How to Consolidate Student Loans

How to Consolidate Student Loans | Student FinTech

If you’ve been out of college for a while, or are looking at options for your student loans as you approach repayment, you may be thinking about consolidating your student loans. Doing so is a great way to make managing your payments easier, simplify the repayment process, and potentially lower your monthly payments. But you may be wondering, what’s the process for consolidating? We’ll break down how to consolidate student loans below.

What is Student Loan Consolidation?

Before we dive in, it’s important to define what student loan consolidation is. Essentially, consolidation describes the process of combining existing federal student loans into one new loan. You do this through a federal Direct Consolidation Loan. You cannot combine any private student loans into a consolidation loan.

Consolidating might give you the opportunity to make changes to your repayment term, which can help make your monthly payments more manageable. However, consolidating your loans won’t change your interest rate. It only creates a weighted average of your existing interest rates. Changing your repayment term may lower your monthly payment, but it is important to understand that extending your term will also cause you to pay more in interest over the life of the loan. However, if you’re struggling with your existing payments, consolidation is a good option to manage your debt and avoid going into default.

How it Works

To consolidate your federal student loans, you’ll complete an application for a Direct Consolidation Loan through the Department of Education at It will take about 30 minutes, and has to be completed in one session. Check out their list to see what information you’ll need, and gather your documents before you start to avoid any confusion.

From there, you can choose which existing federal student loans you want to include in the consolidation. (Say, for example, you have one loan with a higher interest rate than your other loans. You may want to exclude this from the consolidation loan and put more effort toward paying this one off. This way, it won’t make a big impact on the interest rate of your new consolidation loan.)

Next, you’ll choose a repayment plan for the new loan. There is an option to pick a repayment term based on your loan balance, or to choose a plan based on your income.

Finally, you’ll read over the terms and submit your application! It’s as simple as that. Until your consolidation is complete, you’ll continue making your student loan payments as usual. Once the consolidation is complete, you’ll have one monthly payment toward your Direct Consolidation Loan instead of multiple.