Although both can help you with your education expenses, private and federal student loans are entirely different financial products. Private financial institutions fund the former, including banks, online lenders and credit unions. The U.S. government backs federal loans.

Refinancing your student loans can be a good strategy for debt management. It may allow you to find better rates or shorter loan terms. However, while you can use a private student loan to refinance a federal one, the opposite isn't possible.

That said, several lenders have benefits similar to those offered by federal loans. You can still enjoy some perks with a private loan refinance.

Key Takeaways

balanceTransfer icon

You cannot transfer a private student loan to a federal one.

cashCard icon

You can consolidate private and federal student loans — which means taking out a new loan from a bank, online lender or credit union.

checkList icon

Refinancing private student loans can be an excellent debt management strategy. It can help you consolidate due dates, and you may get lower rates, shorter repayment terms or the option to have a co-signer.

Private Student Loans vs. Federal Student Loans

Taking out a loan to help finance a college education is something that many people do, leading to significant debt. On average, the outstanding balance of a federal student loan is $37,787, while private educational loans average $40,780.

Private student loans originate from non-government financial institutions. Eligibility requirements usually include a minimum credit score and enrollment in a degree program, but some lenders have more requirements than others.

In comparison, federal student loans — administered by the U.S. Department of Education — have different requirements. To qualify, you must be a U.S. citizen or qualified noncitizen, show proof of enrollment in a qualified program and submit a FAFSA (Free Application for Federal Student Aid) form.

Private and federal educational loans have similar features, such as charging interest, varying repayment terms and borrowing limits. Federal student loans typically offer lower rates. Private student loans often require you to begin repayments immediately, while federal ones allow a grace period, usually requiring you to start paying after you've graduated.

Private Student Loans Compared to Federal Student Loans
Private Student Loans
Federal Student Loans

Loan Provider

Private financial institutions, like banks
credit unions and online lenders

The U.S. Department of Education


Varies per lender, but typically
includes the following:

  • Credit score and history
  • Income
  • Debt-to-income ratio
  • Enrollment in a qualified degree
  • Proof of U.S. citizenship or
    noncitizen eligibility
  • A valid Social Security
    Number (except those from
    Palau, Micronesia or the
    Marshall Islands)
  • Currently enrolled or at least
    accepted for enrollment in an
    eligible program
  • Enrolled at least half-time
    (for Direct Loan programs)
  • Proof of financial need (for
    Direct loans)
  • Requires consistent,
    satisfactory academic
  • Proof that you qualify to
    receive a college or career
    school education
  • A completed FAFSA form

Loan Amount

Up to 100% of your total cost of
attendance (CoA), minus financial

Depends on your profile:

  • Dependent First-Year
    Undergraduates: $5,500
  • Independent First-Year
    Undergraduates: $9,500
  • Dependent Second-Year
    Undergraduates: $6,500
  • Independent Second-Year
    Undergraduates: $10,500
  • Dependent Third-Year (and
    beyond) Undergraduates:
  • Independent Third-Year (and
    beyond) Undergraduates:
  • Graduates or Professional
    Students: $20,500
  • Parents: Up to your child’s
    cost of attendance, minus
    financial aid

Grace Period

Some private lenders require you to
make payments right away, while
others won’t ask you to begin
repayments until after you graduate.
For example, LendKey has a
six-month grace period

Federal student loans offer a
guaranteed grace period of six
months from when you graduate.
You must also begin repayment if
your enrollment falls below half-time
or if you decide to leave school

Interest Rates

Between 6% to 7% interest rates.
Lenders may give you the option to
choose between fixed or variable

Interest rates range
between 4.99% to 7.54% depending
on the type of loan you


Loan terms may range from five to
15 years

Offers various repayment options,
such as:

  • Standard (10 years)
  • Extended (25 years)
  • Income-driven


  • Higher borrowing limits
  • You can choose between
    fixed and variable rates
  • A good credit score may give
    you lower interest rates
  • Discounts are available (like
    signing up for autopay)
  • Allows you to have a
  • Lower interest rates
  • All loans have fixed rates,
    allowing you to predict how
    much you need to pay each
  • Flexible repayment options
  • Does not consider your
    credit score
  • Offers hardship options

Can You Combine Private & Federal Student Loans?

Once you begin making repayments, you may consider refinancing your student loan to make it more manageable. However, depending on the type of student loan you have, there may be restrictions on what you can and can't do.

You likely won't experience challenges if you have multiple private loans and want to refinance or consolidate your debt using another private loan product. If you have a federal student loan, you can also refinance it through a private loan. However, it is crucial to understand that doing this comes with risks, such as losing benefits federal student loans provide.

