Should you consolidate your student loan debt?


While federal student loans are the most popular and widely applied for today, there are a variety of other options for both prospective and existing college students in the US. Similarly, while one loan might be right for you when entering college, that may change in the years that follow. Consequently, many students graduate with the burden of debt from not one, but several different student loans. This can be difficult to manage, and at a difficult time when a graduate must enter the wide world and seek out employment.

Consolidation your student loan debt can be an excellent idea, and is worth researching even before you graduate. It allows those who are paying back student loans to revise their outstanding balances and turn them into one monthly payment. This will obviously make managing this debt much easier. Student loan debt consolidation can also save you a lot of money, since paying a single rate is obviously a lot more affordable than paying back several different rates – rates that may have increased over the years since the student first took out the loan.

“Consolidating your student loan debt can be an excellent idea, and is worth researching even before you graduate”

How Student Loan Consolidation Works

As mentioned above, federal loans – those subsidized by the government – are the most popular among students today in the US. When consolidating several federal student loans, the existing loans are in fact taken on by the Department of Education. A fixed interest rate is then applied to this debt, based on a number of factors but primarily the current rates and the rate of each loan. There is also a cap applied to this final interest rate of 8.25%, meaning that the consolidated rate can not exceed this figure – no matter the rates of the loans being consolidated.

Unlike debt consolidation or refinancing, federal student loan consolidation will not cost the borrower extra money in fees; private financial institutions will make their money not from the students but from the federal government. It is important to note that federal and private student loans cannot be lumped together in one consolidation. If you are unable to consolidate your total student loan debt through the government, it is best to shop around banks and credit unions to find the best deal to suit you based on your credit score. Though, beware of companies that look to scam impressionable students by offering low rates that may seem attractive now but will cause the student to pay more in the long run.

“Unlike debt consolidation or refinancing, federal student loan consolidation will not cost the borrower extra money in fees.”

As mentioned, federal loans can be consolidated through the government and Department of Education, but not all types. The different types of federal loan that qualify for this kind of consolidation are listed below:

  • Direct Subsidized/Unsubsidized Loans
  • Subsidized/Unsubsidized Federal Stafford Loans
  • Direct PLUS loans
  • FFEL, or Federal Family Education Loans
  • Supplemental Loans
  • Federal Perkins Loans
  • Federal Nursing Loans
  • Health Education Assistance Loans

The Pros and Cons of Student Loan Consolidation

As always, there are both benefits and drawbacks to consolidating your student loan debt. The best thing you can do as a pre or post-graduate is to research the process of consolidating your loan, as well as the typical rates offered by local institutions. This will better equip you should you decide to consolidate your student loan debt, and ensure that you are not taken advantage of. Below are some general advantages and disadvantages to consolidating your debt. These are worth considering and weighing alongside one another when applied to your current situation before taking the step to consolidate.


  • Consolidation will simplify your payments by turning several different loans into one new loan with a single interest payment.
  • This interest payment will likely be a fixed rather than valuable rate, which will stay the same for the duration of the loan.
  • You can select a different repayment scheme, such as income-based scheme, which will require payments depending on how much money you are making.
  • You can also extend the duration of your loan, from the standard 10-year repayment plan to a more traditional length of 15 to 30 years.


  • While consolidating can lead to a lower monthly payment, extending the life of the loan will mean that you pay more in the long run.
  • This is because the total paid in interest will be higher, as will the number of payments you ultimately make.
  • Consolidating will also lead to you lose any of the benefits associated with the separate loans that you are consolidating.
  • The consolidation of student loans is final, meaning that once you complete the process you cannot undo it if you change your mind.

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