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It’s not uncommon for student borrowers to take out a new student loan every year they’re enrolled. By the time repayment starts, you might be juggling multiple monthly bills with varying interest rates. Student loan consolidation can help by combining multiple loans into a single loan, potentially giving you access to better loan terms and repayment options.

Here’s what you should know about how to consolidate your student loans, including the processes involved and the pros and cons to consider before you move forward.

What is student loan consolidation?

Debt consolidation is a money management strategy that involves taking out a new loan to pay off existing debts. Student loan consolidation is often used interchangeably with student loan refinance, but when it comes to federal loans, the two mean very different things. Consolidating refers to combining several federal student loans into one loan from the government. You don’t have to go through a credit approval process, and you’ll come out with what’s called a Direct Consolidation Loan.

With private student loans, consolidation happens when you refinance your student loans. You’ll work with a private lender and need to meet credit approval requirements. You’ll end up with a single interest rate, which can be fixed or variable.

In both cases, the result involves new repayment terms. You can get a longer repayment term with lower monthly payments or opt for a shorter one with larger payments if your priority is to get out of debt more quickly.

The benefits of consolidating student loans

A primary benefit of consolidating, or refinancing, your private student loan debt is getting new, better loan terms. That’s how refinancing can save you money; if your credit score and payment history have improved since you first took out your loans, you may be eligible for a lower interest rate. This can be especially beneficial if you’re trying to pay off your loans as quickly as possible, since shorter repayment terms tend to come with lower interest rates. Alternatively, if you’re struggling to afford your monthly payments, refinancing can help you lower your monthly payment if you pick a longer term.

When you consolidate federal loans, the benefits include choosing a new loan servicer. For borrowers with Parent PLUS Loans, Perkins Loans or older Federal Family Education Loans, consolidation also opens up access to income-driven repayment options that can lead to loan forgiveness.

Finally, another benefit of consolidating applies to both federal and private student loans: you can combine multiple loans into one monthly payment, which may make it easier to budget and manage your bills. (Note that it’s possible to combine both federal and private loans into one new loan, but doing so requires refinancing into a private loan and giving up access to federal borrower benefits. More on that below.)

The drawbacks of consolidating student loans

If you’re consolidating to get lower monthly payments and a longer loan term, keep in mind that leads to more interest paid over time, regardless of whether your loans are federal or private.

With federal student loans, you can’t get a lower interest rate by consolidating — your new interest will be a weighted average of your current rates.The only way you can get a new interest rate for your federal loans is to refinance them into a private loan.

Most importantly, consolidating federal loans typically means you’d lose credit for payments made toward Public Service Loan Forgiveness (PSLF) or income-driven repayment forgiveness. For example, if you made eight years' worth of qualifying payments out of the 10 years required for PSLF and then consolidated, your clock toward forgiveness would start over.

This is how it normally works, but there’s a temporary waiver in place until the end of 2023 that eliminates this downside of consolidating federal loans.

How to consolidate student loans: federal loans and private loans

The process for consolidating federal student loans is very different from the process for refinancing private student loans. Here’s how each works:

How to consolidate federal student loans

To consolidate federal student loans, you must first meet eligibility requirements. While most government loan types qualify, you can’t combine your own student loans with Parent PLUS loans that you took out for your children. The government also requires that you’re either out of school or not currently taking a half-time or higher course load. Additionally, if you’ve defaulted on your federal loans, active garnishment orders can prevent you from consolidating.

Once you’ve verified your eligibility, you can start the consolidation process online on the Federal Student Aid (FSA) website. Here are the next steps:

1. Access your Federal Student Aid (FSA) account

You likely already have an FSA account from previously filling out documents associated with taking out a student loan. Otherwise, you can create a new account on studentaid.gov. Note that the FSA website requires a security verification process with a code that it sends to your phone or email address.

2. Get your loan records and personal documents together

The FSA website can import your user information to the federal student loan consolidation application. However, you should still have your original loan documents handy and locate other key details you’ll need to provide.

First, look for the most recent statements you’ve received for your federal loans and note the loan servicer, total amount and current balance. Next, gather personal documents such as your Social Security number and driver’s license. You’ll also want updated contact information for two personal references.

3. Complete the Direct Consolidation Loan application

Access the FSA website’s “Loan Repayment” menu and select “Consolidate Loans” to begin the application. The FSA’s application will ask for the following information:

  • Personal identifying and contact information
  • Employer details
  • Names and contact information for two references
  • The specific federal loans you do and don’t want to consolidate, along with account details
  • The desired repayment plan type, grace period and loan servicer

The Direct Consolidation Loan application will show borrower terms and responsibilities to which you must agree. Lastly, you’ll sign and date the application before you submit it.

