Pembrolizumab, Lenalidomide, and Dexamethasone in Treating Patients With Newly Diagnosed Multiple Myeloma Eligible for Stem Cell Transplant

Inclusion Criteria: * Diagnosis and previously untreated active multiple myeloma by International Myeloma Working Group (IMWG) diagnostic criteria for multiple myeloma * Calculated creatinine clearance (using Cockcroft-Gault equation) \>= 30 mL/min * Absolute neutrophil count (ANC) \>= 1000/mm\^3 * Platelet count \>= 75000/mm\^3 * Hemoglobin \>= 8.0 g/dL * Total bilirubin =\< 1.5 x upper limit of normal (ULN) * Alanine aminotransferase (ALT) and aspartate aminotransferase (AST) =\< 3 x ULN * Prior therapy for the treatment of solitary plasmacytoma is permitted, but \> 7 days should have elapsed from the last day of radiation * NOTE: Prior therapy with clarithromycin, dehydroepiandrosterone (DHEA), anakinra, pamidronate, or zoledronic acid is permitted; any additional agents not listed must be approved by the principal investigator * Measurable disease of multiple myeloma as defined by at least ONE of the following: * Serum monoclonal protein \>= 1.0 g/dL * \> 200 mg of monoclonal protein in the urine on 24 hour electrophoresis * Serum immunoglobulin free light chain \>= 10 mg/dL AND abnormal serum immunoglobulin kappa to lambda free light chain ratio * Eastern Cooperative Oncology Group (ECOG) performance status (PS) 0 or 1 * Provide written informed consent * Negative pregnancy test done =\< 7 days prior to registration, for women of childbearing potential only * Willing to follow strict birth control measures as suggested by the study * Female patients: If they are of childbearing potential, must agree to one of the following: * Practice 2 effective methods of contraception, at the same time, from the time of signing the informed consent form through 90 days after the last dose of study drug, AND must also adhere to the guidelines of any treatment-specific pregnancy prevention program, if applicable, OR * Agree to practice true abstinence when this is in line with the preferred and usual lifestyle of the subject (periodic abstinence \[e.g., calendar, ovulation, symptothermal, post-ovulation methods\] and withdrawal are not acceptable methods of contraception) * Male patients: even if surgically sterilized (i.e., status post-vasectomy), must agree to one of the following: * Agree to practice effective barrier contraception during the entire study treatment period and through 120 days after the last dose of study drug, OR * Must also adhere to the guidelines of any treatment-specific pregnancy prevention program, if applicable, OR * Agree to practice true abstinence when this is in line with the preferred and usual lifestyle of the subject (periodic abstinence \[e.g., calendar, ovulation, symptothermal, post-ovulation methods\] and withdrawal are not acceptable methods of contraception) * Willing to return to enrolling institution for follow-up (during the active monitoring phase of the study) * Willing to provide consent to Institutional Review Board (IRB) number (#) 521-93 and provide research tissue and blood specimens Exclusion Criteria: * Monoclonal gammopathy of undetermined significance (MGUS) or smoldering myeloma * Prior cytotoxic chemotherapy or corticosteroids for the treatment of multiple myeloma * NOTE: Prior corticosteroid use for the treatment of non-malignant disorders is permitted * Diagnosed or treated for another malignancy =\< 2 years before study enrollment or previously diagnosed with another malignancy and have any evidence of residual disease. * NOTE: Patients with nonmelanoma skin cancer or carcinoma in situ of any type are not excluded if they have undergone complete resection * Any of the following: * Pregnant women * Nursing women * Men or women of childbearing potential who are unwilling to employ adequate contraception * Other co-morbidity which would interfere with patient's ability to participate in trial, e.g. uncontrolled infection, uncompensated heart or lung disease * Other concurrent chemotherapy or any ancillary therapy considered investigational * NOTE: Bisphosphonates are considered to be supportive care rather than therapy, and are thus allowed while on protocol treatment * Peripheral neuropathy \>= grade 3 on clinical examination or grade 2 with pain during the screening period * Major surgery =\< 14 days prior to study registration * Radiotherapy =\< 14 days prior to registration * NOTE: If the involved field is small, 7 days will be considered a sufficient interval between treatment and administration of study drugs * Participation in any other clinical trials with other investigational agents not included in this trial, =\< 21 days prior to registration * Active autoimmune disease that has required systemic treatment in the past 2 years (i.e. with use of disease modifying agents, corticosteroids, or immunosuppressive drugs) * NOTE: Replacement therapy (e.g., thyroxine, insulin, or physiologic corticosteroid replacement therapy for adrenal or pituitary insufficiency, etc.) is not considered a form of systemic treatment * Has a history of (non-infectious) pneumonitis that required steroids or current pneumonitis * Active infection requiring systemic therapy * History or current evidence of any condition, therapy, or laboratory abnormality that might confound the results of the trial, interfere with the subject's participation for the full duration of the trial, or is not in the best interest of the subject to participate, in the opinion of the treating investigator * Known psychiatric or substance abuse disorders that would interfere with cooperation with the requirements of the trial * Is pregnant or breastfeeding, or expecting to conceive or father children within the projected duration of the trial, starting with the pre-screening or screening visit through 120 days after the last dose of trial treatment * Received prior therapy with an anti-PD-1, anti-PD-L1, or anti-PD-L2 agent * Known history of human immunodeficiency virus (HIV) (HIV 1/2 antibodies) * Known active hepatitis B (e.g., hepatitis B surface antigen \[HBsAg\] reactive) or hepatitis C (e.g., hepatitis C virus \[HCV\] ribonucleic acid \[RNA\] \[qualitative\] is detected) * Received a live vaccine =\< 30 days of planned start of study therapy