How to Consolidate Student Loans [Federal and Private]

Most students end up taking out many different loans over the course of their college career. Taking out loans as you need the money while in school makes sense, but it makes repayment challenging later when juggling multiple different loans. 

You can combine your debts into one easy-to-manage package by consolidating your student loans, which comes with many other benefits, too. But in some cases, it can cause you to lose benefits. We’ll show you what to consider and how to consolidate student loans if it’s right for you. 

Table of Contents

1. What does it mean to consolidate student loans?
2. Federal student loan consolidation
3. Private student loan consolidation (refinancing)
4. When to consider consolidating student loans
5. When not to consolidate student loans
6. Where to consolidate student loans

What does it mean to consolidate student loans?

Consolidating any type of debt means taking out a new debt to pay off several older ones. But when you’re talking about student loan debt, it gets a bit more specific. 

“Student loan consolidation” is really only an option with federal student loans, which have existing programs that allow you to combine them all together with minimal hassle and no credit check. Unfortunately, you can’t roll your private student loans into a federal consolidation loan—but you do have another option. 

Private student loan borrowers can instead refinance their private loans, combining one or more of their old student loans into one new student loan. Private lenders aren’t as picky about which types of student loans they accept, so you can refinance your federal loans into private loans, too—but this isn’t always advised.

Whether you refinance or consolidate your loans, there are several advantages. You may be able to change your loan term length, for example, allowing you to speed up your repayment to save on interest or slow it down and get a smaller monthly payment. 

Federal student loan consolidation

We’ll dive more into the pros and cons of consolidating student loans later on. But for now, here’s a brief overview of how the federal student loan consolidation process works:

Assess eligibility

You can consolidate any of your federal student loans as long as a few conditions are met: 

• You’re no longer a full-time student
• Your student loans are not in default
• The loans are listed in your name alone

If you’re looking to combine student loans from other people, you may need to look into other options. You can’t consolidate Parent PLUS loans that your parents took out for your education, for example, although they can consolidate their loans if they wish. The same goes for spouses and other family. 

Understand the process

You can get more information and apply for student loan consolidation directly on the Federal Student Aid website. It looks like this:

You’ll need some basic information about your finances, and the application itself should take under 30 minutes to complete. You’ll be prompted to choose a new repayment plan. If your income is below a certain level, you may be eligible for an income-driven repayment plan. 

Note that your term length resets even if you choose the same payment plan as before. If you’re six years into a 10-year standard repayment plan, for example, you’ll be paying off your student loans for another 10 years, not four. 

Private student loan consolidation (refinancing)

You have a lot more choices to make when it comes to refinancing since you can refinance private and federal student loans together, with loan options available from countless lenders. Here’s a good approach to checking whether it’s worth it or not:

Evaluate your loans

You’ll be doing a lot more comparison shopping when it comes to refinancing student loans, so it’s a good idea to know where you’re starting from. Check with each of your individual lenders (including your federal student loans, if you have any), and write down the following details for each of your loans:

• Interest rate
• Remaining balance
• Remaining term length
• Interest rate type (fixed or variable)

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How to Consolidate Private Student Loans

Shop for the best rates 

When refinancing private student loans—or federal loans through a private lender—it’s crucial to compare offers from multiple lenders to find the lowest interest rates and the best terms. Rates can vary based on your credit score, income, and chosen repayment term, so taking the time to shop around could save you thousands of dollars over the life of your loan.

Our guide to the best student loan refinance companies is an excellent starting point for comparing top lenders. SoFi stands out as a leading option for its no-fee refinancing and borrower benefits, including financial planning advice and a 0.25% rate discount for autopay. SoFi’s streamlined application process and competitive rates make it a top choice for many borrowers.

Be sure to consider fixed versus variable rates, repayment flexibility, and lender benefits before committing to a refinancing offer. Use prequalification tools when available to check your potential rates without affecting your credit score.

When to consider consolidating student loans

Experts recommend a few specific cases where refinancing or consolidating student loans can really help:

✅ Simplify repayment

Plain and simple, it’s just easier to manage repayment on one loan versus tracking several. 

