Easy Guide to Student Loan Debt Consolidation

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Student loan debt consolidation enables students with multiple debts from various lenders to roll them into one, thus creating a single payment for the total amount of student loans held.

This process will also typically reduce the number of monthly payments required (often from upwards of 10). The average American college graduate has an average of $26,000 in student loan debt.

Some types of student loans cannot be consolidated. Federal education loans include Stafford Loans and PLUS Loans, while private loans can come from banks, financial companies, and school authorities.

Consolidating federal loans is generally beneficial because they keep their benefits such as options for deferment or forbearance, negotiated interest rates based on the borrower’s credit score, and more flexible repayment plans.

What to Consider Before Consolidating Your Student Loans

The first thing to do when considering student loan consolidation is to contact each of your existing student loans service providers.

Ask them if they can provide a better rate or program than their standard rate. 

Since this is usually easily done online, you will not have any trouble finding information to compare, and you will learn how much work the companies are willing to go through for their clients.

You can also use websites that compare student loan programs for you. There are many benefits of consolidating your multiple loans.

One of these is being able to take advantage of federal loan forgiveness programs, which is in itself enough for many borrowers to consolidate in order to reduce their monthly payments.

Other benefits include being able to take advantage of the government’s better interest rates, which are often at least 0.25% lower than private loans’ standard rates. Finally, you will have only one loan payment–this is helpful even when your student loan repayment period is much longer than the period for private loans.

You can consolidate student loans by filling out a government form, which you can find online at StudentLoans.gov, or by contacting your existing lenders.

Most people choose to go through their lenders because they know that these institutions are already well versed in how to implement this process successfully and quickly.

Student Loan Consolidation and Payment Reduction Program

What is student loan consolidation? It is the process of applying for a loan with one lender to pay off several loans. This allows students to have only one monthly payment, instead of many.

The repayment period for student loans varies from ten years up to thirty years, depending on how much money is owed and when it was borrowed.

Thanks to income-based repayment plans, the amount of time it takes to pay off loans can be even longer—as long as forty years. So getting rid of extra interest costs early on will save borrowers money over time.

With this option, you can reduce your monthly payment or help lower your student debt. This is available now because student debt has increased dramatically in recent years.

Taking advantage of a payment reduction program can also help you save money on interest since it will lower your monthly payment and give you more time to pay off the debt.

There are three types of income-driven repayment plans. They are:

  • Income-Based Repayment (IBR),
  • Pay As You Earn (PAYE), and
  • Revised Pay As You Earn (REPAYE).

These programs allow a borrower to have lower monthly payments based upon income and family size. Borrowers usually pay 10% – 15% of their discretionary income every month. The repayment period is 20 – 25 years depending on what plan you are on.

There is also forgiveness after that time for any remaining balance.

Income-Based Repayment (IBR) is for borrowers who want their monthly payment to be 15% of discretionary income. The repayment period is 20 years, and it does not matter when you received your loans.

Income Contingent Repayment (ICR) has a fixed payment that is the lesser of either 20% of discretionary income or what you would pay on a repayment plan with a fixed payment over 12 years, adjusted to your income and family size. The repayment period is 25 years and it does not matter when you received your loans.

These programs can reduce monthly payments up to 15%. Repayment periods are still the standard 10 – 30 years.

This is for those who have graduate or professional school loans and want their monthly payment to be 20% of discretionary income. The repayment period is 25 years and it does not matter when you received your loans.

The consolidation process usually takes around twenty minutes, but it can take longer depending on whether you choose to consolidate with a private lender or with the government.

If you contact your private lenders, they will usually do the consolidation for you and send it to the government, so that means no additional paperwork on your part.

Some lenders may opt to consolidate loans as well as lower monthly payments over a longer period of time.

Your federal student loan balance will be reduced by the consolidation. This is good because you will only have one monthly payment to make instead of several.

