How To Consolidate Private and Federal Student Loans Into One Payment

It's common to leave college with several student loans waiting to enter repayment as soon as you graduate or drop below full-time status. Maybe you had to borrow every year to cover tuition, or perhaps one loan wasn't enough to cover the full cost of attendance. Whatever the reason, juggling multiple payments on multiple loans can be overwhelming.

Consolidating those loans into a new loan with one payment is a simple way to lower your monthly costs and streamline the repayment process.

If you have federal student loans and private student loans, you can refinance both into a new private loan. But you should consider your options before deciding because you'll lose certain federal loan benefits, including income-driven repayment plans and eligibility for loan forgiveness.

How to consolidate student loans

There's an important distinction between student loan consolidation and refinancing.

When people say “student loan consolidation,” they're referring to federal student loan consolidation offered by the U.S. Department of Education through a Direct Consolidation Loan. This loan combines multiple federal student loans into one to simplify repayment or access specific repayment options and forgiveness programs. 

Your credit score isn't a factor because you won't necessarily get a lower interest rate with consolidation. Instead, the interest rate is based on a weighted average of the rates you paid on the loans you want to consolidate.

On the other hand, private student loan lenders don't offer “consolidation” in the federal sense. Instead, they offer “refinancing.” When you refinance, the private lender you choose pays off one or more of your existing student loans — federal, private, or both — and issues you a new loan with a new interest rate and loan terms. Most people refinance their student loans with a private lender to get a lower rate, reduce their monthly payments, or shorten the loan term. Your interest rate on the new loan is based on your credit score and income.

Find out: How Much Do I Owe in Student Loans?

Federal student loan consolidation

The Department of Education offers federal student loan borrowers Direct Consolidation Loans at no cost, which can help make loan repayment more manageable. Most student loans, except private ones, are eligible for consolidation, including defaulted loans. You're eligible for consolidation after leaving school or dropping below half-time enrollment, and you can consolidate one, two, or all of your federal loans.

Applying for a consolidation loan takes about 30 minutes. You'll be asked to choose a new repayment plan: a fixed-payment or an income-driven repayment (IDR) plan.

Fixed repayment plans include the Standard Repayment Plan, Graduated Repayment Plan, and Extended Repayment Plans. These plans calculate your monthly payment based on how much you owe and the interest rate assigned to your new Direct Consolidation Loan.

IDR plans calculate your monthly payment based on your income and family size. They include the Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR) plans. If consolidating a defaulted loan, you must pick an income-driven repayment plan.

According to Federal Student Aid, “After paying a certain number of months of qualifying payments on an IDR plan, you can get the remaining balance of your loan(s) forgiven.” You have to recertify your plan every year, even when there's no change to your income or family size.

When you consolidate federal student loans, the government determines the interest rate based on your combined loans. It rounds up the rate by 0.125 of a percentage point, so most borrowers don't receive a lower interest rate, but the rate stays the same for the remainder of the loan.

Federal student loan consolidation pros and cons

Federal student loan consolidation has several benefits, including having one loan payment and planning your budget in advance. You'll still have access to federal benefits, like income-driven repayment plans (IDR) and loan forgiveness programs, and you can switch from variable-rate loans to a fixed interest rate.

When you consolidate your federal student loans, you lose rate discounts and credit toward any payments you were making under an income-driven payment plan. Repayment starts 60 days after the loan is disbursed.

Besides Perkins Loans, which have a fixed interest rate of 5%, interest rates for federal student loans depend on the loan type you want. For the 2024-25 academic year (July 1, 2024 to July 1, 2025), federal interest rates are:

How to consolidate private student loans

When you have multiple private student loans — or multiple student loan lenders — and want to consolidate them into one monthly payment, you'll need to look into refinancing. This lets you combine the separate loan balances into a new loan with one monthly payment. Refinancing private loans can potentially get you a lower interest rate, too.

If you pick a longer term, your monthly payment will be lower, but you'll pay more interest over time. Refinancing your student loans can lower interest rates, especially if you have a good credit history or apply with a cosigner. Some private lenders allow cosigners to be released from the loan following a specific amount of on-time payments. A lower interest rate means lower monthly payments and overall loan costs.

You can compare rates from multiple private lenders to be sure you find the best fit for your financial needs.

Why you can trust our Credible experts

The Credible editorial team is independent and unbiased. Partners do not influence our editorial content. To help you find the best student loan for your situation, we conduct thorough research and analyze thousands of lender data points. Using data-driven methodologies, we score criteria that are important to you. This allows us to objectively rank student loan lenders and products. To learn more, read our methodology below.

Methodology

To determine the best student loan refinance lenders for borrowers, Credible collected more than 1,000 points of data on two dozen companies and evaluated them on several different categories: repayment options, eligibility, interest rates, loan terms, and customer support. We assigned a score out of five stars to each lender based on our findings. Below are the weightings assigned to the general categories for the best student loan companies — which comprise individual criteria that are also weighted.

• Repayment options: 30%
• Eligibility: 25%
• Interest rates: 20%
• Loan terms: 15%
• Customer support: 10%

While the best lender for you will depend on your unique needs and financial circumstances, these findings should help answer your questions and assist you in your search for the best student loan.

Learn more about our methodology.

Private student loan refinancing pros and cons

If you have private student loans, refinancing could be beneficial if you can secure a lower interest rate on your refinance loan. You can check refinancing rates from multiple lenders without affecting your credit score. Lenders offer different rates, perks, and rate terms and have different eligibility requirements.

Once you apply, your credit score will be dinged with a hard credit check, so be aware before applying. After processing the loan, your new lender will pay off your previous loan balances. Continue making payments on your existing loans until you receive confirmation that your new lender has paid them off.

Check Out: When Is the Best Time To Refinance Student Loans?

Student loan consolidation calculator

Whether you have federal or private student loans, use an online loan calculator to estimate your new payments and decide whether refinancing or consolidating are good options. A calculator can show you how your monthly payments, interest rate, and total repayment costs might change after you consolidate them. Toggle between different loan terms, like 10-, 15-, or 20-year options, to find the right fit.