7 things to know before consolidating student loans

2 min read

Whether you’re just starting to pay them off or you’ve been paying for a few years, you might be looking into how to consolidate student loans if you’re feeling the weight of your monthly payments.

The process of consolidating student loans can seem overwhelming, but in reality, learning how to consolidate loans (and why) is relatively simple.

The main points of Student Loans 101

If you’re researching how to consolidate student loans, consider these seven points.

1. How loan consolidation works

Student loan consolidation is a way of bundling student loan debt with one or more existing loans to create a single new loan. Because it’s all been put into one loan, consolidation allows borrowers to pay one bill each month, instead of trying to keep track of several separate payments.

2. Is consolidation right for you?

Borrowers who need more cash flow each month may be ideal candidates for a student loan consolidation. By extending the life of the loan and potentially locking in a lower fixed-interest rate, consolidation can result in lower monthly payments.

Student loan consolidation isn’t for everyone, though. If the term of the loan is simply extended, it could end up costing you more over time. Borrowers who can afford their payments should think twice before signing onto a consolidation, and those nearing the end of a student loan obligation may not benefit much from it.

3. Federal vs. private loans

Federal student loan consolidation doesn’t require application or origination fees. Federal law also limits the period of time for loan repayment and caps the interest rate on the loan.

Private consolidation loans don’t have the same restrictions as federal loans and may have variable rates and numerous fees. They may also be stripped of the benefits of federal loans such as interest subsidies on deferred loans.

4. Research potential lenders

You can get a consolidation loan from the U.S. Department of Education, or you can get the loan from a private lender with government approval. Public and private loans can’t be combined. Research student loan institutions online, such as StudentLoans.gov.

5. Pay attention to interest rates

Most student loan borrowers can consolidate only once, so if you consolidate at 6 percent interest and rates drop later, you cannot get a new rate. In certain circumstances, such as going back to school and taking on new loans, you might be able to consolidate again.

6. Learn about negotiating terms

Read up on student loans to learn about negotiating favorable terms such as interest rate reduction for making timely payments or opting for automatic withdrawal.

7. Consider alternatives to consolidation

Those looking to try to lower the total amount owed on their student loans may want to look into student loan forgiveness or student loan refinancing instead.


FORGIVENESS VS. CONSOLIDATION: Learn the difference between student loan forgiveness and consolidation, and see which option is right for you.

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Refinance your student loan for a better rate and a faster payoff date.