Unless you consolidate private loans with your federal loans, you will still see payments on two separate bills every month.

This helps reduce monthly payments and puts borrowers on an income-driven repayment plan for twelve months.

After completing IBR, IBR-Pay As You Earn or PAYE for twelve months, borrowers can consolidate their federal loans again to get a lower interest rate and one monthly payment.

You can pick up to ten different bills that you want to consolidate into one student loan consolidation.

The repayment period for the new consolidated loan is extended from fifteen years down to ten years.

The repayment period for the new consolidated loan is extended from twenty-five years down to twenty years if you consolidate with the government.

By consolidating your loans, you can increase your monthly payment or help lower your student debt.

After finding out which method works best based on your needs, you are ready to apply.

If you are approved for an income-driven repayment plan, the government will consolidate your federal student loans for you.

For example, if you want to lower monthly payments and your income is too high to qualify for PAYE or IBR, then REPAYE might be best.

You cannot consolidate Federal Perkins Loans into Direct Loans. You must first convert Perkins Loans to a Direct Unsubsidized Loan or a Direct PLUS loan before consolidating into a new loan, which is then eligible for student loan consolidation.

If you have private loans that you want to consolidate, you can consolidate them with federal student loans whether they are subsidized and unsubsidized federal student loans, or if they are Parent PLUS Loans or Grad PLUS Loans.

If you have private loans, you can consolidate them with federal student loans.

Student loan consolidation is a process that turns multiple student loans into one big student loan.

This guide will show you how to consolidate your federal or private student loans, depending on which kind you have.

If you want to consolidate Federal Perkins Loans into Direct Loans, you must first change your Perkins Loan to a Direct Loan.

You can only consolidate federal student loans, so if you have private student loans, you will need to change them into a federal student loan.

This guide is for those who are seeking consolidation of their federal and private student loans and does not apply to Perkins Loans.

If you want to consolidate subsidized and unsubsidized federal student loans, Parent PLUS Loans, or Grad PLUS Loans into a Direct Loan, then the standard repayment plan is the best choice for you.

Federal Student Loan Debt Consolidation

Federal student loans include Stafford Loans, Perkins Loans, PLUS Loans, and more.

This is the case regardless if you are consolidating just federal student loans or a mix of both federal and private loans.

Keep in mind that the threshold for consolidation is actually $30,000. Most federal loans (for those with qualifying loan types) can be consolidated.

However, this amount is usually quite high for borrowers who are consolidating just federal loans.

Private Student Loan Debt Consolidation

This type of consolidation is not as commonly done because there are fewer companies that offer it than those that offer consolidation of government programs.

Choose your company wisely–they should be able to provide a lower interest rate and more benefits than your original lenders.

Also, check to see if the company you are interested in has a good BBB rating. This will ensure that you have a chance of being treated fairly by the lender.

So is there really an easy guide for consolidating student loans? 

The quick answer is yes.

Just contact each of your existing loan service providers and see if they can provide you with a better interest rate and more benefits.

If not, then choose one of the many companies that specialize in consolidating both federal and private loans and pursue your consolidation.

Easy Steps to Apply for Direct Consolidation Loan

If you are interested in consolidating your student loans, the first thing to do is contact your lenders. This can be done via phone call or email–it’s up to you to decide what method of communication will work better for you.

Most companies (if not all) that offer this service online will also give the option of requesting an automatic callback.

This is a great method because it allows you to multitask while you wait for the representative to call back – something that most people are grateful for.

When you reach your lenders, ask them if they can provide an interest rate or program better than their standard one.

If they cannot, then tell them that you will be consolidating your student loans. 

If they can provide a better interest rate than the average, then you may choose to stay with your original lender.

Otherwise, ask them how you should go about consolidating your student loans – this is usually done by filling out a government form online or by mailing in forms that are obtained from StudentLoans.gov.

Can My Student Loans Be Forgiven If I Consolidate?

