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Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
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Matthew Gross is an editor at Compare.com. With a background in editing and SEO, he’s passionate about creating content that helps readers get the information they need to make more informed decisions. Prior to Compare.com, Matthew brought his user-centered approach to his work with global brands like Apple and Adobe.
Matthew graduated from Illinois State University, where he earned his bachelor’s degree in Journalism.
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Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
John Leach is a licensed insurance agent who reviews and fact-checks articles for Compare.com. John has several years of experience reviewing and editing various insurance topics, and he also holds a valid personal lines producer license from the California Department of Insurance (NPN #20461358).
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Student loan consolidation combines multiple loans into one new loan with a single monthly payment. The U.S. Department of Education offers Direct Consolidation Loans for existing federal student loan borrowers.
Most people consider consolidation because they’re juggling multiple loan servicers, different due dates, and varying payment amounts. It can lead to confusion, missed payments, and unnecessary stress. Consolidation streamlines your student loan debt into one loan, but it typically doesn’t reduce your interest rate.[1]
We’ll break down how federal student loan consolidation works and how it differs from private student loan refinancing.
Consolidation simplifies student loan repayment, but it might not save you money over the life of the loan.
You may get a lower interest rate if you refinance your student loans with a private lender, but you’ll give up federal benefits for your federal loans.
Your loan servicer may add unpaid loan interest to your balance during consolidation, increasing the total amount you’ll repay.
Student loan consolidation combines multiple federal student loans into a single loan with one monthly payment. It replaces your current loans with a new Direct Consolidation Loan from the U.S. Department of Education.
“Consolidation” applies only to federal loans. Private lenders use the term “refinancing,” even though both options involve combining loans. Refinancing transfers your student loan debt to a private lender. Consolidation keeps your loan with the federal government.
The interest rate for your new loan is the weighted average of your current loan rates. Although you might get a lower interest rate, you usually won’t save on interest. But you’ll get to keep federal benefits, which is a key difference from refinancing.
Common reasons to consolidate include:
Simplifying multiple payments into one
Accessing income-driven repayment plans
Maintaining eligibility for loan forgiveness programs
Getting loans out of default
Extending your repayment term with lower monthly payments
Refinance your loans and save.
Refinancing is when you combine multiple loans — private, federal, or both — into one new private student loan. The process is similar to consolidation, where the new lender pays off your existing loans and replaces them with a single new loan.
But you should be aware of some major differences between consolidation and refinancing. If you have good credit and a stable income, you can often get a lower interest rate when refinancing. But if you include federal loans, you’ll give up federal benefits like deferment, forbearance, and income-driven repayment options.[2]
When determining your new rate, private lenders typically consider your:
Credit score
Income and employment history
Debt-to-income (DTI) ratio
Education history (degree completion)
The table below shows important considerations and things to know about consolidating and financing student loans.
 | Federal Direct Consolidation Loan | Private Student Loan Refinancing |
|---|---|---|
| Purpose | Simplify federal loan repayment | Lower rate, change terms, or release a co-signer |
| Eligible loans | Federal only | Private and federal |
| Effect on interest rate | Weighted average of your current rates | May be higher or lower based on credit |
| Federal benefits | Keep your benefits | Lose your benefits |
| Credit check required | No | Yes |
| Ideal borrower | Needs easier payments or federal protections | Has good credit and stable income |
Student loan consolidation can make repayment easier, but it’s not the right move for everyone. Although it simplifies your student loans into a single payment, it may increase your total interest or affect your progress toward forgiveness.
Easier repayment schedule
Maintain access to federal protections and programs
Helps bring loans out of default
Get rid of variable interest rate loans
May increase total interest
Can reset loan forgiveness progress
May lose discounts and cancellation benefits
Might extend repayment period
Direct Consolidation Loans combine several federal student loans into a new federal loan with a single servicer and one monthly payment. You can typically consolidate:
Subsidized and Unsubsidized Federal Direct Loans
Federal Perkins Loans
Federal Family Education Loans (FFEL)
Direct PLUS Loans
Parents can also consolidate Parent PLUS Loans, but not with student loans in their child’s name.
Your new interest rate is a weighted average of your current loan rates, rounded up to the nearest one-eighth of a percent. For example, if the interest rates of your loans averages 5.25%, your new fixed interest rate may be 5.375%. In most cases, consolidation won’t lower your interest.
The consolidation loan application takes about 30 minutes to complete. The approval process can take up to six weeks. After approval, your new loan pays off your old loan balances.
You can apply and choose a repayment plan directly at StudentAid.gov.
You can easily consolidate your federal student loans online. Refinancing, on the other hand, involves applying to a private lender and undergoing a credit-based approval process.
Follow the steps below to consolidate your student loans into a Direct Consolidation Loan:[3]
Log on to StudentAid.gov.
