There’s no doubt that student loan debt is a huge problem in the US, daunting to hundreds of thousands of Americans. In fact, it’s currently the second-highest form of consumer debt in the country. With the rising cost of college tuition, it’s only getting worse. In case you’re struggling to keep up with your loan payments, you may be considering student loan consolidation as a way to lower your monthly payment.   

However, is this really the best option? Here, we’ll take a look at everything you need to know about consolidating your student loans. We’ll explore the pros and cons of consolidation, as well as some other options you may want to think through. By the end, you should have a better idea of whether or not consolidation is right for you.  

Student loan consolidation can be a great way to lower your monthly payments and pay off your debt more easily, but it’s not right for everyone. Consolidation is when you combine multiple student loans into one single loan with one monthly payment. This can be helpful if you have multiple loans with different interest rates and repayment terms. 

There are two main types of student loans you can consolidate- private loans and federal loans. Private consolidation is when you consolidate your private student loans with a private lender. Federal student loan consolidation is when you consolidate your federal student loans.  

Going through this consolidation process also comes with some risks. For example, if you have federal loans, you may lose certain benefits like access to income-driven repayment plans and forgiveness programs. And, depending on the terms of your new loan, you may end up paying more in interest over the life of the loan.  

So, take some time to understand the whole process before you come to a conclusion should consolidate your student loans.  

What is Student Loan Consolidation?

While struggling to keep up with multiple loan payments each month, many students decide on consolidating student loans. This process is where you combine all of your existing student loans into one new loan with a single monthly payment.  

This is usually done as a way for a borrower to save some money and lower interest payments. By combining many loans that have different due dates each month and acquiring different interest charges, a borrower can save quite a bit by making just one larger payment.  

Nonetheless, this still isn’t the best option in every situation.  

Student Loan Consolidation vs. Refinancing: What’s the Difference?

Many people get confused with these two terms and think they essentially mean the same thing. But, in reality, they don’t. Let’s discuss the difference between the two so you can better understand both.  

The main difference between student loan consolidation and refinancing is that consolidation combines your multiple federal student loans into a single loan with one monthly payment while refinancing replaces your existing student loans (both federal and private) into one new, private loan.   

Consolidation can offer some benefits, including the ability to lower your monthly payment by extending the repayment term of your loan. The consolidated loan also has a fixed interest rate, which can save you money if you currently have variable-rate loans.   

Refinancing also has significant benefits, including the lower monthly payment, as well as the ability to choose a repayment term that works better for you. Additionally, with this process, you can cover all your loans, both federal and private.  

Student Loan Consolidation: Pros and Cons

Now that we thoroughly covered what a student loan consolidation is, we must take a look at both the positive and negative sides to this process. Although student loan consolidation can have some benefits, there are also some potential drawbacks that should not be overlooked.   

Potential benefits include that it can help you save money on interest. If you have multiple student loans with different interest rates, consolidating them into a single loan with a lower rate can help you reduce the amount of interest you pay over time. This will make your monthly payments more manageable.   

Some drawbacks to consider before consolidating is that you may end up paying more interest over the life of the loan if you extend the repayment term. Another potential drawback is that it can lead to delays in repayment if you consolidate with a private lender and then switch to a federal repayment plan later on.  


  • It can save you money on interest and lower your monthly payments.  
  • If you have several student loans with different payment due dates, consolidating them into one loan can simplify your payment schedule.  
  • You can choose a new repayment plan that better fits your needs.   
  • Can also make it easier to keep track of your debt and make timely payments. Having one loan instead of multiple ones can help you better manage your finances.  


  • This will likely extend the repayment period of your loans, which means you’ll be paying the interest over a longer period of time.   
  • Consolidation can also reset the clock on your grace period, meaning you’ll have to start making payments on your consolidated loan immediately – rather than being able to wait a few months after graduation.   
  • If you consolidate federal loans with private loans, you will lose some protections and benefits that are available only with federal.  

How to Consolidate Student Loans

If you are interested in how to consolidate student loans now that you know you can, we are here to give you a quick guide.  

