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How to Consolidate Student Loans

by Lucy Lazarony

How To Consolidate Student Loans

Having a tough time juggling multiple student loan payments? Are they negatively impacting your credit score? Consolidating your federal student loans may be the way to go.

A student loan consolidation differs from a standard loan consolidation because you are borrowing from the federal government.

Here’s How to Consolidate Your Federal Student Loans

A Direct Consolidation Loan from the U.S. Department of Education allows you to consolidate multiple federal education loans into a single loan so you’ll have a single loan payment to make each month, instead of three or four or more. A Direct Consolidation Loan also may lower your monthly payments by giving you as long as 30 years to repay.

Consolidating federal student loans may give you a much-needed break on your monthly student loan payments. But that lower monthly payment amount comes with a price. By increasing your loan repayment period, you’ll have more payments to make and pay more interest.

There are no prepayment penalties with a Direct Consolidation Loan, so feel free to pay ahead when you have the extra cash. And there is no application fee when you apply.

Federal loans eligible for a Direct Consolidation loan include: subsidized and unsubsidized Direct Loans, subsidized and unsubsidized Stafford Loans, Supplemental Loans for Students, Perkins Loans, Health Education Assistance Loans, and Federal Nursing Loans.

Private or alternative student loans cannot be consolidated into a Direct Consolidation Loan.

A Direct Consolidation Loan has a fixed interest rate. The loan rate you will pay is based on the weighted average of the interest rates on the federal loans that you consolidate, rounded up to the nearest one-eighth of 1%.

Once you consolidate your federal education loans into a Direct Consolidation Loan, there is no going back. When you consolidate your loans into one new loan, all your previous student loans are paid off.

When you apply for a Direct Consolidation Loan, you will want to continue to make payments on your federal student loans right up until you receive notice from your federal student loan servicer that your loan has been paid off.

As you pay down your student loans, it’s a good idea to keep track of your credit score. Paying on time, over time, can help you build – or maintain — good credit. You can monitor your credit scores using Credit.com’s Credit Report Card, which is a free tool that updates your scores and credit overview every month.

To learn more about student loans and how they impact your credit, read more from our experts by visiting our Student Loan Learning Center.



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  • Meet Our Expert

    lucy_lazarony GravatarLucy Lazarony is a freelance personal finance writer. Her articles have been featured on Bankrate, MoneyRates, MSN Money, and The National Endowment for Financial Education. Prior to freelancing, she worked as a staff writer for Bankrate for seven years. She earned a bachelor's degree in journalism from the University of Florida and spent a summer as an international intern at Richmond, The American International University in London. She lives in South Florida.
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