
Student loan consolidation can be a game-changer for those overwhelmed by multiple loans. By combining multiple loans into one, you can simplify your payments and potentially lower your monthly bills.
Consolidating your loans can save you money on interest and fees, but it's essential to understand the terms and conditions first.
To qualify for consolidation, you typically need to have at least one federal student loan. This is because private lenders often have stricter requirements and higher interest rates.
Benefits of Consolidation
Consolidating your student loans can simplify the process for repaying federal loans and keep your options open for various repayment plans.
You can consolidate private student loans with a lower interest rate if your credit score has improved dramatically since graduation.
Home equity loans can also help you consolidate a lower interest rate for your private student loans.
With a federal Direct Consolidation Loan, you can rehabilitate your student loans even if you're in default, without a credit check.
For your interest: Student Loan Consolidation Private and Federal

A co-signer with good credit can help you qualify for consolidation from private lenders if your credit score is under 650.
Local credit unions may have softer requirements than traditional lending services, making them a viable option for consolidation.
You may be able to get a better interest rate and lower monthly payments by using private lenders for student loan consolidation, especially if you have a good credit score and a well-paying job.
Some private companies, like SoFi and LendKey, offer competitive rates and flexible repayment conditions for student loans.
For your interest: Do You Need Good Credit to Get a Student Loan
How to Consolidate
Consolidating private student loans is focused around your credit score. If your credit score has improved dramatically since graduation, you may be in line for a lower interest rate.
To consolidate private student loans, contact several lenders before making a final decision. Home equity loans are another way to consolidate a lower interest rate, while variable interest rate loans may also be suitable for your situation.
Federal student loan consolidation doesn't require a credit check, so even if you have bad credit, you will qualify. This makes it a great option if you're struggling with your credit score.
Expand your knowledge: Private Student Loan Lawsuit
How to
To consolidate defaulted student loans, you need to make three consecutive on-time payments to enroll in a different repayment plan.
You can consolidate defaulted student loans under one of the income-driven repayment plans, which can make your monthly payments more manageable.
Your loans will no longer be in default once they are consolidated into a Direct Consolidation Loan, but it will remain on your credit report as a negative mark.
To remove the defaulted loan from your credit report, you can opt to enter student loan rehabilitation, which will wipe the slate clean.
It's unlikely you'll find a lender to consolidate private student loans in default, so contact your lender and request repayment assistance before they send your debt to collections.
Your original lender is more likely to work with you than a debt collector, so don't hesitate to reach out and ask for help.
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Choose Your Servicer
Choosing a student loan servicer is a crucial step in the consolidation process. You have several options to consider, including FedLoan Servicing, which manages the Public Service Loan Forgiveness program.

For federal loans, you can choose from several servicers, such as FedLoan Servicing or Great Lakes Educational Loan Services. These servicers offer different benefits and features, so it's essential to research and compare them before making a decision.
Some private student loan companies offer refinancing options, but be aware that interest rates can vary greatly, ranging from about 2.5 to 9.09% as of 2018. Variable rates can change over time, while fixed rates stay the same.
When choosing a private student loan company, consider factors like loan amount, loan period, and hardship options. Some lenders may have minimum or maximum loan amounts, or a minimum loan period of five to 15 years. Others may offer deferment and forbearance options to help you if you're struggling to pay.
Here are some key factors to consider when choosing a private student loan company:
Ultimately, the right servicer for you will depend on your individual needs and circumstances. Take the time to research and compare your options before making a decision.
Repayment Plan

You're one of the 44 million borrowers with outstanding student loan debt, and you're looking to consolidate your federal student loans. The Direct Consolidation Loan Program offers several repayment plans tailored to your income and family size, giving you up to 25 years to pay off the debt.
You can even switch programs if your financial or family situation changes. This flexibility is a game-changer for those with fluctuating income or family dynamics.
The terms on a consolidated loan range up to 30 years, depending on the balance and repayment schedule. This is a significant consideration when planning your repayment strategy.
For federal loans, you have several repayment options, including the Standard Repayment Plan, which offers fixed payments over 10 to 30 years. You can also consider the Graduated Repayment Plan, which starts with low payments that increase over 10 to 30 years.
Income-Driven Repayment Plans are another option, which recalculate your payments each year based on factors like your income and family size. This plan can help you qualify for forgiveness of the remaining balance after 20 years.
Here are some key repayment plan options to consider:
- Standard Repayment Plan: 10-30 years
- Graduated Repayment Plan: 10-30 years
- Extended Repayment Plan: 25 years
- Income-Driven Repayment Plans: variable repayment period
Can You?

