Skip to Content

Understanding Student Loan Consolidation

After graduation, many people find themselves with multiple federal education loans to pay off. Some may consider consolidation, which makes repayment easier by combining the existing debt into a single loan. This makes payment easier, as borrowers only have to make a single payment, rather than a payment on each type of loan.

Pros of Student Loan Consolidation

Student loan consolidation can also lower your monthly payments by increasing the amount of time you have to pay back the loan, as well as giving you access to other student loan repayment options. For those with variable interest rates, consolidating to a Direct Consolidation Loan will convert the interest to a fixed interest rate for the life of the loan, based on the weighted average of the interest rates on the consolidated loans. This fixed rate can provide stability and a lower monthly payment.

Cons of Student Loan Consolidation

However, there are cons to consolidation. If your previous loans had any benefits, like interest rate discounts, rebates, or forgiveness, you may lose those benefits in the loan consolidation process. Consolidated loans also cannot be unconsolidated because, after consolidation, the individual loans are considered “paid off” and no longer exist.

Consolidation can take place any time after the student has left school, graduated, or dropped below half-time enrollment. However, you should not consolidate your loans without carefully examining the pros and cons listed above.

Am I eligible for consolidation?

Most federal loans are eligible for Direct Consolidation, including Direct, Stafford, Perkins, and more. A PLUS loan made out to the parent of a dependent student is not eligible for the student to consolidate, as the loan belongs to the parent and not the student (there is a PLUS Loan Consolidation Program for parents). Private education loans are not eligible for Direct Consolidation, but an entire list of eligible student loans is available in the application. Defaulted loans must be arranged with the loan servicer, or agreement to repay must be made under an approved repayment plan.

To qualify, you must have at least one Direct or FFEL Program loan in a grace period or repayment. Repayment of the consolidated loan can begin 60 days after disbursement.

Note: there is no application fee to consolidate your federal education loans. Federal Student Aid notes that if you are contacted by a consolidation service that requires a fee, this is not a U.S. Department of Education consolidation servicer.

Apply for a Direct Consolidation Loan here. 

ACCC provides links to other services but does not endorse non-ACCC websites or validate their content.

American Consumer Credit Counseling (ACCC) provides nonprofit credit counseling, debt relief, and debt elimination services for consumers nationwide. We offer free credit counseling to help consumers identify the right debt reduction program or debt solution for their unique situation. Since 1991, our certified credit counselors have helped thousands of individuals and families learn how to pay off a credit card balance and how to get out of debt fast through programs designed to payoff credit card debt within five years. Our debt management programs consolidate card credit debt payments and help reduce interest rates and finances charges, reducing the time it takes for getting rid of debt. And we offer comprehensive financial education services where consumers can get answers to questions like "How do I create a budget?", "What is debt consolidation?" and "How can I avoid debt in the future?"

American Consumer Credit Counseling - Consolidate Debts - Better Business Bureau American Consumer Credit Counseling - Consolidate Debts - Mass Housing Approved National Industry Standards for Homeownership Education and Counseling American Consumer Credit Counseling - Consolidate Debts  - Council on Accreditation American Consumer Credit Counseling - Consolidate Debts  - NFCC Member