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Student Loan Refinance vs.
Student Loan Consolidation

BEFORE YOU CONTINUE READING: The information in this Comparison is valid only under normal circumstances. There are special benefits being applied on Federal Direct Loan Consolidations during these trying times that are not permanent but are being applied for an indefinite period of time. As well, there are proposals for federal student loan forgiveness that have a likelihood of passing, that are not reflected in this Comparison. Please click here to review information on these special programs and take them into consideration when comparing Student Loan Consolidation and Student Loan Refinance at this time.

What About Federal Student Loan Consolidation?

The U.S. Department of Education offers borrowers the ability to consolidate existing federally-backed student loans and Direct Loans owned by the federal government into a single loan. Though both consolidating and refinancing can combine existing student loan debt into a single loan, there are some significant differences.

What are the differences?

Direct Loan Consolidation is offered through the federal government, whereas refinance loan options are offered by private lenders such as Brazos.

Only federal loans are eligible for consolidation under the Direct Loan Consolidation program, whereas federal and private education loans are eligible for refinancing through Brazos.

The interest rate on the Direct Consolidation loan is the weighted average of your existing federal loans, regardless of credit history. Because the rate on a Brazos Refinance loan is determined in part by your credit score, you may be eligible for a lower rate.

Certain repayment options may be available through the Direct Loan Consolidation program that are not available through private lenders.

Consolidating under the Direct Loan Consolidation program will not require a credit check, whereas private refinance programs are credit underwritten, meaning you’ll need to pass a credit check to be approved.

Federal Direct Loan Consolidation Brazos Refinance Loan
Lender United States Department of Education Brazos Education Lending Corporation
What loans are eligible? Federal Loans Only Federal and Private Loans
Can I lower my interest rate? No Yes
Can I save money? No Yes, you can save money by lowering your interest rate and/or shortening the term of your loan.
Is a credit check required? No Yes
Are income sensitive or graduated repayment plans available? Yes No

What Repayment Options Are Available?

Repayment on a Brazos Refinance Loan typically begins 30 to 45 days after disbursement. Consolidation loans from the federal government are eligible for additional repayment plans, including graduated repayment plans and income sensitive repayment plans.

Direct Loan Consolidation is offered through the federal government, whereas refinance loan options are offered by private lenders such as Brazos.

If you believe you may need to take advantage of the Income Based Repayment or graduated repayment options offered by the federal government, a Direct Consolidation Loan could make sense.

Additionally, if you have federally-backed loans and are employed in a qualified “public service” position, you may be eligible for loan forgiveness programs not available with a Brazos Refinance Loan.

If you have federal loans, you can learn more about your repayment options and the Public Service Loan Forgiveness Program by visiting Federal Student Aid.1

Will I save money either way?

Not necessarily. Direct Loan consolidation of existing loans at the weighted average rate is not designed to save you money.

Direct Loan consolidation offers the ability to combine loans into one loan with one monthly payment, as well as the ability to extend the term of your loans in certain circumstances. While extending the term on your loans may result in lower monthly payments, you’ll pay more interest over the life of the loan.

Refinancing your student loans allows you to lower the interest rate on your loans, which could help you pay off your loans sooner, meaning you’ll pay less interest over the life of your loan.

Student Loan Refinance Fixed rates from


Including 0.25% Auto-Pay Discount2

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1. While refinancing government loans as well as private loans may help many borrowers, federal loans have certain benefits that can help borrowers who experience financial distress. Private loans typically don’t have the same benefits. Everyone’s situation is different, so think carefully about refinancing your government loans and talk about it with a trusted advisor.

2. Brazos Refinance Loan fixed rates from % APR to % APR (with Auto-Pay Discount). Variable rates from % APR to % APR (with Auto-Pay Discount). Interest rates on Brazos loans are capped at 9.90%. The Variable Rate is based on an Index of the greater of the (A) 30-Day Average SOFR or the (B) forward looking term rate based on SOFR, plus a Margin. The lowest variable rate APR displayed is based upon the current SOFR Index of % plus a % Margin, minus the Auto-Pay Discount. The Variable Rate will adjust monthly and the loan payment will be re-amortized and may change monthly. Not all borrowers receive the lowest rate. If approved for a Brazos loan, the fixed or variable interest rate offered will depend on your creditworthiness, the term of the loan and other factors, and will be within the ranges of rates listed above. For the Brazos variable rate loan, the Thirty-day Average Secured Overnight Financing Rate (SOFR) index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the (SOFR) index increases.

Auto-Pay Discount. The interest rate in effect will be reduced by 0.25% if either the borrower or the cosigner authorizes automated (ACH) payments from any bank account. This ACH interest rate reduction, referred to as the Auto-Pay Discount, applies only when full principal and interest payments are automatically drafted from a bank account. This interest rate reduction will not continue to apply during periods of approved forbearance or deferment. The Auto-Pay Discount will terminate if the automatic bank account payments discontinue or there are any three instances of insufficient funds at any time during the term of the loan. A borrower may requalify upon reauthorization of automatic payments from a valid bank account.