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Here’s When You Should Consolidate Student Loans

Federal student loan consolidation can lower your bills. But student loan refinancing or income-driven repayment may save even more. Calculate payments under each option.
Loans, Student Loans

Consolidation, refinancing and income-driven repayment are three ways to lower your student loan payments.

  • Federal student loan consolidation doesn’t lower your interest rates, but your bill may drop because the loan term is longer.
  • Student loan refinancing lowers interest rates, allowing you to reduce your payments, pay off the loan more quickly, or both.
  • Income-driven repayment plans cut payments the most, to a percentage of your income.

Here’s how to decide whether student loan consolidation, refinancing or income-based repayment is right for you.

Like the federal government, private companies offer the option to consolidate multiple student loans into one. But unlike the federal government, they can consolidate both federal and private loans.

The goal with this process is not only to get the ease of a single payment, but to receive a lower interest rate based on your financial history.

Consider refinancing if you have:

  • Made at least a few on-time student loan payments after leaving school
  • Good or excellent credit, generally defined as credit scores of 690 or higher
  • A stable job
  • Access to a co-signer with those characteristics, if that doesn’t sound like you

Refinancing federal loans into a private loan means losing consumer protections specific to federal loans. Those include the option to tie payments to income and get loans forgiven if you work for the government or a nonprofit.

If you have private loans only, or you don’t plan to take advantage of those federal protections, compare refinance lenders to get the lowest possible rate. Strongly consider lenders that offer the most flexibility on payments and multiple options for forbearance.

LenderFixed APRVariable APRGet started


3.09-6.69%2.69-6.01%


3.35-8.24%3.11-8.46%


3.18-7.25%2.57-7.07%

3.25-6.32%2.57-5.87%


3.25-7.25%2.58-7.07%

3.50-6.99%2.99-6.42%


3.50-7.28%3.15-6.93%

Rates updated Feb. 2, 2018.

Not everyone is a good candidate for private student loan refinancing.

Federal loan consolidation doesn’t have a credit requirement, and it offers the benefit of a single loan bill and potentially lower payments. But it’s only for federal loans, and it won’t cut your interest rate. Consider federal consolidation if you:

  • Need to consolidate to be eligible for income-driven repayment or public service loan forgiveness. This is the case if you have Federal Family Education, Perkins or parent PLUS loans.
  • Want a single federal loan payment, but don’t need it to be drastically lower
  • Are in student loan default and want to get back on track

Your new fixed interest rate will be the weighted average of your previous rates, rounded up to the nearest one-eighth of 1%. You’ll get a new loan term between 10 and 30 years, depending on your balance. That may reduce your payments.

A longer term also will result in paying more in interest. But you can always pay off your loan faster if possible, which will save money.

Total federal loan balanceDirect consolidation loan repayment term
Less than $7,50010 years
$7,500 to $9,99912 years
$10,000 to $19,99915 years
$20,000 to $39,99920 years
$40,000 to $59,99925 years
$60,000 or more30 years

A few words of caution on federal consolidation:

  • Keep Perkins loans separate so you can maintain access to forgiveness for public sector workers. You’d lose this option if you consolidate them.
  • Consolidating your federal loans through the Department of Education is free; steer clear of companies that charge fees to apply on your behalf.

The application takes most borrowers less than 30 minutes, according to the Federal Student Aid website. When you’re ready, go to studentloans.gov. You must complete the application in a single session, so gather the documents listed in the “What do I need?” section before you start.

If you’re considering either federal or private student loan consolidation in order to get a drastically lower loan bill, look further into income-driven repayment instead.

The government offers plans that cut payments to 10% or 15% of “discretionary” income and offer forgiveness on the remaining balance after 20 or 25 years. You can sign up for free on studentloans.gov.

If you have a large loan balance and a low income, income-driven repayment is probably your best option for the lowest monthly bill.


Like the federal government, private companies offer the option to consolidate multiple student loans into one. But unlike the federal government, they can consolidate both federal and private loans.

The goal with this process is not only to get the ease of a single payment, but to receive a lower interest rate based on your financial history.

Consider refinancing if you have:

  • Made at least a few on-time student loan payments after leaving school
  • Good or excellent credit, generally defined as credit scores of 690 or higher
  • A stable job
  • Access to a co-signer with those characteristics, if that doesn’t sound like you

Refinancing federal loans into a private loan means losing consumer protections specific to federal loans. Those include the option to tie payments to income and get loans forgiven if you work for the government or a nonprofit.

If you have private loans only, or you don’t plan to take advantage of those federal protections, compare refinance lenders to get the lowest possible rate. Strongly consider lenders that offer the most flexibility on payments and multiple options for forbearance.

LenderFixed APRVariable APRGet started


3.09-6.69%2.69-6.01%


3.35-8.24%3.11-8.46%


3.18-7.25%2.57-7.07%

3.25-6.32%2.57-5.87%


3.25-7.25%2.58-7.07%

3.50-6.99%2.99-6.42%


3.50-7.28%3.15-6.93%

Rates updated Feb. 2, 2018.

Not everyone is a good candidate for private student loan refinancing.

Federal loan consolidation doesn’t have a credit requirement, and it offers the benefit of a single loan bill and potentially lower payments. But it’s only for federal loans, and it won’t cut your interest rate. Consider federal consolidation if you:

  • Need to consolidate to be eligible for income-driven repayment or public service loan forgiveness. This is the case if you have Federal Family Education, Perkins or parent PLUS loans.
  • Want a single federal loan payment, but don’t need it to be drastically lower
  • Are in student loan default and want to get back on track

Your new fixed interest rate will be the weighted average of your previous rates, rounded up to the nearest one-eighth of 1%. You’ll get a new loan term between 10 and 30 years, depending on your balance. That may reduce your payments.

A longer term also will result in paying more in interest. But you can always pay off your loan faster if possible, which will save money.

Total federal loan balanceDirect consolidation loan repayment term
Less than $7,50010 years
$7,500 to $9,99912 years
$10,000 to $19,99915 years
$20,000 to $39,99920 years
$40,000 to $59,99925 years
$60,000 or more30 years

A few words of caution on federal consolidation:

  • Keep Perkins loans separate so you can maintain access to forgiveness for public sector workers. You’d lose this option if you consolidate them.
  • Consolidating your federal loans through the Department of Education is free; steer clear of companies that charge fees to apply on your behalf.

The application takes most borrowers less than 30 minutes, according to the Federal Student Aid website. When you’re ready, go to studentloans.gov. You must complete the application in a single session, so gather the documents listed in the “What do I need?” section before you start.

If you’re considering either federal or private student loan consolidation in order to get a drastically lower loan bill, look further into income-driven repayment instead.

The government offers plans that cut payments to 10% or 15% of “discretionary” income and offer forgiveness on the remaining balance after 20 or 25 years. You can sign up for free on studentloans.gov.

If you have a large loan balance and a low income, income-driven repayment is probably your best option for the lowest monthly bill.


To see how much you’d pay monthly using each option — refinancing, federal consolidation and income-driven repayment — enter a few details about your loans below.

Student loan consolidation calculator

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