To consolidate your loans, you’ll need to apply for a consolidation loan through a lender. Your consolidated loan will have a new interest rate based on the weighted average of your previous rates, plus a 0.5% consolidation fee.  

Before signing anything, make sure to compare the total cost of a potential new loan with the cost of keeping your existing one. By doing this you will find out if student loan consolidation is the best option for you.  

In case you decide to consolidate your student loans, follow these steps:  

  • Research different consolidation lenders and compare their terms.  
  • Apply for a consolidation loan from a lender.  
  • Use the consolidation loan to pay off all of your existing student loans.  
  • Start making payments on your consolidated loan according to its terms. 

Federal Student Loans

There are two types of federal student loans: direct and FFEL. Direct Loans are made by the federal government and FFEL loans are made by private lenders but backed by the federal government.  

If you consolidate your Direct Loans or FFEL Loans into a Direct consolidation loan, you may lose certain benefits associated with your current loans. For example, if you have an interest rate reduction or income-based repayment plan on your current loans, you will no longer be eligible for those benefits after consolidation. You should consider these factors carefully before you make a decision.  

Private Student Loans

These loans are issued by private lenders and not backed up by the government. Therefore, private student loans cannot be consolidated into federal consolidation loans.  

If you have both federal and private student loans, you may want to consider going through private student loan consolidation first. Here’s why:  

You can usually get a lower interest rate on a consolidation loan than you’re currently paying on your private student loans. A single monthly payment may be easier to manage than multiple payments. And by doing this with private loans you will save a lot more because they are generally more expensive.   

Does Student Loan Consolidation Hurt Your Credit?

If you’re by now really invested in consolidating your loan you also may be wondering does loan consolidation hurt your credit?  

The simplest answer to this is that it depends. If you consolidate your loans and then make all of your payments on time, your credit score will improve. However, if you miss payments after consolidating your credit score will drop.  

So, in case you’re considering consolidation, make sure you’re prepared to make all of your payments on time. Otherwise, you could end up hurting your credit score in the long run.  

Don’t forget to factor in student loan consolidation rates which can range anywhere from 5 to 9%.  

Is Student Loan Consolidation a Good Idea?

Loan consolidation can be a good option for some borrowers, but it’s not right for everyone. Before you make a decision, it’s important to understand how consolidation works and what the pros and cons are.  

Loan consolidation will allow you to take out a new loan to pay off your existing ones. This new loan will have a new interest rate, which is determined by taking the weighted average of your current interest rates and then rounding up to the nearest one-eighth of 1%.   

If you have any federal loans, know that you’ll lose certain borrower protections by consolidating into a private loan. These protections include access to income-driven repayment plans and forgiveness programs. Additionally, private consolidation loans usually have higher interest rates than federal consolidation loans. So, if most of your debt is in federal loans, consolidating into a private loan probably isn’t worth it.  

When Does Student Loan Consolidation Make Sense?

Going through the consolidation process will make sense if you have multiple student loans from different lenders, as this will simplify your repayment process by giving you a single loan.   

Secondly, if you’re struggling to keep up with multiple monthly payments, consolidation could lower your overall monthly payment amount. And lastly, if you have high-interest-rate loans, consolidating can help you save money over the life of your loan. If any of these situations sound like you, then consolidation might be a good option for you to consider.  

Bottom Line

The bottom line is that consolidating your loans can save you both time and money. If you have multiple student loans, consolidating them can help you keep track of your debt and stay on top of it. You may also be able to get a lower interest rate on your consolidated loan, which can save you money.   

However, this is not a decision that should be rushed as there are some risks, so make sure you understand all the terms and conditions before signing up for a consolidation loan.  

If you need any additional help don’t hesitate and hire a financial advisor to guide you through the whole process.  


But I must explain to you how all this mistaken idea of denouncing pleasure and praising pain was born and I will give you a complete account of the system, and expound the actual teachings of the great explorer of the truth, the master-builder of human happiness. No one rejects, dislikes, or avoids pleasure itself, because it is pleasure, but because those who do not know how to pursue pleasure rationally encounter consequences that are extremely painful.

Leave A Reply