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How To Consolidate Your Student Loans

Scott Steinberg4-minute read
PUBLISHED: November 05, 2020

Wondering how to consolidate student loans? We don’t blame you. After all, it can be highly stressful trying to juggle multiple loan commitments at varying interest rates and manage monthly payments to several lenders.

Luckily, the process of student loan consolidation can help minimize aggravation and alleviate challenges here. Allowing you to reorganize multiple loans into a single outstanding loan while also potentially extending your repayment terms and lowering monthly fees, it’s often a convenient way to streamline student debts into a single monthly payment.

Simply read on to learn the best ways to consolidate your federal or private student debt while also keeping balances and loan terms manageable.

What Is Student Loan Consolidation?

A form of financial assistance that helps pay for school-related expenses such as tuition, books, school supplies, and living expenses – student loans are common amongst individuals seeking to pay for a higher education. But these loan expenses, which are often considerable and typically repaid after your education has finished, can quickly add up and become a burden to manage.

Student loan consolidation is a process that allows you to streamline the process by combining your student debt repayments into a single monthly payment. Additionally, it can make you eligible for other repayment plans or loan forgiveness. In effect, the process of student loan consolidation can be leveraged to help you more effectively manage your outstanding education loans, including both private and federal student loan packages, or secure better terms on outstanding balances.

When Should I Consolidate My Student Loans?

Having to make multiple payments to various service providers can complicate monthly budgets, prompt confusion, and potentially even hurt your credit score. If you’d prefer to minimize upkeep, or could use more money in hand, you may wish to explore the possibility of student loan consolidation.

That’s because consolidating student loans can not only help you roll up outstanding debts into one agreement with a single lender. It also presents the possibility for you to secure new loan terms which may be more favorable. For example, you may be able to extend the life of the loan, shrink your monthly payments, or even adopt a new, income-based repayment schedule. Note that extending the length of any loan may increase the amount you pay in interest overall, however.

Student Loan Consolidation: Federal Vs. Private

Two types of student loan consolidation are available to borrowers, including solutions for federal and private student loans. While the processes may sound similar on paper, differences exist between each, as noted below.

Federal Student Loans

Federal student loan consolidation for subsidized or unsubsidized federal student loans allows you to effectively combine multiple federal loans under one umbrella via a single loan facilitated through the Department of Education. Approved participants, who can apply online, will have their outstanding federal loans paid off and be issued a Direct Consolidation Loan in the amount of the total balances paid. Bear in mind though that while taking out a Direct Consolidation Loan can help you combine your repayments into a single monthly payment and extend the amount of time you’ll have to repay the loan, it won’t lower your interest rate.

Private Student Loans

Alternately, private student loans can be issued that allow you to refinance borrowed sums and combine your existing private student loans, federal student loans, or a mix of both under a new loan instrument at a lower interest rate from a single private lender. But a private loan refinance may require you to meet certain minimum credit score and income requirements, or even take on a cosigner if you don’t yet have the financial history or income needed to qualify. Should you elect to accept private student loan consolidation, you may also render yourself ineligible for select federal repayment or forgiveness programs. As a result, it’s best to research all options before committing to a student loan consolidation program.

What Are The Interest Rates For Student Loan Consolidation?

Should you elect to consolidate your federal loans through the Department of Education, which comes at no cost, your fixed interest rate will become the weighted average of the interest rate of all the loans that are being combined. You won’t lower your interest rate by going through the process, but you may lower the amount that you are required to repay on a monthly basis as the term of the loan will be increased. On the flip side, should you choose to consolidate student loans by privately refinancing, your current credit score will be used to determine your new interest rate instead.

Pros And Cons Of Student Loan Consolidation

As with any financial decision in life, there are potential upsides and downsides to consolidating student loans.


  • Allows you to simplify and streamline student loan repayments into a single monthly payment that is made to a single servicer

  • Can help you lower your monthly payments or extend the overall term of your loan

  • May make you eligible for certain student loan forgiveness programs

  • No additional cost or fee for consolidating student loans


  • Longer loan terms mean that you may ultimately pay more in interest over time

  • Any outstanding interest will carry over to the consolidation loan’s principal balance

  • Consolidating may render you ineligible to receive select borrower benefits associated with your previous loans

  • You may lose credit for payments already made to loan forgiveness programs

Bottom Line

Borrowers seeking to consolidate student loans have many options to pick from. As a result, you’ll want to research and review options extensively before applying for a student loan consolidation program.

Federal consolidation loans often offer a variety of repayment, loan forgiveness, and loan discharge options, including the choice to adopt an income-driven repayment program. Private consolidation lenders may offer more favorable monthly payment terms and repayment plans that better suit your needs, but also attach variable rates and fees to sums lent.

Before committing to a lender and plan, be sure to look into available student loan forgiveness programs. A variety of options exists that are designed to meet your individual student loan needs.

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Scott Steinberg

Hailed as The Master of Innovation by Fortune magazine, and World’s Leading Business Strategist, award-winning professional speaker Scott Steinberg is among today’s best-known trends experts and futurists. He’s the bestselling author of 14 books including Make Change Work for You and FAST >> FORWARD.