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How To Consolidate Your Student Loans

As the clock ticks toward the August 31 restart of federal student loan repayments, you may be wondering how to make your monthly payments more affordable. And even if you weren’t able to take advantage of the pause on student loan payments because you have private loans, you might be wondering the same thing.

Consider consolidating your federal and private student loans to simplify repayment or to make your monthly payments more affordable by extending your repayment period.

When you consolidate (aka combine) your federal student loans into a single federal loan, it’s known as consolidation. When you consolidate your private and/or federal loans into a single private loan, it’s known as refinancing.

If you’ve got questions about consolidating your student loans, we’ve got answers. And we’ll also share the pros, cons and possibilities of student loan consolidations.

What Is Student Loan Consolidation and How Does It Work?

Student loan consolidation works by combining multiple student loans into one loan. Instead of keeping track of multiple payments (and multiple interest rates), you make one payment with one interest rate.

Consolidating your student loans could allow you to:

  • Switch to an extended repayment plan with a lower monthly payment
  • Qualify for an income-driven repayment plan that lowers your monthly payments based on your income and family size (for federal loans only)
  • Get your loans back in good standing if you defaulted (aka missed payments)

The Department of Education will consolidate your federal loans with a Direct consolidation loan – and it’s free.[1] After consolidating, you get a new loan servicer and a new fixed interest rate that’s an average of the interest rates you were paying on your old loans (rounded up to the nearest one-eighth of a percent).

Your new loan servicer pays off your old loans, and you start repaying your new consolidated loan.

There are private companies that aren’t associated with the Department of Education but offer federal student loan consolidation. Read the fine print before you agree to work with one of these companies because they may charge a fee.

With some Direct consolidation loan repayment plans, all of your student debt – including any private student loans you may have – is factored into the length of your repayment period. So, the more loans you have, the longer the length of your repayment may be.

What Are the Advantages and Disadvantages of Student Loan Consolidation?

The advantages and disadvantages of student loan consolidation depend on your situation. Take an honest assessment of your current financial situation and your future financial goals. Use your results to guide your decision on student loan consolidation.


  • Consolidating can simplify your monthly payments because you’ll only have one student loan bill to pay.
  • It can lower your monthly payment if your repayment period is extended.
  • Consolidating federal loans may give you access to other income-driven repayment plans to help make your payments more affordable (more on this later).
  • It may allow you to remove a co-signer.
  • You may be able to switch variable interest rate loans to a fixed-rate loan.


  • Consolidating your loans usually extends your repayment period, which means it’ll likely take longer to pay off your loan, and you’ll pay more interest over the life of the loan.
  • If your loans have certain benefits (like discounts, loan forgiveness or grace periods) you may lose them when you consolidate or refinance them.
  • You’ll lose credit for any payments made toward income-driven repayment plan forgiveness or Public Service Loan Forgiveness.
  • Any unpaid interest on your current loans gets added to your consolidated loan’s principal balance. So you end up paying interest on a higher principal balance, which may result in the consolidation costing you more.

What Are the Eligibility Requirements for Federal Student Loan Consolidation?

First things first, make sure the federal student loans you have are eligible for consolidation.

For most repayment plans, you’re eligible for a federal consolidation loan when you drop below part-time enrollment, leave school or graduate. Let’s take a look at some of the other eligibility requirements:

  • Your loans must be in repayment or a grace period.
  • To consolidate an existing consolidated loan, you must add another eligible loan to the consolidation.
  • You may be able to reconsolidate an existing Federal family education loan (FEEL) consolidation loan without adding another loan.
  • To consolidate a defaulted loan, you must either make three consecutive monthly payments or agree to repay your consolidated loan under these repayment plans:
    • Income-based repayment plan
    • Pay as you earn repayment plan
    • Revised pay as you earn repayment plan
    • Income-contingent repayment plan
  • You can’t consolidate a defaulted loan that is being paid through wage garnishment or a court order unless the wage garnishment or court order is removed.

What Steps Do I Take To Consolidate Federal Student Loans?

If you’re ready to consolidate your federal student loans, there are just a few steps to take:

  1. Log in to your Federal Student Aid online account
  2. Fill out a free Federal Direct Consolidation Loan Application and promissory note
  3. Confirm which loans you want to consolidate (p.s. you don’t have to consolidate all your eligible loans)
  4. Agree to the repayment terms of your new Direct consolidation loan

The online application will take about 30 minutes to complete and must be finished in one sitting. You can also download the form, fill it out and send it back in the mail.

Unless your loans are in forbearance, deferment or a grace period, keep making your monthly payments until the consolidation servicer verifies that your loans have been paid off through the consolidated loan.

When your new servicer reaches out, they’ll also tell you when your first payment is due. Usually, your first payment is due 60 days after the consolidation payout. At that point, you start paying off the consolidated loan.

