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How to Consolidate Student Loans

How to Consolidate Student Loans
Sophia Shoemaker
UpdatedAug 18, 2008
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    4 min read
Key Takeaways:
  • Consolidation may stretch the term of the loan.
  • Ask about rate discounts for automatic payments.
  • Federal student loans are easier to consolidate.

Learn the 5 Steps to Consolidate a Federal Student Loan, and the 4 Steps to Consolidating a Private Student Loan.

Although your school gave you some information when you took out your student loans, they may not give you the full scoop on student loan consolidation after you graduate. If you wonder, "How do I consolidate my student loans?" keep reading to find the answer.

Student Loan Consolidation Offers

Until mid-2007, most people with student loans received numerous offers to consolidate their debts. Due to a change in federal lender subsidies, many of these solicitations have stopped, but that does not mean you cannot consolidate your college loans.

Eligibility for Student Loan Consolidation

If you have Federal Stafford, PLUS, or Perkins loans, you can consolidate them together. Private loans may be eligible for consolidation, but not all lenders agree to become part of a consolidation. In most cases, it is not possible to combine federal and private student loans in a student loan debt consolidation loan, due to the differences between loan terms.

How to Consolidate Student Loans

Consolidating federal student loans is a fairly straightforward process. Consolidating private loans is more difficult, but it can be done.

Five Steps to Federal Student Loan Consolidation

  1. Gather your loan paperwork for all of your loans. Depending on the cost of your school and the number of years you accepted loans, you will have several individual loans. Most students have both subsidized and unsubsidized Stafford loans for each year. You may also have Perkins loans or PLUS loans for each year.
  2. Contact the primary lender for your loans. Depending on your school, this may be the Federal Direct loan program, or an individual.
  3. Ask about any additional offers for rate reductions with automatic payments or following a certain number of on-time payments.
  4. Research terms available from other consolidation lenders online to see if anyone offers a larger discount for automatic payments or an additional discount after 36-48 on-time payments. Due to the recent changes in funding, most lenders now offer a quarter percent reduction for automatic payments. A few also offer a quarter percent reduction after 36 on-time payments, but these offers are harder to find.
  5. Choose your lender and sign the paperwork. Your old loans will be paid off and you will now receive payment instructions for your new consolidation loan. Sign up for automatic payments promptly. There may be a one-month delay before the program takes effect, so be sure to make on-time payments for that first month. If your grace period expires before you file for consolidation, make sure to make the payments until the consolidation process is completed.

Four Steps to Private Student Loan Consolidation

Private loan consolidation is more difficult to find, but it is possible. Take these four steps:

  1. Gather your loan documents.
  2. Research private consolidation lenders online for minimum loan balance and interest rate requirements.
  3. Contact your current lenders to ask about consolidation offers.
  4. If you are eligible for consolidation, ask about discounts for automatic payments. A few lenders offer them, but they are harder to find due to the change in funding laws.

Student Loan Consolidation Benefits

The primary benefit of consolidation is simplified payments. Rather than five, ten, or more payments every month, you have just one or two payments to make.

In many cases, consolidation stretches the term of the loan, so you may actually pay more in interest over the life of the loan. If possible, try to accelerate your payments as your income grows to avoid paying additional interest. However, any discounts you receive for consolidating student loans will reduce the total interest you pay over the life of the loan.

Finally, student loan consolidation makes it easier to keep track of your total annual interest paid. That figure is important if you are eligible for the student loan interest tax deduction. Although the deduction will not save you a lot of money, every little bit helps.


KKevin, Aug, 2012
Hi. I had several Federal Direct Loans - both subsidized and unsubsidized. I consolidated the loans and they now appear on "" as two different consolidated loans of subsidized and unsubsidized. shows all the old individual school loans as PIF by CONSOL. My question is, when do the three Bureaus reflect that the all the individual loans have a zero balance? My credit report is reflecting the new consolidated loans PLUS an outstanding balance on all the individual ones which have consequently lowered my score and misrepresent how much I have outstanding in the installment loans section of my credit report. How long does it take for the credit bureaus to reflect this? Trans Union has it updated, but not the other two. - Thanks.
BBill, Aug, 2012
I thnk that you should expect your credit reports to be updated within a couple of months. If not, contact each bureau separately, to dispute the inaccurate information.
MM, May, 2012
Hi, I have 2 private student loans. One is up to $63K the other is at $83K. One payment is $500/mo & $769/month. I cant afford that...So I have decided to take some classes to get Sallie Mae off my back. What options do I have in terms of getting a better interest rate? Sallie Mae is very high. It gains interest daily. In reality I probably can only afford maybe $400 for the both of them. What can I do?
BBill, May, 2012
See the article Sallie Mae Forbearance & Deferment for a discussion of the issues you raised in your question. See also the comments on that page to learn our advice to others. Ask any follow-up questions you may have on that page.
SSonya, Apr, 2012
I've been unemployed for over a year. My $39,000 student loan is on deferment. Earning my degree has been useless in obtaining a job. I've applied for several openings in public service, but most are in the midst of a hiring freeze. Apparently protocol forces them to post jobs even though they have no intention to hire. Are there any programs that might help me with student loan debt?
BBill, May, 2012
Sonya, the main student loan forgiveness programs are based on reducing what you owe due to you working in some type of public service job. This applies to federal loans. There are not a lot of other good options, unfortunately, for someone in your position.
LLiz, Feb, 2012
Someone tell me that in order to get out from my financial difficulties i should be consolidating my loans, however, i don't know what and where to start. I guess i just have to follow your steps and see if it works for me. Anyway, i would like to personally thank you for sharing something that is helpful for many individuals wanting to consolidate their loans.
aantoinette, Aug, 2012
I had graduated from University of Pheonix in 2008. Now the loans are piled up one is Sallie Mae, AES and the other one is Telnet and I believe they add up to over 80,000 dollars approximately. I do not know what to do.
BBill, Aug, 2012
Your options depend on many factors, including: whether your loans are federal or private (and you may have both), how much you earn, what assets you have, and whether you're being contacted for collections. It is hard to give you any specific, helpful advice, without knowing more details about your situation. A first step is trying to speak to your creditors, in order to work out some kind of payment plan. However, if no one is contacting you, it can be risky to contact them, as it could accelerate their efforts to collect.
BBill, Jul, 2009
Readers, what strategies and tactics did you use to pay off your student loans ahead of schedule?