Student Loans and Debt

5-Step Formula to Consolidate Your Student Loans The Right Way

Knowing how to consolidate student loans from different lenders could help ease the burden of your student loan debt. Having a student loan payment can be stressful enough; having multiple loan payments is even worse.

Dealing with various accounts, payment amounts, due dates, interest, and terms can make your loans all the more aggravating. Consolidating your student loans into one single loan can give you relief in more ways than one.

For starters, you’ll only have one monthly payment to make. And you may even come out with a lower interest rate and payment amount on top of that. This makes the payment process easier and allows you a chance to pay back your debt more quickly.

So, if you’d like to add convenience and potential savings to your student loan debt, then you may want to consider consolidating all your loans from different lenders into one loan from one lender.

If you’re not sure where to start, follow the five steps below to ensure you don’t miss anything.

1. Make a list of all your current loan types and their amounts

The type of loans you have will dictate the type of consolidation path you’ll pursue. There are two types of student loans to consider here: federal and private.

If you are unsure of the amount or type of loans you have, there are a couple of ways to check. The first thing you can do is get your credit report. It will show you all the loans you have in your name along with the amounts owed.

If you still can’t pinpoint the type of loan you have from your credit report, check the National Student Loan Data System. This database allows you to view your federal loans, grants, aid, and overpayment. If you have a student loan that doesn’t appear here under your name, then you have a private loan.

2. Determine the type of consolidation you’ll use

Once you know the types of loans you have, the next step is learning more about the consolidation options available to you.

Federal loans

If you have federal loans, you have two options:

  1. Consolidate your loans through the Department of Education
  2. Consolidate your loans with a private lender (more commonly referred to as “refinancing“)

Private loans

If you have private loans, your only option is to consolidate or refinance your loans with a private lender. You cannot consolidate private loans through the Department of Education.

Federal and private loans

If you have a mix of federal and private loans, and you want to consolidate them together, you can only do so with a private lender. The private lender would pay off your old loans and you would have a single new loan account.

Note, once you move your federal loans to a private lender, you could lose benefits such as loan forgiveness and flexible repayment plan options offered under federal loan programs. If you ever run into financial difficulty, a private lender may not give you the flexibility of payment options that your federal loans can.

3. Consider the pros & cons of each product

Here’s a quick overview of the pros and cons of each consolidation option to help you decide which one you should choose.

Federal loan consolidation


Compare the pros and cons to make a better decision.

  • One payment
  • Can qualify for flexible repayment plans
  • Loan forgiveness forbearance, and deferment options
  • Fixed interest rate
  • Possible lower monthly payment
  • Won’t save money
  • Could pay more interest over time
  • Cannot be undone (once you’ve consolidated your federal loans, they can’t be broken up again)
  • Can’t include private student loans
  • Will lose progress with loan forgiveness once loans are consolidated
  • May lose other federal benefits
  • Debt forgiveness is taxable

Private loan consolidation


Compare the pros and cons to make a better decision.

  • You’ll lose federal benefits
  • Variable interest rate could increase future payments
  • Possible application fees and closing costs
  • Best rates are typically reserved for borrowers with great credit and income

Click here to learn more details about the pros and cons of each consolidation option. 

4. Choose a lender

If you have federal loans and prefer not to move them to a private lender, your choice is simple: Direct Consolidation Loan through the Department of Education. You can complete and submit the application online.

If you would like to consolidate your loans into a single private loan, you have some research to do. There are many lenders to choose from and you need to make sure you choose the right one.

You can start by using our personalized loan offer engine to see which lenders you pre-qualify with, without hurting your credit score.

5. Crunch the numbers

For Federal loan consolidation, you can use this loan calculator to analyze your consolidation prospects. For private lenders, you’ll need to complete your own analysis with a calculator that computes the total cost of your loan based on terms like APR and the length of the loan.

Once you complete a few applications with private lenders, you’ll want to pour over the proposed promissory notes for the terms and rates each company presents you with. The loan process is not complete until you agree to the terms and sign the promissory note. This is a good thing because it will give you some time to do your due diligence.

You’ll want to crunch the numbers according to those terms. Here’s an example* for a $30,000 balance across all your loan balances (both private and federal):

* This example doesn’t take origination fees or early payment fees into consideration. Be sure you understand all the fees related to consolidating or refinancing your student loans.

Depending on your financial goals, one option may be better than another for you. For example, if your goal is to have a lower monthly payment, Company C’s terms would be best, but you’ll end up paying over $7,000 in interest over the life of the loan.

Conversely, you may not like the idea of paying a lot of interest and would like to have a higher monthly payment to get out of your loan more quickly. In this case, you may choose Company A’s consolidation product instead.

Finally, you’ll want to make sure you’ll fare better under a new loan. In the example above, the borrower might have a lower interest rate than what all of these private lenders are offering for consolidation. If that’s the case, it may not make sense to refinance or consolidate into a new loan.

Additionally, someone with federal loans and inconsistent income might find a private lender’s repayment terms too rigid. If this borrower is depending on income-driven repayment plans or will expect loan forgiveness, then refinancing with a private lender would not be a good move for them.

What to do next

If you know you want to combine your loans into one loan with a private lender, start by getting pre-qualified offers from leading lenders. It only takes a few minutes and it will not impact your credit score.

Once you have an idea what you qualify for, it’s critical that you compare rates and terms from each lender, including the ones you don’t pre-qualify for. You want to see what else is out there to make sure you get the best deal before signing the dotted line.

Ready to consolidate your student loans seem like a good idea? Compare rates and terms from each lender here.

Apply with a few companies so you can compare the final offers, then choose the one that works best for you and your long-term financial goals.