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It can be difficult to keep track of multiple student loans with different interest rates and payments. In this case, student loan consolidation could be a helpful strategy. Through consolidation, you can combine your existing loans into a new loan with just one monthly payment, which could greatly simplify your repayment.
Keep in mind that there are options for both federal and private student loan consolidation, depending on your needs. If you have federal student loans and aren’t sure how you’ll afford your payments after the forbearance period granted by the CARES Act expires on May 1, 2022, then federal consolidation in particular might help you manage your loans more easily.
Here’s what you should know about student loan consolidation:
- How does student loan consolidation work?
- How consolidation compares to refinancing student loans
- Loan types that can be consolidated
- How to consolidate private student loans
- How to consolidate federal student loans
How does student loan consolidation work?
Student loan consolidation is the process of combining your student loans into one new loan with a single payment. Here are the two main categories of consolidation available for student loans:
- Private consolidation: Also known as student loan refinancing, this process lets you pay off your existing loans with a new private student loan. Depending on your credit, this might get you a lower interest rate — which could save you money on interest and potentially help you pay off your loans faster.
- Federal consolidation: If you have federal student loans, you can consolidate them into a federal Direct Consolidation Loan. While this won’t get you a lower interest rate, it will let you extend your repayment term up to 30 years, which can greatly reduce your monthly payments. Just keep in mind that you’ll pay more interest over time with a longer term.
However, if you refinance federal student loans, you’ll lose access to federal benefits and protections — such as income-driven repayment (IDR) plans and student loan forgiveness programs.
Learn More: The Complete List of Student Loan Forgiveness Programs
For private student loan consolidation, you’ll need:
- A history of earnings and credit: If your credit score keeps you from being approved, you can try applying with a cosigner.
- Enough income to manage your monthly payments: If your debt-to-income ratio is too high, you might not be approved.
For a federal Direct Consolidation Loan, you’ll need:
- To be in grace or repayment: You can’t consolidate while you’re in school or if your loan is currently in default.
- 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.
- 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 consolidation compares to refinancing student loans
Federal student loan consolidation can lower monthly payments by stretching out your loan term to as long as 30 years. But your interest rate does not change — it’s the weighted average of your existing loans, rounded up to the nearest one-eighth of a percent.
Since you don’t get an interest rate reduction, the tradeoff for lowering your monthly payment through federal consolidation can be thousands of dollars in additional interest charges. But if you end up qualifying for loan forgiveness in an IDR plan, you might come out ahead.
You may qualify for a lower interest rate with lenders that offer private student loan consolidation. Refinancing with a private lender also allows you to adjust your repayment term, and a lower interest rate can help you pay your loans off faster. Borrowers who lower their interest rate and shorten their repayment term can save tens of thousands in interest charges.
Learn More: Student Loan Consolidation vs. Student Loan Refinancing
|Federal consolidation||Private consolidation (refinancing)|
|What is it?||Combines most types of federal student loans into a new federal loan||Get a new interest rate and repayment term by refinancing into a private loan|
|Best if||Your interest rates are too high|
|Which loans can be combined?||Most federal loans||Private loans and most federal student loans|
|Will it lower my interest rate?||No||Yes
(creditworthy borrowers may qualify for a lower interest rate)
|Can it save me money?||Maybe, if you qualify for loan forgiveness|
(you may pay more if you don’t qualify for loan forgiveness)
|Yes, especially if you don’t extend your repayment term|
|Will I keep federal benefits and protections?||Yes||No|
|Credit check required?||No||Yes|
Loan types that can be consolidated
Private student lenders will consolidate almost any federal or private student loan taken out by a creditworthy borrower to attend a qualified school. Most lenders will refinance parent PLUS loans, and a few will also let parents transfer those loans to their children.
Only government student loans are eligible to be combined in a federal Direct Consolidation Loan. But almost any type of federal loan, including the following, qualifies:
Federal loans that can be consolidated
- Subsidized Federal Stafford Loans
- Unsubsidized and Nonsubsidized Federal Stafford Loans
- PLUS loans from the Federal Family Education Loan (FFEL) Program
- Supplemental Loans for Students
- Federal Perkins Loans
- Direct PLUS Loans
- Parent PLUS loans
- Grad PLUS loans
- Nursing Student Loans
- Nurse Faculty Loans
- Health Education Assistance Loans
- Health Professions Student Loans
- Loans for Disadvantaged Students
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- FFEL Consolidation Loans and Direct Consolidation Loans (only under certain conditions)
- Federal Insured Student Loans
- Guaranteed Student Loans
- National Direct Student Loans
- National Defense Student Loans
- Parent Loans for Undergraduate Students
- Auxiliary Loans to Assist Students
See: Transferring Parent Loans to a Student
How to consolidate private student loans
If you’re interested in lowering the interest rates on your federal and private student loans, look into private student loan consolidation. Checking rates with several lenders that offer student loan refinancing will help you find the loan that’s the best fit for you.
