Student loan consolidation allows you to combine multiple federal student loans into a new Federal Direct Consolidation Loan. The new consolidation loan lets you:
- choose a new loan servicer
- qualify for income-driven repayment plans
- get a single monthly payment
- stretch your loan repayment period up to a 30-year term
- have a loan that is eligible for student loan forgiveness programs
What loans are eligible for consolidation?
Most federal student loans are eligible for consolidation:
- Federal Stafford Loans Unsubsidized and Subsidized
- Parent Loans for Undergraduate Students
- Federal Family Education Loan (FFEL) Program Loans
- FFEL Consolidation Loans and Direct Consolidation Loans (only under certain conditions)
- Federal Perkins Loans
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans (Parent Plus and Graduate Plus)
- Federal Insured Student Loans
- Guaranteed Student Loans
- National Direct Student Loans
- National Defense Student Loans
- Nursing Student Loans
- Nurse Faculty Loans
- Health Education Assistance Loans
- Health Professions Student Loans
- Loans for Disadvantaged Students
- Supplemental Loans for Students
- Auxiliary Loans to Assist Students
Does it cost money to consolidate federal student loans?
It does not cost money to consolidate federal student loans. There are no loan origination fees for consolidation loans.
The federal government lets borrowers consolidate federal education loans for free at studentaid.gov.
You can also submit a paper loan application to a loan servicer of your choosing.
Can you consolidate federal student loans with private loans?
You cannot use the Department of Education to consolidate federal student loans with private student loans. You can, however, combine your federal student loans with your private student loans by refinancing with a private lender.
Can you transfer private student loans to federal?
You cannot transfer private student loans to federal student loans. But you can refinance federal student loans into a private student loan. Beware: There is no way to return a federal student loan you refinanced with a private lender back into a federal student loan.
Can you consolidate student loans twice?
You can consolidate student loans more than once if you have another federal student loan to consolidate it with. Borrowers with a FFELP Consolidation Loan can apply for a Direct Consolidation Loan even if they don't have a second federal student loan to pair with the FFEL Loan.
Should I refinance my federal student loans with a private loan?
You should consider refinancing your federal student loans with a private loan if you have a stable, reliable income that will allow you to aggressively pay your student loan debt.
Borrowers refinance with a private lender to get a lower interest rate.
Typically, the low interest rate takes the form of a variable interest rate.
As a result, it makes sense to refinance if you can pay off your student loan debt before the variable interest rate increases drastically.
Cons to refinancing federal loans with a private lender
- You lose access to deferment and forbearance options
- You lose eligibility for repayment options based on your income
- You lose eligibility for loan forgiveness programs like Public Service Loan Forgiveness
- You may lose eligibility to discharge student loan debt due to Total and Permanent Disability
- You may have to pay loan origination fees
- You may be required to provide a cosigner
Is it smart to consolidate federal student loans?
It is smart to consolidate your federal student loans to qualify for loan forgiveness programs and lower monthly payments, and get out of default.
It is not wise to consolidate your federal student loans to get a lower fixed-rate loan. Federal student loan consolidation does not give you a lower interest rate. The new interest rate of your consolidation loan is the weighted average of the interest rate of the loans included in the consolidation, rounded up to the next one-eighth of one percentage point.
Only Direct Loans are eligible for the Public Service Loan Forgiveness Program. Loans made under the Federal Family Education Loan Program (FFEL) and Federal Perkins Loan Program do not meet the eligibility requirements for the PSLF Program. However, you can make them eligible by consolidating them into a Direct Consolidation Loan.
Lower monthly payments
Most Direct Consolidation Loans are eligible for all of the income-driven repayment plans:
- Revised Pay As You Earn (REPAYE)
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
FFELP, Perkins Loans, and Parent Plus Loans aren't eligible for some or all of the IDR plans.
With one exception, consolidating those loans makes you eligible for the income-driven repayment plan that gives you the lowest monthly payment: the Revised Pay As You Earn Plan.
Consolidation loans that include a Parent Plus loan are, however, ineligible the REPAYE Plan. Those types of consolidation loans are eligible only for the income-contingent repayment plan.
