If you have federal student loans, you can consolidate them to make monthly payments easier and more manageable for your finances. Instead of paying many loans at once, consolidating combines all your loans. The Direct Consolidation Loan is only available through the federal government via the U.S. Department of Education.
What you’ll need to consolidate your federal student loans
To start consolidating your student loans, you’ll need to get organized first. Check to see if your loan qualifies for consolidation before applying.
Private student loans can’t be consolidated, but most federal loans are eligible for consolidation. Direct PLUS Loans taken out by parents for dependent children can’t be consolidated with other federal loans by the student.
Now that you know which loans you can consolidate, here’s what you’ll need to start the process:
- Your FSA ID: This is your Federal Student Aid ID. It gives you access to the online portal for your loans and also serves as your digital signature.
- Your personal information: This includes your address, email, phone number, and the best time to reach you.
- Financial documents: Depending on your plan, you might be required to complete income information, so have recent tax returns handy. If you’re married, you’ll need your partner’s tax returns and income information as well.
How to apply for student loan consolidation online
Once you’ve got your documents ready, you can apply for student loan consolidation.
1. Apply online through StudentLoans.gov
Log in or set up your account through StudentLoans.gov. Make sure you have your FSA ID handy before you get started. This might hold up the application process if you try to start without one.
2. Make sure you have your documents handy
If you have all your files electronically, create a folder on your computer to put them in. If you have a physical folder, keep it with you as you start completing information. That way you can reference the information throughout the application process.
3. Fill out the application
Start answering questions regarding your personal details, like where you live and your Social Security number. You’ll also need to provide employer information, so have your company address and other pertinent info on hand.
4. Select the loans you want to consolidate
Next, you can pick which loans you want to add to the consolidation loan. If there are loans you don’t want to include, you’ll be asked about those in the next section. You’ll need detailed loan information, including:
- Loan code (which is available in the instructions)
- Loan holder/servicer name, address, and area code/telephone number
- Loan account number
- Estimated payoff amount
If any of your loans are in a grace period, you can delay your application to be processed until closer to the end of your grace period.
5. Choose your repayment plan
When it comes to your repayment options, you can choose a plan that’s best for you. This might just be a Standard Repayment Plan, or you can choose an income-driven repayment plan like:
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
This is where your income information and documents will be handy because an income-driven plan is influenced by how much you earn.
6. Read the terms and agreement
Make sure you understand what your obligations are as a loan borrower. This is still a loan repayment plan that you are responsible for paying back under the terms of your agreement. Remember that this is just an application; you’re not obligated to accept the loan terms if you don’t feel comfortable with them.
7. Review and submit your application
Do you repay existing loans while waiting for consolidation approval?
If you’re not in a grace period, you’re still obligated to pay your student loans as the current terms say. At the very least, you should be paying the minimum amount on time every month.
Not paying your loans on time can set you up for a major credit score plummet. Payment history is the biggest factor in determining your credit score. Even if you’re waiting for your consolidation loan application to process, you’re still required to pay your loans right now.
Is consolidating your loans the best choice?
Consolidating your student loans is a great option if you have many different federal loans with various loan servicers. It can combine them into one loan payment that’s easier to maintain than many small ones. It can keep you on track to making on-time payments every month, which might be difficult if you have a lot of different loans.
But consolidation isn’t the best option for everyone. If you have a mix of federal and private loans, consolidating only takes care of the federal loans. Or if your federal student loans don’t qualify, they won’t all be included in the consolidation process.
If you want all your loans to be consolidated, you might consider refinancing your student loans with a private lender. This takes all your loans — federal and private — and combines them into a single loan. But instead, you’ll get a new loan with a new interest rate and repayment term to replace all your existing loans.
Refinancing might be a good idea for you, but keep in mind that you lose your federal protections — like an income-driven repayment plan or forgiveness options like Public Service Loan Forgiveness — when you refinance. Review all your options and choose which one is best for your financial situation.