No. Student loans are not, and very rarely ever will be, forgiven by consolidation. 

There is also no loan forgiveness in general for federal student loans in the United States–although there are some rare cases that may or may not apply to you.

If your student loans can’t be forgiven through consolidation, then why should you consolidate them? 

Well, student loan consolidation is actually one of the few ways you can save money on your interest rate.

If your loans are at a lower interest rate after consolidation than before, then this is a good option that will help you to pay back your student loans faster without having to worry about as high of an interest rate.

How Your Debt-to-Income Ratio Affects Your Loan Approval

Your debt-to-income ratio, abbreviated as DTI, is a number used to determine whether or not you can actually handle repaying your loans.

This ratio compares the amount of money that you owe in debt (including student loan debt) with what you make per year. Generally speaking, federal student loans only require that you have a debt-to-income ratio of 10% or lower.

However, private lenders can sometimes be much stricter with this requirement–requiring anywhere from 20% to 50% depending on what your salary is.

The lower your DTI is, the better off you will be in regards to getting approval for a student loan consolidation.

This is because a company that approves your consolidation will have no worries about you being able to pay back the money that you owe them.

It will allow them to offer you a lower interest rate on your consolidation without worrying about losing their initial investment.

Student loan refinancing is the process by which you can get a new student loan with better terms. B

y refinancing, you are able to choose between multiple lenders that will offer different interest rates depending on your credit score and financial situation.

You then end up choosing one of these lending companies to consolidate with – who in turn pays off all of your old loans.

What are the Advantages of Consolidating Your Student Loan Debt?

The advantages of student loan refinancing are that you can get a lower interest rate on your new consolidation and that you can choose between many different lenders.

This is something that not many people know about because of the bad reputation of private companies among college students.

Although they have had some problems in the past, nowadays most private student loan companies are doing their best to show students and graduates alike that they can be trusted.

What are the Disadvantages of Consolidating Your Student Loan Debt?

The main disadvantage of consolidating your student loans is that you may end up losing some of the perks of having a federal loan.

In particular, you will lose some benefits such as interest rate caps and access to income-driven repayment plans.

Federal loans also tend to have a grace period before payments are actually due.

It means that there is a time period after you have graduated, dropped below half-time hours, or stopped going to school where you won’t have to make any monthly payments.

You will also end up losing the option of having a fixed rate–meaning that your interest rate could change from year to year depending on how well the economy is doing.

The only solution for this would be to refinance again when you feel that the time is right – in order to get your interest rate back down.

Is Student Loan Debt a Good Settlement?

Student loan debt settlement is an effective way of settling any student loans you owe.

It’s different from refinancing because it doesn’t actually consolidate your debts–instead, you make a deal to pay back less than what you currently owe.

Debt settlement can be risky because it could end up causing more damage to your credit score than simply paying off the entire loan.

The main benefit to debt settlement is that you will end up saving a lot of money in the long run, as opposed to just consolidating your loans and paying everything off at once.

It is because debt settlement companies will typically take a percentage of what you would have paid otherwise as payment–which means less money for interest.

Why Did My Credit Score Go Down When I Consolidated My Student Loans?

Your credit score can go down when you consolidate your student loans because of the extra inquiry made to your file.

In order to find out what type of interest rate you qualify for on a consolidation loan, another company will have to investigate your financial background–which in turn lowers your score.

This is something that normally happens anytime a new financial product is opened and is typically a one-time action.


Even though student loan consolidation has many benefits, it may not be right for everyone.

If you have federal loans, you are currently on an income-driven repayment plan, or if your interest rate is very low–you might want to stay with the original option.

Consolidating can also make it difficult to budget properly because all of your debt will be in one place, making it harder to actually see how much you’re paying every month.

Make sure to share this article on all of your social media accounts and with any friends or family members who may need help with their student loan debt.

Remember, there are many great companies willing to help you consolidate, so you have nothing to worry about.

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