You can consolidate multiple federal loans into a single federal Direct Consolidation Loan, but it's not possible to consolidate private and federal loans with a federal Direct Consolidation Loan.
Private lenders, however, can consolidate private and federal loans, but you'll lose access to valuable federal repayment options like income-based repayment plans and loan forgiveness.
Consolidating federal loans can restart the process for federal loan forgiveness, so be aware of this before making a decision.
Some federal loans, like Perkins loans or most FFEL loans, require consolidation to qualify for alternative federal repayment plans like REPAYE, PAYE, IBR, or ICR.
For more insights, see: Direct Loan Consolidation Public Service Forgiveness
Impact on Credit and Debt
Having installment loans like student loans in addition to revolving credit like credit cards is great for your credit mix, which makes up 10% of your credit score.
Student loan consolidation can make your student loans more manageable and easier to track by combining payments into one lower monthly bill, decreasing the chances of accidentally missing a payment.

The new loan account from consolidation will impact your length of credit history, including the average age of your accounts, but this is not as important as your payment history.
A hard inquiry from private loan consolidation may initially have a negative impact on your credit score, knocking off fewer than five points, but this is temporary and can be offset by making on-time payments.
Payment May Decrease, Repayment Time May Increase
Your monthly payment may decrease after consolidating your student loans, but that's not always the case. Consolidation could also extend your repayment period, making it take longer to pay off your loan.
You can check how consolidation will impact your monthly payment and total repayment period by logging into your account and viewing Steps 1 and 2 of the Direct Consolidation Loan Application.
Consolidation could raise your repayment period from 10 years to 20 years, which could increase the total interest you would pay over the life of your loan. This is a trade-off you'll want to consider before making a decision.
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Here are some repayment plans you may be eligible for:
- Standard Repayment Plan: Fixed payments over 10 to 30 years
- Graduated Repayment Plan: Payments start out low and increase over 10 to 30 years
- Extended Repayment Plan: Fixed or graduated payments; pay off your loans in 25 years
- Income Driven Repayment Plans: Payments are recalculated each year based on factors like your income and family size
Keep in mind that private student loan refinancing companies do not have the same kinds of repayment options as federal loans.
Consolidating Defaults
You can consolidate defaulted student loans into a Direct Consolidation Loan by enrolling in a different repayment plan after making three consecutive on-time payments.
This change will remove your loans from default status, but the default mark will still appear on your credit report.
Entering student loan rehabilitation can also remove defaulted loans from your credit report, making it a viable alternative.
It's unlikely you'll find a lender to consolidate private student loans in default, so it's best to contact your lender for assistance.
Your lender might offer forbearance or temporarily adjust your monthly payment, so it's worth asking before they send your debt to collections.
Types of Consolidation
If your credit score has improved since graduation, you may be eligible for a lower interest rate through consolidation with a private lender. This can be a great way to simplify your payments and save money on interest.

Federal student loan consolidation doesn't require a credit check, so you can qualify even if you have bad credit. This is a major advantage over private lenders.
To consolidate private student loans, you may need a co-signer with good credit if your score is under 650. This can be a challenge, but it's not impossible.
Types of Consolidation
Federal Direct Consolidation Loans have a fixed interest rate that's a weighted average of the interest rates on the loans being consolidated.
This weighted average interest rate is calculated using the official interest rates for your loans, and it doesn't take into account any interest rate reductions you may be receiving.
You can log in to the Direct Consolidation Loan Application to calculate your weighted interest rate, or use the application demo if you can't log in.
Federal Family Education Loan (FFEL) Program Loans can be consolidated into a Direct Consolidation Loan, but you'll lose any interest rate reductions you've earned.

For example, if you have a FFEL PLUS Loan with a 7.5% interest rate and you make 36 on-time payments to reduce your interest rate to 5.5%, consolidating will use the original 7.5% interest rate to calculate the weighted average.
The fixed interest rate on a Direct Consolidation Loan is rounded up to the nearest one-eighth of 1%, so a weighted average interest rate of 6.20% would become 6.25% after consolidating.
Discover more: What Is a Good Interest Rate for Student Loan
Types of Eligible
There are two primary types of educational loans that can be consolidated. Federal and private loans are the two main categories.
Federal student loans can be consolidated without a credit check, making them a good option for those with bad credit.
Private student loans, on the other hand, are consolidated based on credit score, with a score of 650 or higher being a general benchmark for qualification.
Home equity loans can also be used to consolidate private student loans and potentially secure a lower interest rate.
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Refinancing