Student Loan Consolidation vs. Refinancing

Unlike federal student loans, private student loans are provided by private financial institutions, like banks and credit unions. They’re awarded based on your overall finances, not just your income (like they are with federal loans).

To consolidate multiple private student loans (or a combination of private and federal loans) you must refinance the loans. When you refinance, you replace your existing loans with a new loan.

Consolidation and refinancing are fairly similar. Both bundle multiple loans into one loan. But there are some major differences.

  • Federal benefits: When you consolidate most federal student loans, you keep all the benefits that come with them. When you refinance your federal loans through a private lender, you lose them.
  • Loan types: You can consolidate federal loans through the Department of Education and refinance private and federal student loans through a private lender. Be aware: When you refinance federal loans into a private loan, they can’t be turned back into federal loans.
  • Interest rates: You can get an interest rate that’s lower than the interest rates on your existing loans when you refinance. But that’s not the case with consolidation. When you consolidate, your new interest rate is the rounded average of your previous loans. You never get a rate lower than your formerly lowest interest rate.
  • Saving money: Consolidation will lower your monthly payments because your repayment term is stretched out, but you may end up paying more in interest over the loan’s lifespan. You can save money by refinancing because you get a lower interest rate and will likely pay less interest over the life of the loan.

How Do I Refinance Private Student Loans?

If you want to refinance private student loans or a combination of private and federal student loans, you refinance through a private lender. Refinancing can help simplify repayment with one loan payment, and you, typically, get a lower interest rate that can help you save money.

You may even be able to choose between a fixed interest rate or a variable interest rate loan.

The introductory interest rate on variable interest rate loans is usually lower than the interest rate on fixed-rate loans. After the intro period, the interest on variable interest rate loans periodically changes as market interest rates change. There’s always a chance that the interest rate may increase (a few times) over the life of your loan.

Fixed rates never change and may be a good option for borrowers who like the idea of predictable monthly payments.

Before you consider refinancing, take a look at your credit score. Your new refinanced loan terms will be based on your creditworthiness – not your income. Generally, a credit score in the high 600s or higher will get you more favorable terms and a lower interest rate.

Search for private student loan refinancing companies and shop around for the best rates and repayment terms. When you’re ready, contact the lender to start the application process.

What Are the Alternatives to Student Loan Consolidation?

If it’s getting harder to pay your student loans, there are other debt-relief options to explore. You can request a deferment, forbearance or switch to an income-driven repayment plan.


Deferment allows you to temporarily postpone your loan payments. The length of time depends on your situation and which loans you have.[2]

In the case of federal student loans, if you have a Direct subsidized loan, interest won’t accrue during the payment pause. If you have a Direct unsubsidized loan or a PLUS loan, interest will accrue during the payment pause.

You can choose to only pay the interest on your loans during deferment. But, if you decide not to make any payments, your unpaid interest will be capitalized (think: added to your principal balance) on all your loans – except for Perkins loans.


Forbearance is similar to deferment. You can postpone your payments for a period and any unpaid interest will be capitalized (except for Perkins loans). No matter which loan you have, interest will accrue during forbearance.

A general forbearance (mostly requested for financial hardship) can last no more than a year, but you can request additional forbearance periods for up to 3 years.

A mandatory forbearance (mostly requested for military soldiers, teachers and medical or dental residents) can last no more than a year, but you can request additional forbearance periods as long as you meet the eligibility requirements.[3]

Income-driven repayment plan

If you have federal student loans and you’re facing long-term financial hardship, it might be best to skip deferment and forbearance. An income-driven repayment plan bases your monthly payments on your income and family size so you can get a more affordable monthly payment.

Depending on the plan you qualify for, you may be able to get a payment as low as zero dollars.[4]

One Loan To Rule Them All

Whether you have federal or private student loans or a combination of the two, loan consolidation may help make your life easier by giving you one monthly payment. It may also help you get a lower interest rate or a more affordable monthly payment.

Girded with the knowledge from this guide, you’re prepared to take on consolidation like Frodo & Co. took on the One Ring. Repaying student loans doesn’t seem so scary when you know there’s one loan that can rule them all.

The Short Version

  • The Department of Education will consolidate your federal loans with a Direct consolidation loan – and it’s free
  • If your loans have certain benefits (like discounts, loan forgiveness or grace periods) you may lose them when you consolidate or refinance them
  • You can consolidate federal loans through the Department of Education and refinance private and federal student loans through a private lender
Back to top of page

  1. Federal Student Aid. “What is Loan Consolidation?” Retrieved March 2022 from

  2. Federal Student Aid. “Student Loan Deferment.” Retrieved March 2022 from

  3. Federal Student Aid. “Student Loan Forbearance.” Retrieved March 2022 from

  4. Federal Student Aid. “Income-Driven Repayment Plans.” Retrieved March 2022 from

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