How to Consolidate Student Loans
The Ultimate Guide

Student Loan Consolidation: The Ultimate Guide

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This guide is intended to provide you with the necessary information to be able to make an informed decision around how to select the best route for refinancing or consolidating your student loans. This guide is broken down into five parts addressing key points in handling student debt.

Step 1: Consolidation vs. Refinancing: Is there a difference?

Consolidation refers to taking a new loan to pay off multiple student loans, folding all your student debt into one monthly payment.

Refinancing refers to taking out a new loan with a new interest rate and loan term.

Refinance Student Debt with a Federal Direct Consolidation Loan

You can combine your Federal student loans into one Direct Consolidation Loan offered by the Federal Student Aid Office of the U.S. Department of Education. The interest rate of the new loan is based on pro-rated average rates from your old loans.


  • Those with certain Federal loans can easily qualify
  • You make one monthly payment instead of several, simplifying your finances
  • You may qualify for Public Service Loan Forgiveness and Income Driven Repayment Plans


  • You can consolidate only Federal student loans with Direct Consolidation Loans
  • As interest rates for the new loan take an average of your previous rates, your overall interest paid out on the loan remains the same
  • The Income Driven plans result in overpayment for some borrowers

Consolidate both Federal and Private Student Loans with a New Private Loan

With this option, you take a new loan with a private lender, refinancing all your student debt, whether Federal, private or both, into one loan. Look to qualify for a lower interest rate, lower monthly payment, or both.


  • In the current competitive marketplace for student debt refinancing, you can likely lower your interest rate
  • Some borrowers can lower their monthly payment
  • Refinance both Federal and private loans for all types of degrees


  • You lose the benefits of Federal loan programs such as Income Driven Repayment Plans and Public Service Loan Forgiveness
  • You must meet the lender's requirements for credit worthiness to qualify

Why Private Student Loan Consolidation?

The right private consolidation loan can lower the total interest paid over the life of your loan, and get you organized to retire your student debt faster. We'll look through the process of choosing a private student debt consolidation loan point-by-point to help you get the right loan that works for you.