When to consider private loan consolidation
Refinancing can help borrowers meet different goals. The type of loan you pick, and the savings you can achieve by refinancing, will depend on your goal:
- Lower your monthly payment: Many borrowers who want to lower their monthly payment will refinance into a loan with a longer repayment term. Even if you lower your interest rate, your total repayment costs may increase if you stretch your payments out over many years.
- Maximize savings: Refinancing into a loan with a shorter repayment term will get you the lowest interest rate, and produce the greatest total savings over the life of the loan. The tradeoff is that your monthly payment may increase.
- A little of both: If you refinance into a loan with a lower interest rate but roughly the same repayment term, you can lower your monthly payment and total repayment costs, although not as dramatically as if you focused on one goal or the other.
Qualifying for private loan consolidation
You’ll need good to excellent credit to qualify for private consolidation — if your credit score is less than 650 to 670, you’ll have better odds applying with a spouse or relative as a cosigner.
To be a good candidate for refinancing, it helps if you:
- Earned your degree: Not all lenders require a degree, but many do
- Have a solid history of credit and earnings: Once you graduate, landing a job boosts your creditworthiness
- Make enough money: The most common reason borrowers are turned down for refinancing is not their credit score, but excessive debt-to-income ratio
Private student loan consolidation makes sense if you don’t expect to qualify for federal student loan forgiveness, and you don’t care about losing access to government programs like income-driven repayment.
Types of loans that are eligible for private loan consolidation
- Federal student loans: Direct subsidized and unsubsidized loans, Federal Family Education Loan (FFEL) loans, FFEL consolidation loans, and Direct Consolidation Loans can all be refinanced.
- Private student loans: You can refinance most private loans that were taken out to attend colleges and universities that are certified to accept federal aid. Private loans that were previously refinanced also qualify.
- Parent and Grad PLUS Loans: If you took out parent PLUS Loans for your child, most lenders will refinance them if you keep them in your own name. Some lenders will also allow parents to transfer PLUS Loans to their children if the child qualifies for refinancing.
Learn More: 10 Best Student Loan Refinance Companies
How long it takes
If you’re approved for refinancing, it could take one or two billing cycles for the refinance to be processed. In the meantime, be sure to continue making payments on your old loans until the refinance is complete.
Interest rates for consolidating private student loans
If you decide to refinance your student loans, be sure to shop around and consider as many lenders as possible to find the right loan for your needs. Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.
|Lender||Fixed rates from (APR)||Variable rates from (APR)||Loan terms (years)|
|4.4%+||5.0%+||5, 7, 10, 15, 20|
|5.39%+1||6.49%+1||5, 7, 10, 15, 20|
|5.99%+2||5.99%+2||5, 7, 10, 12, 15, 20|
|7.16%+5||7.71%+5||5, 10, 15, 20|
|5.08%+3||4.78%+3||5, 7, 10, 12, 15, 20|
|5.61%+4||7.6%+4||5, 10, 15, 20|
|4.49%+||5.02%+||5, 7, 10, 15|
|5.5%+||N/A||7, 10, 15|
|5.79%+||N/A||5, 10, 15|
|Compare personalized rates from multiple lenders without affecting your credit score. 100% free!
All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures | 8Nelnet Bank Disclosures
How to consolidate federal student loans
To consolidate federal loans, apply through the Department of Education’s website, studentloans.gov, for a Direct Consolidation Loan. The process is easy and free — there’s no need to pay third-party companies that may offer to help you apply for federal loan consolidation.
When to consider federal consolidation
You can consolidate your federal student loans any time after you graduate. If you’d like to keep the six-month cushion provided by your grace period, you can specify that you want the loan application to be processed closer to when the grace period ends.
Some types of federal loans must be combined into a federal Direct Consolidation Loan in order to be eligible for income-driven repayment options which can lead to loan forgiveness. Parent PLUS loans, for example, are only eligible for IDR plans after being consolidated. Older Stafford loans from the FFEL program must also be consolidated in order to qualify for an IDR plan.
But be careful. If you already have loans enrolled in an IDR plan or have made qualifying payments toward Public Service Loan Forgiveness, you’ll have to start over if you convert those loans into a federal Direct Consolidation Loan. Payments made before you consolidated won’t count toward forgiveness.
Learn More: Pros and Cons of Consolidating Student Loans
For private student loan consolidation, lenders typically want to see a history of earnings, and a good credit score. Although you may qualify to refinance soon after leaving school and landing a job, you may qualify for a better rate once you’ve been working for a year or two.
Qualifying for federal student loan consolidation
For a Direct Consolidation Loan, you’ll need to either be already repaying your current student loans or the loans will need to be in their grace period. You can’t consolidate a loan amount that is currently in default.
Types of loans that are eligible for federal loan consolidation
Most federal student loans can be consolidated into a Direct Consolidation Loan. Private student loans aren’t eligible.
How long it takes
You can fill out the application for a federal Direct Consolidation Loan online at StudentLoans.gov. You have to complete the application in a single session — you can’t save your progress — but it takes most people less than 30 minutes.
Repayment begins within 60 days after your new loan is paid out. Your loan servicer will let you know when the first payment is due.