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How to Consolidate Student Loans

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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’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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  • Gerri Detweiler

    Really the best way to find out if you can discharge the student loan debts in bankruptcy is to talk with an experienced bankruptcy attorney. The consultation should be free or at low cost. We’re not attorneys so it wouldn’t be wise for us to try to advise you are speculate on your case. This article may be of interest:
    How to Get Your Student Loans Forgiven in Bankruptcy

  • Jennifer Gottfried

    If you are deemed permanently and totally disabled, you may be able to get all of your student loans forgiven without bankruptcy. Sally Mae does not easily discharge student loans when a school closes due to ethical problems, but you may check to see if they have, and maybe your servicer just didn’t get the notice. In bankruptcy, you may (I stress MAY, not automatically), be able to get all of the loan amounts not directly used toward tuition discharged, but they won’t likely discharge the amount that was used to directly pay tuition. If you took out loans that were more than tuition, this may be one way to get them lowered and more affordable, if you are not considered totally and permanently disabled. I would definitely talk to an attorney, both a bankruptcy attorney and a NON-bankruptcy financial attorney (bankruptcy attorneys have a vested interest in leading you to bankruptcy) before making any decisions. I hope you feel better, and can eventually do what you love!

  • Katherine

    The Income Based Repayment program and the Pay As You Earn program are the two programs that will assist federal student loan borrowers, based on your income, marital status and family size.

  • Gerri Detweiler

    Liz – Private student loan consolidation is possible but it doesn’t work like federal loan consolidation. You have to be able to qualify based on your income and creditworthiness, and some companies also look at your major/what school you went to etc.

  • Gerri Detweiler

    Hi Liz – here is our article on that topic: How to Consolidate Private Student Loan Debt

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