What you need to know
After leaving college, many former students are hit with a barrage of bills from different student loans.
College loan consolidation can tame the problems and risks of having several loans with different terms and interest rates, especially variable-rate loans that could adjust higher in the future.
Consolidating loans is similar to refinancing a mortgage. In effect, you take out one big loan to pay off several smaller loans. The interest rate for the new loan will be a weighted average of all the loans you’re consolidating. Essentially, you’ll end up paying the same rate of interest, but it will be a fixed rate that won’t go up as variable rates sometimes do.
To qualify for a federal consolidation loan, borrowers must have at least one federally insured student loan that is in grace, repayment, deferment or default status. Loans that are in an in-school status can’t be included. Most subsidized and unsubsidized federal loans — including Stafford loans, PLUS loans and Perkins loans — are eligible for consolidation. You can obtain a loan directly from the government through Direct Consolidation Loans or through a private lender under the Federal Family Education Loan, or FFEL, program.
If you’d prefer to work with a private lender, contact the consolidation department of a participating institution. You’ll find a list of the top 100 lenders at FinAid.
To get a consolidation loan directly through the federal government, fill out an application at the Direct Consolidation Loans site.