One question that may come up is whether the opposite is possible — can you refinance a private student loan to a federal one? Unfortunately, the answer is no.

Some private lenders refer to their refinance products as consolidation loans. You might mistake this as part of the Federal Student Loan Consolidation Program, but as its name implies, that program is only for federal student loans, and you cannot include private ones. If you want to consolidate federal and private student loans together, you can do so, but only through a private lender.

Federal-Like Benefits of Private Student Loans

Even if you can't transfer a private student loan to a federal consolidation loan, you can consider refinancing it with a private one. Several lenders offer federal-like benefits.

Here are some perks you can find, even with a private student loan.

  • annualFee icon

    Grace Period

    A grace period is a time a lender gives you before you are required to begin repayments. For example, Citizens Bank allows you to defer your payments until six months after graduation or when your enrollment falls below half-time.

    A grace period before you begin repayments can relieve you of financial stress. It also gives you more time to set aside money for your payments. This way, you'll likely be financially ready by the time the first payment is due.

  • metalCard icon


    Like federal student loans, some private lenders allow you to pause payments if you undergo hardship, such as medical emergencies or unemployment. Financial stress and being in debt may affect your mental health, and worrying about loan repayment can fuel the fire.

    Forbearance is a way to avoid repayments while you get your finances back on track. You get a reprise from payments without defaulting if you are approved for forbearance.

  • discount icon

    Interest-Only Payments

    Each time you make a payment on your loan, a portion of it goes to your principal balance. One strategy to keep your debt manageable is to make interest-only payments while you're still in school.

    With interest-only payments, the full payment amount goes to your interest and can save you hundreds (or even thousands) of dollars in the long run. And, when you graduate, your outstanding loan amount will be lower.

Should You Refinance Private Student Loans?

A private student loan can help you pay for your college education but also leaves you in debt. If you're wondering whether refinancing your private student loan is the right move, here are some points to consider:

  • You can get better interest rates: If you took out your student loan when interest rates were high, you might be in an ideal position to find lower rates. Refinancing your loan with lower interest allows you to save money in the long term.
  • You can choose different repayment terms: You can change your loan terms by refinancing. Shortening your loan repayment period may mean you retain the amount of your monthly payment (or even increase it), but it could save you money over time.
  • You can consolidate multiple loans: Having several student loans from different providers can be stressful to manage. Refinancing can combine your loans, so you'll only need to be mindful of one due date and monthly payment.
  • You can release your co-signer: Private lenders often consider your credit standing when you apply for a loan, and college students often need a co-signer, especially if they don't have enough credit history. However, once you start working and build your credit, you can release your co-signer through a refinance.
  • You can switch lenders: A good loan experience includes the quality of service your lender provides. If you're dissatisfied, refinancing is an excellent opportunity to look for a different lender.
creditBuilderLoan icon

Refinancing your private student loan isn't complicated, but you should consider several factors to get the best possible deal. MoneyGeek recommends taking the following steps:

  • Step 1: Assess your creditworthiness.
    Requirements vary between lenders, but most will look at your credit score. A good credit standing typically means getting more competitive interest rates. If you know that your credit is less than ideal, you can take steps to improve your credit score.
  • Step 2: Look for the best rate.
    Comparing offers between lenders is a crucial step in the process. Remember, you're likely to get varying rates and terms, even if you provide the same personal and financial information to every lender.
  • Step 3: Pick the best offer.
    Besides the interest and repayment terms, don't forget to look at other factors before selecting a lender. See what features different providers offer that you may want to get.
  • Step 4: Complete the loan application form.
    Once you decide on your preferred lender, it's time to complete the paperwork. Fill out an application and begin preparing the necessary documents.
  • Step 5: Start making payments.
    When you refinance your private student loan, you'll have a new due date and repayment amount. Keep these in mind to ensure you don't fall behind.

Frequently Asked Questions About Private Student Loan Refinancing

Most borrowers wonder if they can refinance a private student loan to a federal one. MoneyGeek looked at the most commonly asked questions about loan refinancing to help you make a decision.

*Rates, fees or bonuses may vary or include specific stipulations. The content on this page is accurate as of the posting/last updated date; however, some of the offers mentioned may have expired. We recommend visiting the card issuer’s website for the most up-to-date information available.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, credit card issuer, hotel, airline, or other entity. Learn more about our editorial policies and expert editorial team.
Advertiser Disclosure: MoneyGeek has partnered with CardRatings for our coverage of credit card products. MoneyGeek and CardRatings may receive a commission from card issuers. To ensure thorough comparisons and reviews, MoneyGeek features products from both paid partners and unaffiliated card issuers that are not paid partners.