interest rate, which can allow you to:

  • Lower your monthly payment.
  • Reduce the time it takes to pay off your loan.
  • Reduce the total amount you spend paying back your loan.
  • Choose a variable interest rate loan, which can be a cost-saving option if you plan to pay off your loan relatively quickly.
  • Enjoy the benefits of consolidation (i.e., one simplified monthly bill).

Unlike consolidation, refinancing is only available from private lenders.

As to whether you should combine federal and private loans, the answer depends on your situation. Some federal loans offer certain benefits and protections (such as Public Service Loan Forgiveness or Income Based Repayment) that do not transfer to private lenders. If you’re considering refinancing, you should first take a look at your federal loans to see if any of these benefits apply to you.