✅ Lower monthly payments

Your term length begins anew when you consolidate or refinance. That means smaller monthly payments, especially if you’ve already been paying down your loans for a while or choose a longer-term length. Federal borrowers can also opt for income-driven plans, if eligible. 

✅ Access benefits

There are many types of Federal student loans, and not all come with the same benefits packages—unless you consolidate them. Perkins loans aren’t normally eligible for Public Service Loan Forgiveness (PSLF), for example, until you consolidate them into a Direct loan. 

✅ Change servicer or lender

Federal student loans are handled by more than one servicing company. If you’re not happy with your current servicer, you may be able to request a new one when you consolidate your loans. 

Similarly, refinancing allows private loan borrowers the chance to switch lenders if they’re not happy with their current one. Uniquely, this provides the only opportunity for private loan borrowers to choose a lender offering better rates, customer service, or benefits package. 

✅ Remove a cosigner

Most private student loan borrowers need someone else to cosign on their loans, such as a parent, since good credit and income aren’t usually things college students have in abundance. 

But as long as they remain on the loan, cosigners are at risk of having to repay the debt and suffer credit damage if you default. Refinancing private loans in your own name is one way you can remove this danger entirely. 

When not to consolidate student loans

It’s just as important to know when you shouldn’t consolidate or refinance your student loans. Don’t let the lure of lower payments sway you from the potential downsides, which could include the following:

❌ Loss of benefits

Depending on the type of loans you have, you could lose out on some benefits. For Federal loans, everything you consolidate will become a new Direct consolidation loan—which is a problem if you’re aiming for loan forgiveness for your Perkins loans, for example.

❌ Higher total interest

Resetting the payment clock or even choosing a new, longer-term length can help make each individual payment more affordable, but it could be more expensive in the long run. That’s because you’ll be paying interest on those loans for a longer period of time. 

It’s a good idea to use a student loan refinancing calculator to calculate the potential cost—in terms of total interest paid—before refinancing or consolidating any student loan. It’s the only way to make a truly informed decision about the real cost of the loan.

❌ Interest capitalization

Federal student loan borrowers with unpaid interest from things like forbearance or income-driven repayment plans will have those interest charges added to their total loan balance when consolidating them. This can cause that fraction of your debt to grow faster than if you’d left it alone.

❌ Less ability to pay down specific loans faster

When you consolidate federal student loans, your new interest rate will be calculated as the weighted average of your current loans. If everything’s changed to the same rate, you lose the ability to pay down more expensive loans faster, which is the key strategy for the debt avalanche method. 

❌ Refinancing offers don’t result in better terms

Not every private student loan borrower will qualify for better rates and terms than they’re currently paying when they apply to refinance private student loans. If your credit score and income haven’t improved significantly since you were a student, chances are you won’t get very good rates—and that’s if you’re even approved at all. 

My recommendation for consolidating or refinancing student loans depends on your financial situation. If you would benefit from federal loan programs, such as income-driven repayment plans or loan forgiveness, I advise consolidation to maintain access to these options. However, if you have a high and stable income and a strong credit profile, refinancing may be the better choice to secure lower interest rates—especially if you do not require the benefits associated with federal loans.

Where to consolidate student loans

If you’re consolidating federal student loans, the only place to do so is through the Federal Student Aid website. The federal Direct Consolidation Loan allows you to combine multiple federal loans into one.

For private student loan refinancing, it’s essential to shop around and compare offers to find the best rates and terms for your situation. 

Using marketplaces—Credible is our favorite—can simplify this process. With Credible, you can prequalify and review personalized rate quotes from multiple lenders in just two minutes, all with a soft credit check that won’t affect your credit score. This marketplace approach helps you identify the best option without applying individually with multiple lenders.

To explore lenders and compare rates, check out our best student loan refinance lenders for an in-depth guide to top-rated options. Whether you’re refinancing federal or private loans, taking the time to compare rates and repayment terms ensures you find the most cost-effective solution.