Select the loans you want to consolidate.
Choose a loan servicer.
Pick a repayment plan.
Submit your application.
Continue paying your current loans until you receive a decision.
Private refinancing is more complicated. You’ll need to prequalify, choose terms, and complete a full application with a credit check and income verification.
Consolidation makes sense when you want to manage fewer loans with a lower monthly payment, without losing federal protections.
You might be a good fit for student loan consolidation if you:
Have older federal loans, like FFEL or Perkins loans, and want access to income-driven repayment (IDR) or Public Service Loan Forgiveness (PSLF)
Have at least two eligible loans in a grace period or repayment
Need to get out of default and restart payments with a more manageable bill
Want one loan servicer and one monthly payment while keeping federal benefits
Plan to switch repayment plans or extend your term
Want to switch from variable-rate loans to a single fixed-rate loan
Student loan consolidation is mainly about simplifying your loans and unlocking federal protections, not helping you save money on interest.
If your goal is to save on interest, refinancing may be a better choice. Unlike consolidation, refinancing goes through a private lender and can lower your rate. You can also shop around and compare loan offers by prequalifying without affecting your credit.
Refinancing may make more sense if you have only private loans, good credit, and a stable income. Always compare multiple lenders and review terms carefully before choosing.
Compare rates and find a better deal today.
Consolidating your loans can either help or hurt your income-driven repayment or loan forgiveness progress, depending on your situation and timing.
Consolidation can make some FFEL, Perkins, and Parent PLUS loans eligible for IDR plans or PSLF. But creating a new consolidation loan may reset your qualifying payment count, unless current rules allow progress to carry over.
IDR payments are based on your income and family size, not how many loans you have. So consolidation won’t automatically lower your payment unless you also change your plan or extend your term.
When Consolidation Helps Loan Forgiveness | When It Can Set You Back |
|---|---|
| Makes FFEL, Parent PLUS, or Perkins loans eligible for PSLF | May reset qualifying payment credits |
| Access to more IDR plan options | Could delay forgiveness timeline |
If your federal student loans are in default, consolidation can help you get back into good standing. Consolidation pays off your defaulted loans and replaces them with a new Direct Consolidation Loan, allowing you to restart payments.
You typically need to make payments under an IDR plan or make a set number of on-time payments to qualify. Once your new loan is active, collections stop, and you regain access to federal student aid.[4]
If loan payments are being collected through wage garnishment or court order, you’ll need to have the garnishment lifted or judgment vacated before you can consolidate.
Loan rehabilitation is another option worth considering, especially if you want to remove the default from your credit history.
Here are answers to common questions people ask about student loan consolidation.
It depends. Consolidating your student loans can be a good idea if you want a lower payment with a fixed interest rate. You may also want to consolidate to access federal programs like income-driven repayment (IDR) or Public Service Loan Forgiveness (PSLF). But consolidation may not be the right fit if you want to save money on interest.
It varies. Your loan payment depends on your interest rate, term, and repayment plan. For example, you’d pay about $555 per month on a $50,000 consolidation loan with a 6% interest rate over 10 years. Income-driven plans could lower your payment based on your earnings and family size.
It depends. Some federal loans may be forgiven after 20 or 25 years under income-based repayment plans. You must make qualifying payments and meet program requirements to qualify. Consolidation may affect your forgiveness timeline, depending on your loan history.
To begin the student loan consolidation process, log on to StudentAid.gov. Then, select your loans, choose a servicer, and pick your repayment plan. The online application guides you through each step and typically takes about 30 minutes to complete.
It depends. You should consolidate your loans if you want to keep federal benefits and simplify payments. But you may want to choose refinancing if you have good credit, want a lower interest rate, and don’t need income-driven repayment or loan forgiveness.
No. Consolidation doesn’t lower your interest rate. Your new interest rate is a weighted average of your existing rates, rounded up to the nearest one-eighth of a percent. Consolidation usually won’t lower your interest rate or total borrowing cost.
No. You can’t consolidate private student loans. Consolidation applies only to federal student loans. You’ll need to refinance through a private lender to consolidate private student loans. Most federal loans are also eligible for private consolidation. But you’ll lose access to federal benefits like income-driven repayment and loan forgiveness.
)
Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
Matthew Gross is an editor at Compare.com. With a background in editing and SEO, he’s passionate about creating content that helps readers get the information they need to make more informed decisions. Prior to Compare.com, Matthew brought his user-centered approach to his work with global brands like Apple and Adobe.
Matthew graduated from Illinois State University, where he earned his bachelor’s degree in Journalism.
Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
John Leach is a licensed insurance agent who reviews and fact-checks articles for Compare.com. John has several years of experience reviewing and editing various insurance topics, and he also holds a valid personal lines producer license from the California Department of Insurance (NPN #20461358).