4. Wait for approval, but don't stop making payments

Approval for a Direct Consolidation Loan can take up to six weeks. During that time, the government may ask questions about the application. While you wait, continue making timely federal student loan payments. The government will eventually notify you that it has paid off the listed loans. You’ll also receive further information about your consolidation loan, including the payment amount, due dates and loan servicer contact details.

5. Begin making payments on your consolidated student loan debt

Once you hear from your new loan servicer, you can create an account on its website to manage the loan and make your consolidated loan payment.

How to consolidate private student loans

Before refinancing (or consolidating) private student loans, you'll need to do an honest assessment of your finances. Is your credit score and debt-to-income ratio on par with what lenders are looking for? If you have a poor or limited credit history, you will likely need to seek the help of a cosigner in order to qualify.

If you’ve decided you are a good candidate for refinancing, below is a brief overview of the process. (For a more complete, step-by-step, read Money’s How to Refinance Student Loans guide.)

1. Research private student loan refinance companies

You'll want to research different lenders' repayment terms, interest rates and eligibility requirements to find the best student loan refinance company for your situation.

Some lenders offer more perks and better service than others. For example, while most lenders offer an interest rate discount for setting up automatic payments, some also offer discounts for having other accounts through the same lender. While origination or application fees are uncommon, some lenders may charge a loan guarantee fee if you have a lower credit score. On the other hand, some lenders no longer charge late fees.

2. Compare multiple interest rate offers and loan terms

Once you find a few potential lenders, look for a pre-qualification option that lets you get more information without filling out a formal application. You’ll provide some personal and financial details to see the actual interest rates you’d qualify for and the expected monthly payment amount for the chosen repayment term.

Determine which lender offers the best combination of an affordable monthly payment, quality service and interest savings for your situation. Be sure to read the fine print for any fees, penalties and rate change details. Comparing reviews for potential lenders will also provide insight into the customer experience.

3. Choose your lender and finalize your application

After you’ve found a lender, submit an official application online. A private lender will typically ask for the following details:

  • Personal identifying and contact information
  • Employer information
  • Contact details for a personal reference
  • Information about your graduation date and degree
  • Account details for all loans you want to include
  • Co-borrower or cosigner information (if applicable)

The lender will likely also request documentation such as your student loan statements, proof of income, driver’s license and verification from the school you attended.

Upon your approval and the loan’s finalization, the lender disburses the funds to your existing lender (or lenders if you have multiple) to pay off your original student loans. You’ll begin making loan payments on the date indicated by your new lender. In the meantime, keep paying your existing private loans as agreed until you are notified that they have been paid in full.

How to consolidate student loans FAQs

What's the difference between student loan consolidation and student loan refinancing?

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Student loan consolidation and refinancing both involve replacing your current student loans with a new loan. However, what you should know about student loan refinancing is that the term applies only to private loans — the federal government doesn't have a refinancing program. But you can combine private and federal loans with private refinancing.

Refinancing your student loans can save you money, primarily by allowing you to secure a better interest rate. While federal consolidation simplifies repayment, the weighted interest rate calculation doesn't lead to a better rate.

If you consolidate your federal student loans, can they still be forgiven?

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If you are on a repayment plan that leads to forgiveness after a certain number of monthly payments, federal loan consolidation could mean losing credit for the payments you've already made. You can still have your loans forgiven, but the clock starts over. You should check with the U.S. Department of Education to verify specific details that could affect your eligibility if you consolidate.

Note that until the end of 2023, consolidating federal loans has no effect on your eligibility for Public Service Loan Forgiveness or forgiveness via income-driven repayment.

How long does it take to consolidate student loans?

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The time needed to consolidate your student loans varies depending on the lender and the type of loan. If you pursue federal student loan consolidation, it usually takes six weeks. Private student loan refinancing can move faster, sometimes taking as little as two to three weeks. But it can take some extra time for loan payoff after the government or private lender approves your application.

Is consolidating student loans a good idea?

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Consolidating federal student loans can help you access new repayment plans, including some that offer student loan forgiveness. But there may be alternatives that better fit your needs. If you need a lower monthly payment, for example, switching to an income-based repayment plan might be ideal.

Summary: How to consolidate your student loans

Consolidating student loan debt can simplify monthly payments and offer the opportunity to get new loan terms. Whether you want to reduce your monthly payment, have a single interest rate or plan for a faster payoff, private student loan refinance or federal student loan consolidation could help you meet your financial goals. But before you move forward, consider the cons, including losing credit toward federal student loan forgiveness, and research alternative options like an income-driven repayment plan, which could potentially lower your monthly payments without consolidating.