Student Loan Consolidation: What You Need to Know Before Applying 

Carol Katarsky Updated: January 21, 2022

Consolidating your student loans can seem like an attractive idea. After all, one payment may be a lot easier to manage than several. While there are many student loan repayment strategies on the market, debt consolidation is one of the most common. 

Before you jump head-first, it's important to understand how student loan consolidation works. Consolidation works differently if you have federal loans, private loans, or a mix of both. Let's discuss everything you need to know before applying for student loan consolidation.

What is student loan consolidation?

When you consolidate your student loans, you combine all your separate student loans and pay them off as a single new loan. Depending on the types of loans you have and your financial goals, you may choose to consolidate through a federal Direct Consolidation Loan with the U.S. Department of Education, or with a private lender as part of a refinancing process.

Borrowers tend to consolidate loans in an effort to simplify their student loan repayment plan. Instead of making multiple loan payments to different lenders, you can consolidate all of your student debt into a single loan. Depending on the type of loan you have, this process can potentially lead to lower monthly payments, different repayment terms, and more. 

Let's explore how each type of loan differs when it comes to loan consolidation. 

Consolidating federal student loans

If you have loans through the government, it often makes sense to bring them under one umbrella.

Here's how this process works: When you consolidate, the government turns your existing federal student loans into a single Direct Consolidation Loan.

However, it's important to know that the interest rate on your Direct Consolidation Loan is not always lower. Instead, the rate is calculated by taking the weighted average of the interest rates on your existing loans and then rounding up to the nearest one-eighth of 1%. This new rate is fixed for the life of the loan.

How to consolidate federal student loans

Ready to consolidate your federal student loans? Here are the steps you need to take:

  1. You'll need to have your Federal Student Aid (FSA) ID handy. (Don't remember your ID? You can find it here.) 

  2. When you're ready, complete the application online or by calling the Federal Loan Consolidation Information Call Center at 1-800-557-7392. It takes at least 30 minutes to complete the application. If you use the online application, you'll see this screen, from which you need to log in with your ID.

  3. Using Federal Student Aid’s Repayment Estimator, you can see what your monthly payment would be on each of the income-driven repayment plans. You can also call your loan servicer and ask which plan could save you the most money over the life of your loan or lower your monthly payment.

  4. Typically, the first payment of your consolidated loan will need to be made within 60 days. IMPORTANT: Until your loan servicer contacts you with a due date and instructions for payment, keep making payments on your old loans. 

Consolidating private student loans

Have private student loans that you'd like to consolidate? You might be wondering if private consolidation is even possible. It is, but you have to go about it a different way.

The truth is you can't consolidate private student loans through the federal government. Instead, you consolidate your loans refinancing through a private lender. Like federal consolidation, student loan refinancing allows you to combine your loans into a single monthly bill. Essentially, refinancing is when you take out a new loan with new loan terms to pay off your existing debt.

This strategy will also work if you have a mix of both federal and private student loans; You can refinance your federal loans through a private servicer as well.

See also: Should I Refinance My Student Loans?

How to consolidate private student loans 

1. Use our Student Loan Consolidation Calculator to see how much you could save by refinancing multiple loans into one new one.

consolidation calculator

This should give you a good idea whether refinancing is the right choice for you. You can also take this 7-question quiz to find out.

Now, since there isn't just one option as with consolidating through the federal government, you need to compare lenders before applying. Some of the highly vetted lenders we currently work with and recommend are:

You can compare lenders' rates and loan terms directly on Nitro. 

You should also consider calling the lenders at the top of your list to see what their customer service is like. Since you'll be in a long-term relationship with your lender once you refinance, you want to make sure that not only their rates and loan terms are good but that they'll respond appropriately when you need support.

2. Submit an application with your lender of choice.

Start by completing an initial inquiry with your top two or three choices. This isn't the same as the full application process, so it won't impact your credit score, but it will give you an idea of what rate you qualify for with each lender. 

Once these lenders give you an initial offer with an interest rate, loan terms, and an estimated monthly payment, compare the results side-by-side. Consider not only your monthly payment but also how much you’ll pay in the long run.

