Discover the best way to consolidate student loans

Paying off student loans is not a simple task. It is often a long endeavor, and to make things worse, the average college graduates are often saddled with 2, 4 or even more different federal and private student loans. Each loan comes with a different interest rate, repayment term, and due date.

Keeping track of each and every loan isn’t easy, and more often than not people default on a student loan not because they are unable to pay, but they forgot about it amidst a couple of other loans. The last thing you want to do is to miss out a student loan repayment, as you might get sued in the worst case scenario.

To help you get organized and make repayment a lot simpler, the best option is to consolidate your loans into 1 or 2 loans that are easy to keep track. Sometimes, you might even be able to save more money by consolidating your loans into a single loan with lower interest rate.

Read on to decide if it makes sense for you to consolidate your loans, and get the facts before you decide.

What is Federal Student Loan Consolidation?


Federal Student Aid provides a Direct Loan Consolidation service that allows you to consolidate (combine) multiple federal education loans into a one loan, resulting in a single monthly repayment instead of multiple repayments.

There is no application fee required for a direct loan consolidation as it is provided by U.S Department of Education (ED) servicers.

Types of Loans That Can Be Consolidated

Most federal student loans, including the following are eligible for consolidation:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • Direct PLUS Loans
  • PLUS Loans from Federal Family Loan (FFEL) Program
  • Supplemental Loans for Students (SLS)
  • Federal Perkins Loans
  • Federal Nursing Loans
  • Health Education Assistance Loans
  • Some existing consolidation loans

What to Consider Before Consolidating Federal Student Loans


Eligibility for Direct Loan Consolidation

You must have at least one Direct Loan or FFEL Program Loan that is in grace period or in repayment. Which means, you are eligible for consolidation if you have just graduated or your are working and making monthly repayments.

Generally, you cannot consolidate an existing consolidation loan again unless you add in another Direct Loan or FFEL Program Loan into the consolidation. However, under certain circumstances you may re-consolidate an existing FFEL Consolidation Loan without adding in another loan. Refer to Direct Loan Consolidation FAQ for more details.

Total Repayment Amount

Direct Loan Consolidation offers up to 30 years repayment term and you might have access to alternative repayment plans that you would not have had before, but bear in mind that longer repayment term means that you will incur monthly repayments for a longer period of time and pay more in interest.

Before you consolidate your loan, make sure you compare your current payments against the amount that you will pay if you consolidated your loans. Multiply the payment amount with the number of years to get the total payable amount. If the consolidated loan will result in you paying significantly more than your original loans, do not take up the loan even if it means lower monthly repayment and lower interest rate.

Borrower Benefits of Original Loans

You should also consider the impact of losing any borrower benefits that come with the original loans. There are some borrower benefits that may reduce your total repayment amount significantly, which may include interest rate rebate, principal rebates, or some loan cancellation benefits. You may lose these benefits if you consolidate.

Once your loans have been consolidated into a direct consolidation loan, you cannot revert back to the original loans. The original loans have been paid off and no longer exist.

Repayment of Private Student Loans

The direct consolidation loan only works for consolidating federal loans, and you cannot consolidate private student loans with it. You have to consider monthly private loans repayment in addition to consolidated federal loans. If you choose to go for a shorter repayment term on your newly consolidated federal loans, you most likely have to contribute a higher monthly repayment. Consider if you can commit to the new payment terms.

If you have multiple private student loans, there are ways to consolidate them into a single repayment too. We’ll discuss it in more details in the following section.

Consolidating Private Student Loans


You can consolidate your private student loans as well, even though the process is different from federal student loans. There is a different term for private loans consolidation, it is called refinancing.

Technically you can refinance both your federal student loans and private student loans into a single repayment, but it is not recommended. Federal loans come with benefits – such as the ability to reduce or defer repayments during hardships, in which private loans don’t offer. If you refinance your federal loans along with private loans, you will lose those benefits.

Eligibility for Private Loan Refinancing

Your eligibility to refinance your private student loans depend on your credit score, income, and other existing debt. You need a good credit score and demonstrate that you earn enough to meet the monthly payment on the new loan.

If you don’t know what your credit score is, you can get it for free at creditsesame. Just sign up for an account and you should be entitled to claim your free credit score. It is always good to know your most current score as all your loan rates will inevitably be determined by your credit score.

Where Can I Apply For Private Student Loan Refinancing?


Due to stiff competitions, private student loan refinancing has gotten a bit more competitive over the recent years. You may check with your local bank or credit union, or find out more from the provider below.

StudentLoanSavers – An online student loans consolidation service provider that provides both federal and private loans consolidation at a competitive rate. I recommend that you go for their private loans refinancing and leave the federal loans consolidation to Direct Loans Consolidation due to federal loans benefits stared above.

The bottom line is, separate your federal student loans and private student loans when you consolidate them.

  1. Consolidate your federal loans with Direct Loans Consolidation provided by Federal Student Aid.
  2. Consolidate your private loans with a service provider such as StudentLoanSavers.