How to Consolidate Student Loans

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Avoiding Student Loan Debt

Graduates from the class of 2018 owe, on average, $29,200 in student loan debt. Many of these graduates hold loans from various lenders and must keep track of multiple monthly payments and different interest rates.

Recipients who consolidate their student loans combine loans from different lenders into one loan. For many graduates, consolidation means a single monthly payment, a lower interest rate, and lower monthly payments. While loan consolidation can simplify the repayment process, it is not the best choice for everyone.

This page explains the consolidation process, including the advantages and disadvantages of consolidating your student loans.

What Is Student Loan Consolidation?

Student loan consolidation lets loan recipients combine multiple student loans into a single loan. Federal loan recipients can apply for loan consolidation through the Direct Consolidation Loan program. People with private loans or a mix of federal and private loans can refinance their loans through private lenders.

Loan consolidation can help lower the monthly payments on student loans. Recipients also benefit from a single monthly payment rather than payments to multiple lenders each month.

Most federal student loan and private loan programs qualify for consolidation. During the consolidation process, recipients negotiate a new interest rate and monthly payment. Consolidation also lets recipients increase the total time to repay their loans.

Loan recipients can apply for a federal consolidation loan for free online after they begin repaying the loan. Before applying for a consolidation loan, recipients should carefully consider the pros and cons of loan consolidation.

Advantages of Student Loan Consolidation

Why should you consolidate your student loans? Student loan consolidation offers several benefits, including lower interest rates, a single payment, and potentially lower payments.

During the consolidation process, students can change the interest rate on their loans. Many students took out loans at interest rates higher than today’s rates. By consolidating, students can benefit from lower interest rates.

In addition, federal student loan recipients often hold loans with multiple loan services. After consolidating federal student loans, recipients have a single loan through one lender. This means one monthly payment versus multiple payments.

Consolidation can also mean lower payments. The federal government gives students up to 30 years to repay their loans after consolidation. While this means paying more interest over the life of the loan, it translates into a lower monthly payment.

Students who took out loans at a variable interest rate can also consolidate to lock in a low fixed interest rate. This can easily mean thousands of dollars in savings.

The Difference Between Consolidation and Refinancing

  • Federal Loan Consolidation

    The federal student aid program offers multiple loans for students, including Stafford loans, PLUS loans, and Perkins loans. Some loans include caps on how much students can borrow. For example, students can borrow $5,500-$12,500 per year in direct subsidized and direct unsubsidized loans. Nearly all federal student loan programs meet the requirements for consolidation.

    Loan servicers work with the federal government to administer the loan. Most students who take out federal loans hold loans from multiple servicers. By consolidating the loan, students take out a new loan equivalent to their total student debt while paying off the multiple smaller loans.

    Recipients must meet several eligibility requirements to consolidate their federal loans. For example, the loans must be in the grace period or repayment. Recipients must demonstrate a satisfactory repayment record on any defaulted loans, typically by making three consecutive payments.


    • Fewer payments to manage monthly
    • Can switch variable to fixed rates
    • Monthly payments might be lower


    • Lower payments sometimes mean lengthier payment terms
    • More interest paid through the loan’s duration
    • No variable rate means loan recipients are stuck if rates fall because they can only consolidate once

  • Private Loan Consolidation

    In addition to federal loans, many private banks and financial institutions offer student loans. Rather than qualifying for these loans by submitting the FAFSA, students can apply directly with the bank. Schools sometimes offer private loans as part of their financial aid package. Recipients may need to demonstrate strong credit or provide a cosigner for private loans.

    Private loans may not offer the same benefits as federal loans, including income-based repayment plans and grace periods to repay interest. However, students can typically borrow more from private lenders.

    Private loan consolidation, also known as refinancing, can help recipients lower their payments and qualify for a lower interest rate. When refinancing, recipients negotiate with a lender to take out a single loan at a lower interest rate. The refinanced loan may come with a fixed or variable interest rate. Lenders may require a minimum income or credit score to refinance.


    • Potentially lower your payments
    • If you have good credit, you might see lower interest rates
    • Helps you dodge or prevent defaulting


    • You might lose borrower benefits
    • Longer payment periods
    • Variable rates might become an issue

Things to Consider Before Consolidating

Should you consolidate your student loans? It depends on several factors. For example, consider a recipient with both federal and private loans who does not qualify for a Direct Consolidation Loan. Refinancing with a private lender means losing the benefits of the federal student loan program, such as income-based repayment options.

When researching consolidation loans, pay close attention to the interest rate, the monthly payment, and the total cost of the loan. While consolidation can lower the monthly payment, it can mean paying more in interest. This might make sense for recipients in danger of defaulting who need to lower the monthly payment — but for others it makes less financial sense.

Recipients with multiple loans at different interest rates should also check whether the consolidated loan offers a lower or higher interest rate.

Recipients participating in a loan forgiveness program can lose progress toward repayment by consolidating. The clock resets for loan forgiveness if you consolidate student loans.

How to Consolidate Student Loans

  • Visit and enter your FAFSA ID. You should have this ID from when you first applied for student aid.
  • Click on “Apply for Loan Consolidation” on the home page. Then, click “Start.”
  • Select the loans you need to consolidate.
  • Loans that are in a grace period may have a processing delay of 1-9 months.
  • Select a servicer, like Navient, Nelnet, Great Lakes Educational Loan Servicing or FedLoan Servicing.
  • Choose a new repayment plan.
  • Submit the application.
  • After applying, maintain your current payment schedule while you wait for a loan servicer to contact you.

How to Consolidate Private Student Loans

  • Research the best lending institution for your student loan consolidation needs.
  • Take inventory of all your private student loan debt, the payment amounts, and interest rates.
  • Contact lenders to determine their application process, how long it takes, and other requirements.
  • Before committing to a lender, make sure you read the fine print regarding added fees, interest rates, and payment terms.

Remember: Consolidating Your Loans is a Personal Choice

Consolidating your student loans can mean lower monthly payments, a lower interest rate, and one monthly payment. Or consolidation can mean losing progress toward a loan forgiveness program and a higher total bill for the student loan.

Consolidation does not benefit all student loan recipients, so carefully research loan options before consolidating. Rather than just considering the monthly payment, research the interest payment and the total loan amount. Determine what loan benefits you might lose by consolidating.

Individuals with both federal and private loans should also research the benefits they might lose by refinancing their loan. And remember — you can only consolidate your loans once.

Loan consolidation can help many students keep their student loans manageable and benefit from lower interest rates. Ultimately, the decision to consolidate student loans is a personal choice. Loan recipients must decide whether the option makes sense for their unique situation.

Portrait of Genevieve Carlton

Genevieve Carlton

Genevieve Carlton holds a Ph.D. in history from Northwestern University and earned tenure as a history professor at the University of Louisville. An award-winning historian and writer, Genevieve has published multiple scholarly articles and a book with the University of Chicago Press. She currently works as a freelance writer and consultant.

See articles by Genevieve

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