After choosing a lender, fill out their refinance loan application. You'll need the following: 

  • Information about your current loans, including your original and current loan balance, interest rate, servicer name and address, and payoff date
  • Your driver’s license, passport or a bank statement to verify your address
  • Your last month’s pay stubs
  • Your most recent tax return
  • Proof of graduation

From there, they will either approve or deny you based on your credit history, current loan status, employment status, and more.

See also: Private Student Loan Refinancing: How to Compare Rates and Choose a Lender

Benefits of student loan consolidation

Finding the right student loan repayment plan is important for everybody after graduation. It can help you manage your student loan debt and even help shorten your repayment period. After determining whether have qualifying loans for consolidation, you can begin to consider the benefits and drawbacks of both.

However, there are different pros and cons to consolidating both federal and private student loans.

Benefits of federal student loan consolidation

Consolidating your federal student loans has plenty of benefits. Overall, it can be a great repayment option post-graduation if you want to simplify your student loan payments. Some of the other benefits to consolidating your federal education loans include:

  • Instead of having different loan payments due each month, consolidating allows you to make just one easy payment.
  • You'll be able to apply for an income-driven repayment plan, allowing you to make payments more manageable for your financial situation. 
  • You'll be able to take advantage of Public Service Loan Forgiveness Program (PSLF) if you work for a qualifying employer. Only Direct loans are eligible for this program. In addition, there are a few other loan programs that may qualify you for forbearance, deferment, or forgiveness. To find out more, visit

Benefits of private loan consolidation

Consolidating your private loans is one of the smartest things you can do. It can help save loan borrowers plenty of money in the long term and gives you a new interest rate. Some of the major benefits of private loan consolidation include:

  • Refinancing saves you money. People who refinance with private lenders, on average, lower their payments by $253 a month or save $16,183 over the life of their loans. To find out how much you could save, check out our Student Loan Refinancing Calculator
  • Like consolidation, refinancing simplifies student debt repayment by converting your existing loans into a single loan with a single monthly payment. 
  • Typically, refinancing gives you a lower interest rate and lower monthly payments. You may also choose to extend your repayment term, which can lower your monthly payments even further.
  • Most lenders that refinance student loans allow flexible repayment options so that borrowers can be the best fit for their particular situation.
  • Most reputable lenders do not charge a fee for refinancing your student loans.
  • If you're employed and you have a good credit score, you probably qualify for refinancing. If you don't, you may still meet eligibility requirements by applying with a cosigner. (See also: Quiz: Do You Need a Cosigner to Refinance Your Student Loans?)
  • Some private lenders have career-specific programs for those completing medical or dental residencies.  

Drawbacks of student loan consolidation

Student loan consolidation is an excellent repayment strategy for some loan borrowers, but not for others. There are a few drawbacks you should consider before applying for student loan consolidation. These include:

  • You might end up paying more interest in the long run, and it could take you longer to pay off your debt. Because of how student loan payments are applied, opting for a single, smaller monthly payment without lowering your interest rate means less of your money will go toward the principal every month.
  • You'll lose certain benefits from specific loans. As an example, federal Perkins Loans are forgiven for some teachers who work in low-income areas, for some law enforcement officers, and for some other public sector employees. But once Perkins Loans are consolidated as part of a Direct Consolidation Loan, you'll lose this forgiveness benefit if you were counting on it.
  • If you've been making payments toward loan forgiveness, you'll lose any credit for qualifying payments after you consolidate. Essentially, the clock starts over. 
  • Private lenders look for good credit and a low debt-to-income ratio. That means that if you have less than excellent credit, high debt-to-income ratio or you've had an unstable employment history, you might not be able to refinance without a cosigner.

Frequently asked questions

Can I save money by consolidating my student loans?

Whether you’ll save money by consolidating your loans depends on your particular situation.

Federal loans are subject to a weighted average of the interest rates of all of your loans. Because of this, you may wind up paying more in the long run. 

However, with a private lender, you have the flexibility to negotiate a lower interest rate on your loans. Additionally, private lenders offer both fixed interest rates and variable interest rates.

Our Student Loan Consolidation Calculator can help you figure out whether consolidation will save you money.

