Coming up with a plan for paying off your student loans can be stressful, but short of the highly unlikely prospect of having your physical therapy student loans forgiven—hey, you can dream, right?—you’re going to be writing loan repayment checks for a while. But, there are some things you can do to minimize the cost of those loans—things like loan consolidation and refinancing. Many PT students and recent grads are confused on the topics of refinancing and consolidating student loans. While these two terms have two distinct definitions, they’re often used together—which is why they can be so confusing. In this article, I’ll discuss what it means to refinance or consolidate and why these two words are often used together. I’ll also explain the advantages and disadvantages of refinancing and consolidating your student loans.

What is Consolidation?

In the context of student loans, consolidation simply means combining multiple loans into one. If you do nothing but combine your loans, then you do not save any money, and the total amount you pay monthly does not decrease. This is where the confusion often arises.

You may have heard someone say, “I consolidated my federal loans into one federal loan and refinanced it into a lower payment.” In this case, the use of the word “refinance” is not correct (I’ll provide a more in-depth explanation of refinancing in the next section). The reason people often misuse this term is that they associate refinancing with getting lower monthly payments. However, when an individual says he or she consolidated his or her federal loans into another federal loan—and has a lower monthly payment as a result—what that person did was combine the loans and extend the term.

Consolidating your federal loans and extending the repayment period can cost you a lot of money in the long run. For more information on what you need to know about consolidation, check out this article.

Can I Refinance and Consolidate at the Same Time?

The answer is yes. First off, refinancing occurs when you have a brand new lender give you a new loan with new terms. Once you agree to those new terms, the new lender pays off the existing loans that you elect to refinance. The primary benefit of refinancing is increased savings in the long run.

For example, say you have a federal loan with a balance of $10,000, an interest rate of 7.3%, and 10 years remaining in the repayment period. The new lender may give you a new 10-year loan at 5.0%. If you refinance, the new lender will send a $10,000 check to the federal government to pay off your old loan. You’d then begin making payments to the new lender instead of the federal government.

So, where does consolidation come into play? Many PTs and student PTs have multiple student loans they’d like to refinance into one new loan, because doing so would allow them to save even more money in the long-run. For example, let’s assume you currently have a $10,000 federal loan with a 7.3% interest rate—like the one I used in the previous example—as well as a second $10,000 federal loan with a 6.85% rate and a repayment term of 10 years. The new lender may be willing to offer you a better rate—5%, for example—and a balance of $20,000, which would cover both existing loans. When you refinance and consolidate, the new lender would send a $20,000 check to the federal government to pay off your old loans. You’d then have one loan instead of two, and your required monthly payment would decrease, all else equal.

What are the Advantages and Disadvantages of Refinancing and Consolidating?

The primary advantage of refinancing and consolidating your student loans is that doing so will save you money in the long run. The primary disadvantage is that you give up the flexibility that comes with federal loans—such as the ability to extend out your loans or go on an income-driven repayment plan. It’s up to you to decide whether the savings are substantial enough to justify giving up that flexibility.

That said, there are ways to increase the level of financial flexibility you’ll retain after refinancing. For example, you could:

  • refinance only your highest interest rate loans and keep the lowest interest rate federal loans, or
  • maintain a higher cash reserve account.

There are many more advantages and disadvantages associated with refinancing and consolidating your loans, but they depend on the details of the refinance. For example, you must decide:

  • if you want to use a fixed or variable rate loan,
  • the term of the loan, and
  • which loans you want to refinance.

If you need help determining whether consolidating and refinancing your loans is right for you, FitBUX can help you customize your strategy for free. We’ve partnered with a number of lenders and can walk our clients through the refinancing process from start to finish.


Joseph Reinke, CFA, is the CEO of FitBUX.