Refinancing is a type of consolidation where you replace your existing student loans with a new one through a private lender. This can be a good option if you have good enough credit or a cosigner with good credit, as you can potentially lower your interest rate.
One of the main benefits of refinancing is that you can obtain a lower interest rate than what you're currently paying. However, this will depend on your credit history, income, and other factors.
Refinancing can also give you more flexibility with repayment terms, with some lenders offering terms ranging from five to 20 years. However, this can vary by lender.
If you refinance your federal loans with a private lender, you'll no longer be able to access federal student loan benefits like forgiveness programs and payment pauses. So, it's essential to weigh the pros and cons before making a decision.
Here are some key differences between federal consolidation and refinancing:
Alternatives to Consolidation
If you're not ready to consolidate your student loans, there are alternative options to consider. You can pay off individual loans separately, which can be a good idea if you have multiple loans with different interest rates.
Paying off the loan with the highest interest rate first can save you money in the long run. This strategy is known as the debt avalanche method.
You can also consider income-driven repayment plans, which can lower your monthly payments based on your income. For example, the Income-Based Repayment (IBR) plan can cap your payments at 10% or 15% of your discretionary income.
Check this out: Can You Use Student Loans to Pay off Credit Cards
Qualification for Forgiveness or Income-Driven Repayment Plans
If you're considering consolidation, you might be wondering if it qualifies you for forgiveness or income-driven repayment plans. The answer is yes, direct loan consolidation can access income-driven repayment plans.
With an income-driven repayment plan under the SAVE Plan, borrowers can qualify for forgiveness of the remaining balance after 20 years. This means you can potentially have a significant portion of your debt erased after two decades of payments.
Here's an interesting read: How to Calculate Debt to Income Ratio with Student Loans
To be eligible for these plans, you need to be aware of the terms on a consolidated loan, which can range up to 30 years, depending on the balance and repayment schedule.
You can even switch to an income-driven repayment plan if your financial or family situation changes, giving you more flexibility in managing your debt.
Here are some key details to keep in mind:
Let It Go
You can actually skip consolidation altogether if you don't have to. Consolidation might lower your monthly payments, but it could also extend your repayment period, potentially increasing the total interest you pay over time.
You don't have to consolidate all your loans if you have benefits on some of them that you could lose by consolidating. For example, if you have Federal Perkins Loans and your work would qualify you for Perkins Loan cancellation benefits, you shouldn't include those loans when you consolidate.
Your repayment period can be extended significantly by consolidating, from 10 years to 20 years in some cases. This means you'll be paying off your loan for a longer time.
Intriguing read: Benefits of Loan Consolidation
Should You Refinance?
Refinancing federal student loans can be a complex decision, and it's essential to consider the potential consequences. You'll lose access to student loan forgiveness programs and income-driven repayment plans when you switch to a private lender.
Some private lenders offer variable interest rates, which could increase your interest costs over time. There's also no guarantee that you'll get approved or receive a low enough interest rate to make refinancing worth it.
However, refinancing might be a good option if you have excellent credit and can qualify for the lowest rates private lenders have to offer. You'll also want to consider whether you don't qualify for existing student loan forgiveness programs.
If your debt burden is large enough that the interest savings from refinancing outweigh the potential offer of widespread loan forgiveness, it might be a good decision for you. On the other hand, if you have high income and savings and don't anticipate needing an income-driven repayment plan, refinancing might be a good choice.
Here are some key things to consider when deciding whether to refinance:
- Loss of access to student loan forgiveness programs and income-driven repayment plans
- Potential increase in interest costs with variable interest rates
- No guarantee of approval or low interest rate
- Varied deferment and forbearance options from private lenders
Frequently Asked Questions
Why does my student loan say paid in full by consolidation?
Your student loan says "paid in full by consolidation" because multiple loans were combined into one larger loan with improved repayment terms. This consolidation likely resulted in more flexible payment options, lower monthly payments, or greater loan forgiveness opportunities.
Sources
- https://studentaid.gov/articles/5-things-before-consolidating-student-loans/
- https://www.experian.com/blogs/ask-experian/how-to-consolidate-student-loans/
- https://www.debt.org/students/loan-consolidation/
- https://www.investopedia.com/terms/d/direct-consolidation-loan.asp
- https://www.educationconnection.com/financial-aid/student-loan-consolidation/
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