We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
APA: Black, M. (2024, June 10). How to consolidate student loans & why you might want to. Bankrate. Retrieved September 17, 2024, from https://www.bankrate.com/loans/student-loans/how-to-consolidate-student-loans/
Copied to clipboard!MLA: Black, Michelle. "How to consolidate student loans & why you might want to." Bankrate. 10 June 2024, https://www.bankrate.com/loans/student-loans/how-to-consolidate-student-loans/.
Copied to clipboard!Chicago: Black, Michelle. "How to consolidate student loans & why you might want to." Bankrate. June 10, 2024. https://www.bankrate.com/loans/student-loans/how-to-consolidate-student-loans/.
Copied to clipboard!
Written by
Michelle Black
Michelle Lambright Black is a credit expert with over 19 years of experience, a freelance writer and a certified credit expert witness. In addition to writing for Bankrate, Michelle's work is featured with numerous publications including FICO, Experian, Forbes, U.S. News & World Report and Reader’s Digest, among others.
Edited by
Pippin Wilbers
Pippin Wilbers is a Bankrate editor specializing in personal and auto loans. Pippin is passionate about demystifying complex topics, such as car financing, and helping borrowers stay up-to-date in a changing and challenging borrower environment.
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money .
Bankrate logoFounded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money.
Bankrate logoBankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
Bankrate logoYou have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
Student loan consolidation means taking multiple student loan accounts and rolling them into a single loan account. Federal student loans are eligible for consolidation through the U.S. Department of Education’s Direct Consolidation Loan program. Though this can result in more interest paid over time, consolidation may be a potential solution if you’re struggling with student loan payments.
Private student loans can be combined through a process more commonly referred to as refinancing. However, refinancing and consolidation aren’t the same thing, even if they both combine multiple loans into one.
While the processes are similar, consolidation and refinancing differ in some ways. Each has advantages and disadvantages. Understanding the nuances can help you select the right process for you when it comes to your student debt.
Student loan consolidation is an option when you have multiple federal loans outstanding. Consolidation rolls several loans into one larger loan and a single monthly payment. This sometimes involves extending the loan repayment period to further lower monthly payments. Your new student loan interest rate will be based on the weighted average of your existing loans.
Student loan refinancing involves moving loan debt from multiple servicers to a single private lender. This can lead to a single, lower overall interest rate and monthly payment. While consolidation retains the benefits of federal loans, like access to income-driven repayment (IDR) plans and forgiveness, refinancing turns your federal loans into private ones.
Though refinancing can save you money in the long run, it means giving up any benefits you may have had as a federal loan borrower. Your eligibility and interest rate will be based on your creditworthiness. Requirements, as well as loan offers, vary by lender.
| Refinancing | Consolidation | |
|---|---|---|
| Will my interest rate change? | Potentially | Yes, to an average of existing rates |
| Will my monthly payment be lower? | Maybe (this will depend on your selected repayment term and new interest rate) | Maybe (your repayment term may be longer; if so, your monthly payment may be lower) |
| Can I save money overall? | Yes | No |
| Can I keep my federal loan repayment options, forgiveness eligibility, and protections? | No | Yes |
| Can I merge federal and private loans into one monthly payment? | Yes | No |
Consolidating private student loans, known as refinancing, is much like any other debt consolidation process. You will want to compare the rates available with different lenders. Consider getting prequalified, which will require some information about your finances.
After you have identified which lender will be the best fit for your financial situation, apply for a consolidation loan. This will merge your existing student loans — potentially from multiple lenders — into one larger loan with a single servicer.
Requirements vary by lender. However, most will take a look at the following factors to determine your eligibility to refinance your private student loans:
To qualify for private student loan refinancing, you’ll need a steady income and a solid credit score of about 670. The application process will also require documents such as your Social Security number, Driver’s license or government ID, loan payoff statements from your existing lenders or servicers and proof of employment, including pay stubs or W-2 forms.
To consolidate your federal student loans, first complete an application form for direct consolidation online or by mail. Once you have selected a repayment plan and loan servicer, your application will be processed. This takes around six weeks, according to the U.S. Department of Education.
About two weeks before your new consolidation loan is disbursed, you should receive a loan summary statement from the new servicer. This document will outline the details of your new loan, including the total balance, interest rate, and repayment schedule.
The statement should include specifics about your first payment due date. You will have 10 business days after receiving this statement to review it and cancel your application if you change your mind.
In the meantime, you should continue making payments to avoid credit or financial consequences.
The U.S. Department of Education sets requirements for consolidating your federal student loans. For starters, any loans you wish to consolidate must be in either the grace period or active repayment status.
If your loans are in default, you’ll need to make an approved repayment arrangement before you can consolidate. As an alternative, you may be able to set up your new Direct Consolidation Loan under one of four IDR plans:
In general, you can’t consolidate an existing federal consolidation loan. However, there’s an exception to this rule if you include another eligible student loan in your new consolidation.
The Department of Education might also allow you to reconsolidate an existing FFEL Consolidation Loan that’s past due or in default if you can qualify for a new income-driven repayment plan.
On top of the requirements above, only certain federal student loans are eligible for consolidation:
If you’re looking for a lower interest rate and aren’t planning on using any federal benefits, refinancing your student loans with a private lender might be a good fit. Refinancing is the only consolidation option if your existing loans are private.
On the other hand, if you have federal student loans and a poor credit score, or you need to bring your loans current or want to hang onto your federal student loan benefits, consolidating your federal student loans might make more sense.
The main benefits of federal student loan consolidation include:
Federal student loan consolidation isn’t the right option for everyone. Some drawbacks to consider are:
Before choosing, use a student loan refinance calculator to help you crunch the numbers. The U.S. Department of Education also provides a Loan Simulator tool to assist you.
As with any financial decision, it’s important to do your homework before consolidating your federal student loans. One of the best ways to determine whether consolidation is the right move in your situation is to compare the benefits and drawbacks.
Borrowers often seek to consolidate their student loans to lower their interest rates or monthly payments. Alternatively, you may learn whether you are eligible (or will be in the future) for student loan forgiveness.
If your main goal is shrinking your monthly payment, you should also look into income-driven repayment (IDR) options. As with loan forgiveness, these are only available for federal loan borrowers. Both can limit your monthly payment to a percentage of your income based on family size.
If you have federal student loans and want to merge your monthly payments without losing federal benefits, your only option is to consolidate through the Direct Consolidation Loan program. But before you do this, consider potential drawbacks.
For example, if you choose a longer repayment term, you could pay more in interest over the life of the loan. Plus, unlike student loan refinancing, consolidating your loan won’t allow you to lower your overall interest rate. Understanding the pros and cons of consolidating your loans can help you make the best financial decision.
Michelle Lambright Black is a credit expert with over 19 years of experience, a freelance writer and a certified credit expert witness. In addition to writing for Bankrate, Michelle's work is featured with numerous publications including FICO, Experian, Forbes, U.S. News & World Report and Reader’s Digest, among others.
