Student Loan Consolidation

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Contributor, Benzinga
July 30, 2020

Juggling the deadlines and varying interest rates of multiple student loans can be a hassle. Student loan consolidation is a process that simplifies your loan repayment with a single loan and just 1 monthly bill. 

There are 2 types of student loan consolidations: federal and private. Federal student loan consolidation is carried out by the U.S. Department of Education and combines only federal student loans. Private student loan consolidation, or refinancing, is carried out by private lenders and combines private loans or a mix of federal and private loans into 1 private loan.

Check out our guide to learn everything you need to know about student loan consolidation. 

Consolidating Private Student Loans

When you start private student loan consolidation through private lenders, you are refinancing your loans. You combine your loans, whether federal or private, to receive a lower interest rate and reduce monthly payment terms.

Here are the steps you can follow to refinance your private student loan:

1. Choose a Lender

There are many financial institutions that consolidate your student loans — banks, credit unions, and lenders that specialize in these types of loans. The well-known names include LendKey, Credible and SoFi. 

2. Get pre-qualified online.

Most lenders allow you to find out if you’ve pre-qualified before you complete the full application.

3. Select your rate and term.

You can choose between saving on your monthly payment or saving on total student loan interest.

4. Sign and accept your new loan.

In your application, you’ll have to provide documents such as proof of citizenship, identity and income along with university information, tuition and financial aid details. You can usually upload screenshots of your information and sign your paperwork electronically.

Best Lenders for Consolidating Student Loans

There are many lenders that specialize in consolidating student loans. You may have a choice between a fixed or a variable interest rate. Fixed interest rates remain the same throughout the tenure of the loan. A variable interest rate will increase or decrease over time depending on economic conditions.

Take a look at our recommended lenders that offer some of the lowest interest rates.

Qualifying for Student Loan Consolidation

Every private lender has different requirements to apply for a student loan consolidation. Make sure you check if you prequalify with the lender before you submit your application. The common criteria include:


Some lenders require you to be at least 18 years of age. Others require you to be at least the age of majority in your state with the ability to enter into a binding contract.


Most lenders require you to be a U.S. citizen, permanent resident or visa holder with valid proof. If you’re a non-permanent resident who does not have a valid visa, you will need to apply with a creditworthy cosigner who is a U.S. citizen or a permanent resident.


Residency can be important to some lenders as they might be authorized to offer loans only in certain states.


Some lenders are particular about degrees or school qualification levels. Lenders will often require you to attend a Title IV school, which means your school processes federal student aid. 

Credit Check

Credit scores and income are very important to lenders. Lenders typically require high credit scores and will have a minimum income requirement. Higher scores and incomes tend to get the best rates or higher borrowing amounts. 

Consolidation vs. Refinancing

Student loan consolidation and refinancing may seem similar, but they are fundamentally different. Each strategy has its benefits.

Take a look at the major differences between loan consolidation and loan refinancing.

Student Loan Consolidation Student Loan Refinancing
What it isCombines multiple federal student loans into a single loanCombines all existing student loans (federal and private) into a single loan
Number of payments in a month11
Interest rateCan’t lower or increase the interest rateCan lower the interest rate to reduce the monthly payment or increase rate to pay loan faster 
Type of loans availableLimited to only federal loansPrivate and federal loans
FlexibilityOnly fixed interest rate and fixed repayment periodCan choose between fixed and variable interest rates
Credit score requirementFair credit scoreStrong credit score
Borrower benefits and protectionsGet access to forgiveness programs and loan protectionsNo benefits or protections

Consolidating Federal Student Loans

You can consolidate your federal student loan online through the Federal Student Aid website. You can also download and print a paper application for submission by U.S. mail. 

Here are the steps that you should take when you apply:

  1. Gather the documents listed in the “What do I need” section before you start
  2. Enter the loans that you want to consolidate
  3. Choose a repayment plan
  4. Read the terms
  5. Submit application

After you submit your application, the consolidation servicer you selected will complete the actions required to consolidate your eligible loans.

Continue making payments on the loans until your consolidation servicer tells you that they have been paid off by your new Direct Consolidation Loan.

When to Consolidate Federal Student Loans

You can consolidate your federal student loans after you leave school or graduate, leave school or drop below half-time enrollment.

There are many reasons why you might consolidate your federal loans. Here are some to consider:

Streamline Payments

You have multiple federal student loans that are with different loan servicers and want to combine it into a single loan with just 1 monthly bill. 

For example, you can consolidate 3 loans from different loan servicers and change the 3 separate interest rates to 1 weighted average interest rate. Your interest rate will be rounded to the next ½ percentage. For instance, if your weighted average is 7.41% then it will be rounded up to 7.5%.

Increase in Repayment Term

You want to lower your monthly payment by getting a longer period of time (ranging from 10 to 30 years) to repay your loans.

Federal Benefits and Protection

You can get access to Public Service Loan Forgiveness (PSLF) and income-driven repayment plan options.

For example, if you want to lower your monthly payment amount but are concerned about the impact of the consolidation, you can consider deferment or forbearance as options for short-term relief. For long-term payment relief, you can get an income-driven repayment plan.

Fixed-Interest Rate

The interest rate remains the same throughout the set period. It gives you a predictable monthly payment, usually for the life of the loan. 

Bottom Line

Student loan consolidation is a process that allows you to take out a new loan, which is then used to pay off your student loans. Both federal loan consolidation and private loan consolidation can help you streamline and lower your monthly payment.

If federal loan protections, repayment options and forgiveness programs are important to you, a federal student loan consolidation should be the right fit. If you have an excellent credit score and steady income, consider refinancing your loans through private lenders for better interest rates.

Start with our recommended lenders to consolidate your student loans today.


Lend-Grow offers 5-, 10-, 15-, 20- and 25-year student loan refinance terms with fixed rates as low as 2.80% APR and variable rates as low as 1.89% APR. 

Lend-Grow pays down your loan, too — 0.10% APR every month for 3 years! Here’s what this means: Lend-Grow deposits 0.10% APR of your loan amount funded each month for up to 3 years (as long as your account is active) with payback rewards. 

Lend-Grow deposits the payback reward directly to the loan account you specify at the time of Payback Reward enrollment. Payback reward is not a rate discount and you must continue to meet your full payment obligations with the lender each month.