Student Loan Consolidation

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Loan consolidation involves merging multiple loans into a single one. If you’ve taken out several student loans during your college years, consolidating them can simplify your life in the following ways:

  • You can turn several loans into a single loan
  • You can make a single monthly payment instead of many
  • You can switch variable interest rates to a single, fixed interest rate
  • You might be able to lower your monthly bill
  • If you have loans that don’t currently qualify for a federal loan forgiveness program, you could turn them eligible

Students with federal student loans have the option to apply for a Direct Consolidation Loan. This allows them to merge various types of loans, including Unsubsidized and Nonsubsidized Federal Stafford Loans.

Often, students consolidate after their grace period is over. The grace period is when your loans are temporarily in deferment after you graduate.

What about private student loans? While not eligible for a Direct Consolidation Loan, you can consolidate your loans through a lender. This is called refinancing.



You can to fill out a Federal Direct Consolidation Loan Application and Promissory Note online. You may need information such as your Social Security Number, driver’s license number, and two personal references.


You may not wish to consolidate all of your federal loans. Why? Because some may come with extra benefits, like Perkins subsidized interest, or cancellation and discharge programs. You’ll lose those benefits after you consolidate.

Plus, if you have a loan with a higher interest rate than the others, you may wish to pay that off on its own. That’s because the interest rate of your Direct Consolidation Loan depends on the weighted average of the interest rates for all your loans. It may be smart to pay off that higher interest loan quickly, instead of including it in your Consolidation Loan.

What about private student loans? Since these don’t come with federal benefits, you could potentially refinance them all with a private lender.


For federal loans, you can choose from several servicers. One possible option is FedLoan Servicing, which manages the Public Service Loan Forgiveness program (PSLF). If you plan to work toward PSLF, it may make sense to choose FedLoan Servicing.

For private student loans, there are several private student loan companies that do refinancing. When choosing a company to work with, consider factors like:

  • Interest Rate Ranges: The interest rate you qualify for depends on your lender, your credit report/eligibility, and the market. As of 2018, variable interest rates range from about 2.5 to 9.09%. Remember that variable rates can get higher or lower over time. Fixed rates, which stay the same, range from about 3.35 to 9% in 2018.
  • Loan Amount: Some lenders have minimum or maximum amounts you can refinance.
  • Loan Period: How quickly do you want to pay off your loan? Refinancers may have a minimum loan period, usually from five to 15 years. They may also have a maximum loan period. Remember that the quicker you pay off your loans, the higher your monthly payments will be. But, you’ll save on interest if you pay off your loans quickly.
  • Hardship Options: Does your lender have deferment and forbearance options? If you have trouble paying off your loan due to an event like the loss of your job, these options could help.
  • Fees: Compare late fees or other kinds of loan servicing fees.
  • Extra Benefits: What extras make a particular lender stand out? For example, some offer interest rate reductions if you hit milestone goals – like repaying the first 10% of your principle.


For federal loans, there may be several ways to repay your consolidation loan. These include:

Standard Repayment Plan – Fixed payments, made over a period of 10 to 30 years Graduated Repayment Plan – Payments start out low and increase over 10 to 30 years Extended Repayment Plan – Fixed or graduated payments; pay off your loans in 25 years Income Driven Repayment Plans – Payments are recalculated each year based on factors like your income and family size

Private student loan refinancing companies do not have the same kinds of repayment options. That said, some lenders may offer more flexible plans.


Once you’ve fully understood your options, it’s time to take the next step. Contact the loan servicer if you have questions or need help with your application.


Both student loan consolidation and refinancing are ways to simplify repayment and change your loan terms. Consolidating only works for your federal loans, though.

If you want to combine several private student loans (or private + federal loans), you’ll have to refinance. Student loan refinancing means applying for a new private student loan and using it to pay off your other loans.

There are pros and cons to both. For starters, consolidation typically won’t lower your interest rate. Refinancing usually does, meaning you could save money over the life of your loan.

That said, refinancing student loans depends on factors like your income, credit report, and debts. In other words, your loan terms are based on your creditworthiness. That’s not the case when you consolidate federal student loans.

And, refinancing federal loans with a private lender could mean you lose out on key benefits – like subsidized interest or loan forgiveness.

Depending on the types of loans you have, a combination of consolidation and refinancing may be the ideal plan.

 Student Loan ConsolidationStudent Loan Refinance
Which Loans Can I Combine?Most federal student loansBoth private and federal loans
Can I Lower My Rates?Can I Lower My Rates? The interest rate on Direct Consolidation loans is based on the weighted average of the interest rates of the loans you’re combining. The good news? This interest rate is fixed, which means it can’t get higher over time. Yes, you may qualify for lower interest rates. It helps if you (or your cosigner) have a high credit score and low debt-to-income ratio.Yes, you may qualify for lower interest rates. It helps if you (or your cosigner) have a high credit score and low debt-to-income ratio.
Can I Save Money?Probably not (though fixed interest rates could help). Consolidation usually increases the length of your repayment period. Taking longer to repay what you borrowed could mean you’ll pay more interest over the life of the loan.Yes, you could save money if you qualify for a lower interest rate. Paying off your loan quicker can also help you save money.
Can I Use Federal Loan Protections and Forgiveness Programs?

Consolidating federal loans other than Direct Loans may give you access to:

  • Income-driven repayment plan options
  • Public Service Loan Forgiveness (PSLF)

But, consolidating your current loans means you’ll lose credit for any payments you’ve already made toward income-driven repayment plan forgiveness or PSLF.

And if you have Federal Perkins Loans, you’ll lose benefits like subsidized interest and cancellation/discharge options.

When you refinance federal student loans with a private lender, you lose federal benefits and programs. These include:

  • Income-based repayment options
  • Federal loan forgiveness programs
  • Interest discounts or rebates
  • Federal deferment and forbearance options (if you have trouble paying back your loans)
Will I Pay Only One Bill?YesYes
Who Offers These Loans?The U.S. Department of Education (often through consolidation loan servicers). Your first step should be to apply for a Direct Consolidation Loan at lenders, like banks and financial institutions


Average aid per full-time equivalent (FTE) student in 2022-23 was:

  • $15,480 per undergraduate student
  • $28,300 per graduate student


LenderWhy this LenderEligible DegreesEligible Loans
LendKeyChoose from flexible repayment plans, like interest-only payments for the first four years. And, pay no origination fees.Undergraduate and/or GraduatePrivate and/or Federal
CommonBondThey offer up to 24 months of forbearance over the life of your loan. And, you’ll pay no origination fees or prepayment penalties.Undergraduate and/or GraduatePrivate and/or Federal
College AveThey offer 16 loan term options. Choose how long it will take to pay back your loan, between five and 20 years. Plus, qualify for a lower interest rate when you use autopay.Undergraduate and/or GraduatePrivate and/or Federal

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Sources for school statistics is the U.S. Department of Education’s National Center for Education Statistics.

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1 You must apply for a new loan each school year. This approval percentage is based on students with a Sallie Mae undergraduate loan in the 2018/19 school year who were approved when they returned in 2019/20. It does not include the denied applications of students who were ultimately approved in 2019/20.

2 This promotional benefit is provided at no cost to borrowers with new loans that disburse between May 1, 2021 and April 30, 2022. Borrowers are not eligible to activate the benefit until July 1, 2021. Borrowers who reside in, attend school in, or borrow for a student attending school in Maine are not eligible for this benefit. Chegg Study® offers expert Q&A where students can submit up to 20 questions per month. No cash value. Terms and Conditions apply. Please visit for complete details. This offer expires one year after issuance.

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