How to Consolidate Student Loans (Federal and Private)

Looking to simplify your student loans by consolidating all of your loans into a single monthly payment? You may be able to lower your monthly payments and only have one payment going forward with a student loan consolidation.

There are multiple ways to consolidate your student loans, but it’s important to know what your options are before choosing to combine your loans. There may be some potential downsides and you could lose valuable loan benefits if you do it wrong.

We’ll cover the details of how student loan consolidation works — for both federal and private student loans — and how to choose the best option for your loans. Plus we’ll walk through step-by-step how to apply for a federal or private student loan consolidation.

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  • Student loan consolidation involves combining multiple student loans into a single loan with one monthly payment.
  • Federal student loan consolidation is free and allows you to combine multiple federal student loans.
  • Private student loan consolidation involves refinancing your loans and paying off your old ones with the new loan.
  • Refinancing federal student loans into a private loan can lose your borrower protections and benefits.

What is student loan consolidation?

Student loan consolidation is the process of combining multiple student loans into a single loan with one monthly payment. There are several ways to do this, including federal loan consolidation and private student loan refinancing. 

You might be considering student loan consolidation for a few reasons, including:

  • Do you want fewer monthly payments
  • You want a lower interest rate
  • Do you want a lower monthly payment

Here’s how federal student loan and private student loan consolidation work:

Federal student loan consolidation

Federal student loans can be combined into a single loan without any origination fees or credit check required. You can choose to consolidate multiple Direct Loans into a single loan payment. You can also elect repayment terms from 10 to 30 years in length, potentially lowering your monthly payments.

When you consolidate your federal student loans, the new fixed interest rate will be the weighted average of your previous loan rates rounded up to the nearest 1/8th of a percent, so you’ll pay nearly the same amount of interest as your old loans.

It’s important to note that consolidating federal student loans will automatically capitalize any outstanding interest on each of the loans, potentially costing you more over the life of the loan.

In general, federal student loan consolidation is available after graduation or when you drop below half-time enrollment. Once the loan is consolidated, your old loans are paid off, and your new loan payment is due 60 days after loan disbursement.

There are some additional benefits when consolidating federal loans that are not Direct Loans. Loans such as FFEL Program loans or Federal Perkins loans may have the following benefits:

  • Can get a fixed interest rate instead of variable
  • May qualify for Income-Driven Repayment (IDR) plans
  • May now qualify for Public Service Loan Forgiveness (PSLF)

Note: Consolidating non-Direct Loans may cause you to lose some benefits of your previous loans. 

Private student loan consolidation 

Private student loan consolidation is basically student loan refinancing. These refinanced student loans require qualification, meaning you will need a decent income, a good credit score, and a clean credit history to get the best rates. If you can’t qualify on your own, many lenders that offer student loan refinancing allow a co-signer to help you qualify or get better loan terms.

Student loan refinancing is ideal for private student loan borrowers who want:

  • A lower interest rate
  • A lower monthly payment
  • To consolidate several private loans into one

However, federal student loan borrowers considering private student loan refinancing may want to avoid it. Even if you can get a lower interest rate with a private loan, you will lose your federal student loan protections and benefits.

You can no longer qualify for Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment plans. And if there are any government-mandated pauses on student loan payments and interest, private student loans will not qualify.

Computing student loans using calculator. Guide to consolidating student loans.

Related: Federal vs private student loans: What's the difference?

Consolidation vs. Refinancing

While lower payments sound attractive, there are several factors to consider, especially if you have federal student loans. If you are thinking of refinancing your federal loans through a student loan refinance with a private company, this removes all privileges that come with your federal loans. 

