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Consolidating student loans is an option for borrowers who want to manage their debt more effectively or get better terms. Some might even wonder if it’s possible to consolidate student loans and credit card debt in one fell swoop.

Credit card and student loan consolidation is unlikely to be the right move, however, as it could be your least cost-efficient option. Here are some facts you need to know about why looking to consolidate student loans with other debts is probably a mistake:

Rules on consolidating student loans and credit card debt

If you’re hoping to meld your student loans and credit cards into a single loan, don’t expect to pay a lower interest rate on the new debt.

Federal student loans have interest rates that usually beat out those of personal loan rates. And although some private lenders do refinance student loans to better rates, this is usually because the new loan is still classified as a student loan.

“You can refinance student loans to a lower interest rate, and that loan will still be limited to qualified education expenses,” Phil DeGisi, a former marketing executive with refinancing company CommonBond, told Student Loan Hero.

Because the new loan is still a student loan, the borrower can’t use it to pay off anything other than existing college debt. This means your student loans cannot be combined with credit cards or other debt under this type of loan.

There are also some other limits in place. Borrowers can usually only qualify for loans equal to their current student loan payoff amounts. Your new loan will also have other qualities of student debt, including being harder to discharge in bankruptcy.

Using personal loans to consolidate student loans and credit card debt

If you’re really set on making student loan and credit card debt consolidation happen, it can be done.

DeGisi noted that you can take out a personal loan and use the money to repay your existing debt, replacing your current loans with a single, new one. However, this usually isn’t a cost-efficient way to manage debt.

“That would be unlikely to be a great path because student debt with high interest will still beat most personal loan interest rates,” DeGisi said.

So while the new loan could provide a lower interest rate than what you’re paying on a credit card, you’ll probably pay more on your student debts with this method.

“Generally speaking, it isn’t going to be a great strategy for someone,” DeGisi said.

The wisdom of consolidating your debt separately

The bottom line is that consolidating student loans and credit card debt together won’t likely be the most cost-effective way to restructure debt. Instead, look at each type of debt separately.

Debt type Consolidation options
Student loans ● Refinancing with a private lender
● Federal direct consolidation loan
Credit cards ● Balance transfer credit card with a 0% introductory rate
● Personal loan
● Debt management plan

Student loan debt

Refinancing student loans could potentially get you a lower interest rate. This could help you pay off debt faster and potentially lower your monthly payment.

“When refinancing student loans, you can choose which loans to refinance,” DeGisi said. “If you have one loan at a great interest rate, it might not make sense to refinance it.”

You might be hesitant to refinance federal student loans so that you can maintain access to government-exclusive protections, for example. You could leave them off your private refinancing application and instead take on a direct consolidation loan from the Department of Education. This way, you could consolidate without losing programs like income-driven repayment and loan forgiveness.

With that said, a direct consolidation loan won’t save you any money directly. Only refinancing allows you to lower your interest rate. You can check how much you might save under different scenarios by using our student loan refinancing calculator.

Student Loan Refinancing Calculator

Credit card debt

If you’re interested in credit card debt consolidation, there are two common options.

  1. Transfer the balances to a new credit card with a 0% introductory rate. To optimize savings, look for one without an annual fee, and pay off the balance before the 0% introductory rate ends.
  2. Get a personal loan (or credit card consolidation loan) and use the funds from that to pay off and consolidate credit card balances. This works because personal loan rates tend to be lower than credit card rates. You could potentially save a nice sum of money, and the installment payments would give you a defined repayment schedule.

If your credit history is spotty and you can’t qualify for the options listed above, you might consider enrolling in a debt management plan.

Tips for refinancing student loans and other debts

If you want to refinance student loans and consolidate credit card debt at the same time, there are some things to watch out for — specifically, note that applying for multiple loans or credit cards at the same time can hurt your credit.

“When you apply for the student loan refinance and apply for the personal loan — those are two separate functions, and you’ll get two hard credit pulls that will go on your credit,” DeGisi said. “The first inquiry could lower your credit score, and impact your ability to get approved for the second application.”

On the other hand, consolidating credit card debt could help other factors that lenders consider when approving a student loan refinance, DeGisi said.

When CommonBond evaluates an application, for example, they look at your monthly cash flow. If consolidating credit cards or other debts results in a lower payment, this also gives you more cash flow each month.

Prioritizing debt if you don’t consolidate

If you decide not to consolidate student loans and credit cards, you’ll need to decide which one to pay off first.

Generally speaking, it’s wise to pay off your credit card debt first, as it likely has a higher interest rate. In addition, lowering your credit utilization ratio can boost your credit score.

If you choose to pay off the debt with the highest interest rate first, simply put any extra money you have toward that balance. Of course, you should also continue paying the minimum balance on your other obligations, so they don’t go into default. When your balance on the highest-interest loan falls to zero, shift your focus to the debt with the next-highest interest rate and continue on until you’re out of debt.

Whatever your debt management goals, look at how different refinancing options can help you achieve them. You’ll probably find that student loan and credit card debt consolidation isn’t cost-effective, but there could be another debt solution that’s perfect for what you’re trying to accomplish.

Andrew Pentis and Laura Woods contributed to this report.

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