Consolidation gets your defaulted student loan debt out of default in about 2 to 3 months.
The consolidation loan pays off the principal, interest, and collection fees owed on the loans included in the consolidation.
There's no way to get the collection fees waived if you consolidate.
If you're interested in getting your collection fees waived, check out federal student loan settlements or the loan rehabilitation program.
How to consolidate student loans
You can consolidate your federal student loans for free at studentaid.gov.
You'll need a Federal Student Aid ID to log in.
After you log in, click "Manage Loans" >> "Consolidate My Loans."
You can also submit a paper application to a loan servicer of your choosing by mail or fax.
Student loan borrowers that are in default may be able to use the collection agency that has their loans to start the consolidation process.
The Department of Education does not charge federal student loan borrowers an application fee for loan consolidation.
How long does student loan consolidation take?
The student loan consolidation process typically takes 30-60 days from start to finish. Consolidation can finish quicker if you waive the 10 business day waiting period after receiving your Loan Summary Statement. It can take longer if you don't respond to requests from your student loan servicer.
The main reason I typically see most consolidations take longer is due to missing income information. To avoid delays, I would contact the loan servicer a few days after submitting your consolidation application to confirm they've received all necessary documents.
Can you consolidate student loans more than once?
You can consolidate student loans more than once in limited situations:
- you can consolidate an FFEL Consolidation Loan by itself into a Direct Consolidation Loan
- you can consolidate an FFEL Consolidation with another federal student loan into a new Direct Consolidation Loan.
- you can consolidate a Direct Consolidation Loan with another federal student loan into a new Direct Consolidation Loan
While you can consolidate an FFEL Consolidation Loan by itself, you cannot consolidate a Direct Consolidation Loan by itself. You have to have another loan to combine it with.
Is there a downside to consolidating student loans?
The main downside to consolidating federal student loans is that you likely pay more interest over the long run for two reasons. First, consolidation extends the loan term. The longer loan term means that you'll pay more interest over time.
Second, any outstanding interest on the loans that you consolidate becomes part of the original principal loan balance on your consolidation loan. As a result, interest will accrue on a higher principal loan balance than if you had not consolidated.
In addition, consolidating your current loans into a single loan will cause you to lose credit for any payments made toward income-driven repayment plan forgiveness or Public Service Loan Forgiveness.
You don't need to include all of your eligible loans in your loan consolidation. For example, if you've earned credit towards loan forgiveness, consider leaving those loans out of your consolidation application.
What is the average interest rate on consolidated student loans?
The interest rate on consolidated student loans is the weighted average of the interest rates of the loans included in the consolidation, rounded up to the next one-eighth of one percentage point. Loans with larger balances factor more significantly into your overall interest rate.
Your new Direct Consolidation Loan will have a fixed interest rate for the life of the loan.
Will consolidating my student loans help my credit score?
Consolidating your federal student loans shouldn't hurt your credit score. The U.S. Department of Education doesn't check your credit history to approve your application. Once approved, your loan servicer will contact the credit bureaus to:
- request the loans included in your consolidation be reported as "paid in full through consolidation" and
- add the new consolidation loan to your credit report as an installment loan.
Some of my clients have reported a temporary drop in their credit scores during the Direct Loan Consolidation process. However, they said their score increased shortly after that.
What credit score do I need to consolidate student loans?
You don't need a specific credit score to consolidate federal student loans with the U.S. Department of Education. The Department of Education doesn't run a credit check before it approves your loan application.
Refinancing your federal student loans with a private lender is different.
Private lenders require a good credit score (minimum credit score of 650-680) to approve student loan refinancing applications.
Also, depending on your credit score, you may need a cosigner for your private consolidation loan.
Can I refinance my student loan after consolidation?
You can refinance your student loan debt after you consolidate it. You just need to find a private lender willing to refinance your Direct Consolidation Loan. Typically, you're going to need a good credit score (680+) and a solid income to qualify for a lower interest rate.
Note. Refinancing a federal student loan with a private lender causes you to lose certain benefits like student loan forgiveness, income-driven repayment, etc.