A student loan consolidation is the process of combining one or more loans into a single new loan. Consolidation may mean combining several student loans into one bigger loan from a single lender. The process of consolidation pays off the existing balances on the other loans. This may provide alternative repayment options and make monthly payments more manageable.
Student loan consolidation is available for most federal loans including including Stafford, PLUS and SLS, FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Private student loans cannot be consolidated with federal student loans.
Consolidating Federal Student Loans
Consolidation loans are available for most federal loans. When you consolidate your federal student loans, you are taking a new loan called a federal direct consolidation loan. This new loan combines several federal student or parent loans into one larger loan, which replaces your original federal student loans. You usually won’t get a lower interest rate, but you will benefit with a single monthly payment for your new federal direct consolidation loan.
Consolidating your federal student loans into a a federal direct consolidation loan will give you access to several alternative repayment plans which include extended repayment, graduated repayment and IBR (Income-Based Repayment). When you choose to extend your payment can reduce your monthly payment but will increase the total interest paid over the life of the loan.
Refinancing Both Federal and Private Student Loans Together
You cannot consolidate both your federal or student loans together but you can refinance both student loan types through a private lender. This is called student loan refinancing. It is often called consolidation but in reality you are refinancing both private and federal loans into a new private loan.
You can choose to consolidate your federal student loans under the federal program and refinance your private student loans through a private lender. When you refinance your federal and private student loans you are taking on a new loan and paying off the old loans.
The benefit of refinancing both federal and private student loans together is to make repayments easier through one single payment versus multiple. Additionally, refinancing federal and private loans into a new private loan may lower monthly payments, reduce interest rates and offer some additional benefits. Read the fine print and understand the new terms of the new private loan.