Student Loan Consolidation

Student loan consolidation is combining multiple loans into a single, new loan. When students are borrowing money to pursue a higher education, they often need to borrow from multiple lenders to cover all the expenses of college, which includes tuition, housing, and books. By the time graduation rolls around, it’s not uncommon to make student loan payments to multiple lenders!

Consolidation is similar to refinancing a loan. You can consolidate all, just some, or even just one of your student loans. Consolidating federal student loans may be a good strategy to lower monthly payments or to get out of default, but it is not always a good idea.

Consolidating Federal Loans

Firstly, it is necessary to realize that there are two different types of student loan loans: Federal student loan loan, and private student loan debt from for-profit lenders. These two types are generally kept divided—you can’t consolidate a government debt with a private debt, and pay only the government.

Instead, you have to conduct these two different loan consolidations,conduct one large student loan consolidation whereby your federal student loan debt is merged with private debt in a new loan from a private lender.

Consolidating Federal Student Loans

Direct Loans, the name of the division of the Department of Education that is responsible for issuing Federal student loans, has an excellent program for debt consolidation of wholly-public debts. Known as a “Direct Consolidation Loan,” students can borrow enough to satisfy multiple student loan debts, thus creating one monthly payment and interest charge from a myriad of individual loans.

Loan consolidation programs from the Department of Education’s consolidation program do have some downsides, which vary in depth. Most importantly, know that a debt consolidation program is essentially a refinancing program. To consolidate, you essentially borrow through a new loan in an amount that is large enough to allow you to pay off your current debts. From then on, you need only make one payment to pay off the new loan.