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How to Consolidate Student Loan Debt

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student loan consolidation

All those different student loans came in handy when you were financing your college education, but making multiple payments each month can be a real hassle.

Here’s some good news: You may be able to simplify your life and consolidate your student loan debt.

What You Need to Know About Federal Consolidation Loans

A Direct consolidation loan allows you to combine several qualified federal student loans into a single loan. So you’ll have just one loan payment to make each month instead of many.

Consolidating your student loans also can significantly lower your monthly payment by extending the repayment period on your new loan by up to 30 years. Of course, the longer you’re in repayment, the more interest you will pay over the life of the loan, so it’s smart to pay more than the monthly payment whenever you can. And because there are no penalties for prepayment, you can pay ahead on a direct consolidation loan any time you wish.

There is no application fee when you apply for a direct consolidation loan and the fixed interest rate that you pay depends on the interest rates of the loans you are consolidating. The interest rate on a direct consolidation loan is based on the weighted average of the interest rates of the federal loans being consolidated, rounded up to the nearest one-eighth of 1 percent. If you’re looking to lower your interest rate on your federal student loans, see if your student loan servicer offers an interest rate reduction for enrolling in automatic payments. Many of them do.

You can apply for a direct consolidation loan through

Can You Consolidate Private Student Loans?

Private student loans cannot be included in a Direct consolidation loan for federal student loans, but you can consolidate private loans into a private consolidation loan. This is also known as student loan refinancing.

Can You Refinance Student Loans?

There are several private lenders who offer student loan refinancing, but the government does not offer refinancing to federal student loan borrowers. While you can refinance a federal student loan with a private student loan, doing so means you no longer have access to the benefits of federal student loans, including student loan forgiveness and federal student loan repayment plans. Interest rates on private consolidation loans are based on your credit score and are determined by the lender, as are fees and whether or not there are prepayment penalties for paying ahead on the loan.

If your credit score has climbed since you first took out your private student loans, you may want to think about consolidating your loans to nab a lower interest rate. If you don’t know where you stand with your credit score, you can check two of your credit scores for free. You also get a personalized plan to build your credit over time.

Whether you are consolidating federal or private student loans, be sure to make on-time payments on your student loans until the consolidation is complete and your old loans are paid off.

This article has been updated. It was originally published July 10, 2014.

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