See also: Should I Consolidate My Student Loans?

Is it a good idea to consolidate student loans?

Each borrower’s financial situation is unique, so only you can say whether consolidating your student loans is a good idea for you. For more information, you can read our article: Should You Refinance or Consolidate Your Student Loans?

How do I consolidate my federal student loans?

You can consolidate your federal student loans online through the U.S. Department of Education at The whole process takes less than 30 minutes.

But be careful: once you start the application, you can’t save it.

You can also consolidate your federal student loans by refinancing with a private lender. Most lenders have easy-to-use online applications. Before you apply, we recommend comparing terms and repayment options of at least three different companies so you can be sure you’re getting a loan that works best for you.

Once you’ve considered how the monthly payments and total payment amounts will impact your current financial situation, fill out the online application for the bank that meets your needs.

Use our Student Loan Consolidation Calculator to see how consolidation may affect your monthly payments.

See also: Student Loan Refinancing and Consolidation Terms You Need to Know.

Which student loans can be consolidated?

The federal government offers a Direct Consolidation Loan for most loans, including:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • Direct Parent PLUS Loans
  • Parent PLUS loans from the Federal Family Education Loan (FFEL) Program
  • Supplemental Loans for Students (SLS)
  • Federal Perkins Loans
  • Federal Nursing Loans
  • Health Education Assistance Loans, and
  • Some existing consolidation loans.

You can consolidate other private and federal loans by refinancing with a private lender.

Remember that if you refinance federal loans with a private lender, you will lose income-driven repayment and forgiveness options.

What does it cost to consolidate student loans?

Federal loans fall under No Cost Consolidation - meaning there are no fees to consolidate your federal student loans. While there may be costs associated with a higher interest rate in the long term, there are no upfront fees for loan consolidation.

Some private lenders may have a cost associated with refinancing and consolidating your student debt, but that varies from lender to lender.

When can you consolidate student loans?

You can’t consolidate federal loans through a federal Direct Consolidation Loan until after you graduate, leave school, or drop below half-time enrollment.

You’ll also have a difficult time refinancing federal loans with a private lender if you’re still in school. Banks generally require proof of graduation with an application to refinance. They also want to see a steady income and a good credit score if you’re applying without a cosigner.

If you’re between jobs or have a poor credit history, now may not be the time to consolidate through refinancing.

See also: Can You Consolidate Your Student Loans if You Have Bad Credit?

Can you consolidate student loans that are in default?

You may be able to consolidate student loans that are in default.

If you’ve defaulted on federal student loans, you can usually consolidate through a Direct Consolidation Loan. The default will remain on your credit record but consolidating can help get you back on track.

However, private lenders will generally not allow you to refinance loans that are in default. If you’ve missed payments on your private loans, contact your lender as soon as possible to discuss repayment options.

How many times can I consolidate my loans?

Generally, your student loans can only be consolidated together once. That means if interest rates drop in the future, you cannot consolidate again. However, you can always choose to refinance your loans through a private lender as many times as you want. 

See also: Student Loan Forgiveness: What You Need to Know

Should I consolidate my federal and private student loans together?

You can’t consolidate private student loans with the U.S. Department of Education. So, if you’re interested in a federal Direct Consolidation Loan, you’ll only be able to consolidate your federal loans.

However, you can consolidate both federal and private student loans together into one loan if you refinance with a private lender. You may also get the added benefit of a lower interest rate and reduced monthly payments.

But because you’re refinancing with a private lender, you will lose access to any federal benefit programs you may have had access to on your federal loans, like income-driven repayment and loan forgiveness. Consider carefully whether you plan to take advantage of these programs before you refinance.

Consolidating your student loans with Nitro's trusted partners

Student loan debt can be extremely overwhelming. With multiple loan payments to make monthly, it can also be difficult to keep track of. Student loan consolidation is an effective repayment plan for both federal and private loan borrowers. 

With Nitro College, you can make sure you're finding a trusted lender to make student debt consolidation as simple as possible. Both variable and fixed-rate APRs are available. To see how much you could save on your monthly payments, check out our Student Loan Consolidation Calculator. 

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