Here’s the difference between a true federal student loan consolidation and refinancing your student loans:

Federal loan consolidationPrivate loan refinancing
Types of loansFederal loans onlyFederal or private loans
Are longer repayment terms available?NoYes
Longer repayment terms available?YesYes
Borrower protections available?YesNo
One monthly payment?YesYes

How to consolidate federal student loans

If you want to get started with consolidating multiple federal student loans into a single loan, here are the steps you need to take:

  1. Make sure you can apply: You’ll need to graduate, leave school, or be enrolled less than half-time to apply for loan consolidation. Ideally, you want to wait until your grace period has ended to consolidate your loans.
  2. Head to the Federal Student Aid website: StudentAid.gov where you can view all of your current federal student loans and details about each loan. This is where you’ll apply for federal loan consolidation.
  3. Apply for a direct consolidation loan: You’ll need to finish the entire application in one go, so make sure you have everything you need before starting the application. This may include personal information, loan information, and other documentation.
  4. Choose your loans: Pick the federal loans you want to include in the loan consolidation. You don’t have to pick all of your federal loans.
  5. Choose a repayment plan: You can choose a repayment term between 10 to 30 years in length, or an income-driven repayment plan based on your income. Income-driven repayment plans require an additional application.
  6. Submit your application: Once you select your loan terms, submit your loan application to complete the consolidation. You’ll need to keep paying on your old loans until the consolidation is complete.

How to consolidate private student loans

If you want to refinance your private loans into a single loan, here are the steps to take:

  1. Compare lenders: There are dozens of private student loan refinancing companies out there, so make sure to compare a few private lenders to find the best loan rates and terms for your situation.
  2. Get prequalified: Most lenders allow you to submit a prequalification application in just a few minutes and will show you potential loan options and interest rates. Submitting a prequalification for several lenders will help you compare your loan options quickly.
  3. Pick your consolidation loan: Once you’ve reviewed your loan options, pick a lender and consolidation loan to apply for. You will need to choose your loan terms, and interest rate terms (variable or fixed), and submit an application.
  4. Apply for a new consolidation loan: Private lenders require that you fully qualify for your student loan refinance. This means submitting your personal information, previous loan information, and financial information. You may need to provide documentation and you will need to undergo a credit check to qualify.
  5. Sign the paperwork: Once your loan is approved, you’ll need to sign all of the required loan documentation and your private lender will pay off your previous loans directly (in most cases). Your first loan payment on your new loan is usually due within a month or so.

FAQs

Is it a good idea to consolidate student loans?

It can be a good idea to consolidate your student loans, but it depends on your individual circumstances. If you have private student loans with high-interest rates or a high monthly payment, refinancing those loans can help you lower both your interest rate and your monthly payment.

If you have federal loans, consolidating can help you combine everything into a single payment with no additional fees, and let you choose a loan term that works better for you. But if you refinance federal student loans, you can lose your borrower protections and access to student loan forgiveness programs which hurt you in the long run.

Does consolidating student loans hurt your credit?

Consolidating federal student loans has very little impact on your credit, as you won’t undergo a credit check and you still have the same student loan balance. Refinancing student loans with a private lender can impact your credit as you’ll need to undergo a credit check and a new loan may impact your credit history.

Will consolidating my student loans affect forgiveness?

Consolidating your federal student loans will not affect your student loan forgiveness qualification as long as you don’t miss any payments. In fact, you may not qualify for student loan forgiveness options if you have a Perkins loan, FFEL loan, or other non-Direct Loan that you consolidate.

If you refinance your federal student loans into a private student loan, this will remove any student loan forgiveness options you previously qualified for.

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I'm an award-winning lawyer and personal finance expert featured in Inc. Magazine, CNBC, the Today Show, Business Insider and more. My mission is to make personal finance accessible for everyone. As the largest financial influencer in the world, I'm connected to a community of over 20 million followers across TikTok, Instagram, YouTube, Facebook and Twitter. I'm also the host of the podcast Erika Taught Me. You might recognize me from my viral tagline, "I read the fine print so you don't have to!"

I'm a graduate of Georgetown Law, where I founded the Georgetown Law Entrepreneurship Club, and the University of Notre Dame. I discovered my passion for personal finance after realizing I was drowning in over $200,000 of student debt and needed to take action-ultimately paying off my student loans in under 2 years. I then spent years as a corporate lawyer representing Fortune 500 companies, but I quit because I realized I wanted to have an impact; I wanted to help real people and teach them that you can create a financial future for yourself.

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Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.