How to Consolidate Student Loans

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The Student Loan Debt Crisis

Student loan debt is as American as apple pie. Roughly 70 percent of college students graduate with a significant amount of student loans to pay off. To put that in perspective, over 44 million people in America have student loans totaling over $1.5 trillion dollars.

This statistic means that approximately 39% of working adults are carrying some level of Student Loan debt. Additionally, most students have between 8 and 14 individual loans with multiple loan servicers or companies when they graduate. Making multiple payments and multiple due dates, keeping up with several different interest rate can be difficult to manage effectively.

This is where student loan consolidation comes in to help simplify multiple loans in to one single loan, meaning there will be one interest rate and one payment per month. Consolidating your loans not only simplifies your re-payment but depending on your monthly financial needs, you will likely be given the option of extending the term or amount of time you have to repay your loan. By extending the term of your loan you will most likely gain a new lower monthly payment. Of course, the longer it takes you to pay off your loan the more you will end up paying in interest over the life of the loan. It would be best to decide which is more important to you, a lower monthly payment or your desire to pay less over the life of the loan. Remember, you can always refinance later to get a better interest rate and adjust the term to make sure that you aren’t over paying in interest.

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Managing Your Student Loan Debt

Managing your student loans is vitally important. Becoming delinquent on your loans can greatly affect your life moving forward. Federal student loans can go into default causing liens to be placed on your tax refunds and other assets. Defaulting on your student loans can also ruin your credit if not handled appropriately which could take years of financial work to recover.

By consolidating your multiple loans, it makes it much easier to maintain a good payment history which helps to raise your credit score, slowly but surely helping to brighten your financial future.

There are a number of options for how to consolidate student loans which mostly depend on the types of student loans that you have. You could have federal or private student loans or a mix of them. If you have only federal student loans, your options are more limited.

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How to Consolidate Federal Student Loans

If you are only consolidating federal student loans The Direct Loan Consolidation program through the Department of Education is your only option to consolidate your federal student loans into one loan with renegotiated payment terms and one low monthly payment.

It is important to know that you can only consolidate your federal student loans one time and the interest rate at the time of consolidation is fixed for the life of the loan. If interest rates become lower over time, you will not be able to take advantage of that lower interest rate. The Federal Government determines the interest rates for federal loans at the beginning of each year. However, the federal interest rate is most often the lowest fixed rates available at the time, so this is frequently not as much of a concern.

When you consolidate your federal student loans, you will be given a new weighted interest rate and new repayment terms. The term is the amount of time you have to pay off the loan and the maximum amount of time you have to pay off your student loans is determined by the total dollar amount of loan that you have at the time of consolidation.

Up to $7,500 10 years

Up to $9,999 12 years

Up to $19,999 15 years

Up to $39,999 20 years

Up to $59,999 25 years

Over $60,000 30 years

There are several perks to staying with a federal loan consolidation program. A helpful on is that you can opt to pay your federal consolidation loan based on an income-contingent repayment plan. There are several income-based options available depending on several qualifying factors. For instance, if you enter into public service of some time like social care or if you didn’t finish school with a degree, consolidating and getting on an income-based repayment plan can greatly assist you in managing your debt.

An important piece of information is that you can only get a federal student loan consolidation one time, so you want to make sure that you include all of your federal loans. If you have any questions about your federal student loans or need any information regarding your federal loans you can contact the Department of Education.

The process of consolidating your federal student loans is an entirely free process, you should never have to pay a fee through the federal student aid website. The application takes about 30 minutes to complete. Continue making any payments that are due on your federal loans during the consolidation process. If your loans go into default before the consolidation is final, you may not qualify for the consolidation.

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Consolidating Federal & Private Student Loans

If you have a mix of federal and private student loans and can qualify, you may want to look into refinancing your student loans. Refinancing is similar to consolidation in that you are taking several different loans and converting them in a sense to one single loan with totally different terms. It is also similar in that the new lender is paying off all of your old loans and now you will just be paying the new lender a single payment.

The biggest benefit borrowers see from refinancing is most often a lower interest rate. If you can save just 1% in interest that oftentimes works out to 10’s of thousands of dollars saved over the life of the loan.

For more information on Refinancing your student loans check out 8 Things you Need to be Aware of When Refinancing Student Loans

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Three Best Private Student Loan Refinancing Companies of 2019


SoFi is the largest private student loan servicer in the country. They focus primarily on graduates with high student loan debt, high income, and good credit. However, their customer service and additional available services cannot be beaten. They also offer competitive interest rates.

  • 5 to 20-year repayment terms
  • Variable or fixed interest rates available ranging from 2.470% to 8.179% based on qualifiers
  • 0.225% interest rate discount for auto pay
  • Deferment or forbearance available for disabled, students returning to school, or active military
  • Minimum credit score 650 FICO
  • A+ Better Business Bureau rating
  • Refinance both federal and private loans into one easy to manage loan
  • Certain bar and residency loans not eligible
  • Career coaching, wealth advice, and entrepreneurship programs available


LendKey is not an actual lender, but rather a marketplace for student loan refinancing. If you want to keep your student loans with a local lender, this is a good place to start. With one application you will receive offers from local banks and credit unions for student loan refinancing.

  • Variable repayment terms available depending on the selected lender
  • Variable or fixed interest rates available starting at 2.47%
  • Undergraduate and graduate loans are eligible for refinancing
  • Refinance both federal and private loans in one easy to manage loan
  • A+ Better Business Bureau rating
  • Minimum income to be eligible $24,000 annually


Earnest is a subsidiary of Navient, a federal student loan servicer. They offer student loan refinancing for both federal and private student loans. They are very competitive in the marketplace, but it can be difficult to qualify for student loan consolidation through this company if you don’t have good credit.

  • 5 to 20-year repayment terms
  • Variable or fixed interest rates ranging from 2.57% to 6.32% APR
  • Discounted interest rate for auto pay enrollment
  • Deferment or forbearance options available for certain situations
  • Ability to tailor loan terms to lower monthly payments at any time
  • Minimum credit score 650 FICO
  • Minimum income to qualify $35,000 annually
  • Must have completed degrees for all loans refinanced
  • A+ Better Business Bureau rating

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June 4, 2019

Alyssa Cotler

Alyssa specializes in creating content and website copy for law and accounting firms and nonprofit organizations. She has an undergraduate degree in history and a J. D. from Columbia Law School. Protection Status