How to consolidate your student loans to lower your interest rate and make a single payment every month

  • Consolidating student loans streamlines your loans into a single monthly payment, and can potentially give you a lower interest rate.
  • If you have federal student loans, you can apply for a Direct Consolidation Loan through the US government, or for a refinancing loan through a private lender. Note that refinancing federal loans through a private lender will lose federal loan benefits like income-based repayment plans, or student loan forgiveness under PSLF.
  • If you have private student loans, you must refinance through a private lender like LendingTree or SoFi.
  • Before consolidating any type of loan, compare the new monthly payment, repayment term, and prospective interest rate offered by multiple lenders to find the loan that best fits your needs. Sites like Credible can help you compare rates from multiple lenders at once.
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Keeping tabs on various student loans is tough.

One solution is to consolidate them. When you consolidate your student loans, you merge all of your loans into one. This helps simplify repayment so you have a single loan and one monthly payment, preferably for a lower rate than your original loans.

How to consolidate student loans

1. Take an inventory of your student loans

The first step in the process is to take an inventory of your student loans.

  • How many student loans do you have?
  • Who are your loan servicers or lenders?
  • Do you have federal loans, private loans, or both?

2. If you have federal loans, look at Direct Consolidation Loans

If you have federal student loans, you can consolidate your loans with a Direct Consolidation Loan, which allows you to consolidate your loans after you graduate. There is no fee to apply, and you can do it online through

If you have private student loans, you aren’t eligible for a Direct Consolidation Loan.

Applying for a Direct Consolidation Loan can seem like an easy solution to make repayment more manageable. However, it’s important to review the pros and cons of taking out a Direct Consolidation Loan.

The main benefit of consolidation is that you streamline your monthly payments. Instead of making payments to multiple loan servicers and managing multiple payments, you only have one loan and one payment to manage.

On top of that, you could extend your repayment term, which will lower your monthly payment. While that can be good, be aware it will cost you more in interest over the long term.

It’s important to be aware that when you consolidate, the outstanding interest on your loan will be added to your principal balance. So you’ll likely end up paying more interest on a higher balance.

Lastly, if you’ve made any payments toward Public Service Loan Forgiveness (PSLF), you’ll lose credit if you consolidate your loans.

If you’re hoping for student loan forgiveness under PSLF, consolidating your loans is not the right move for you.

3. If you have federal or private loans, consider refinancing through a private lender

Another option is student loan refinancing, for which both federal and private student loan borrowers are eligible. Student loan refinancing is a type of consolidation where you can roll all of your existing loans into a new loan with a lower interest rate. You apply for a student loan refinancing loan, which pays off your current loans, then you pay off the new loan. The new loan will likely be at a lower interest rate, so you’ll have just one monthly payment and save money on interest as well.

When you consolidate through a student loan refinancing company like LendingTree or SoFi, you’re working with a private lender. Each lender will have various terms, pros, and cons. In general, though, the pro of consolidating through refinancing is getting a lower interest rate. In some cases, you could save thousands of dollars in interest by refinancing.

Additionally, you make the payment more manageable by downsizing from multiple loans to one.

The main con of refinancing is that, if you have federal loans, you give up federal student loan benefits. Remember that if you refinance your federal loans, they will be paid off with the new loan. You’ll then have a private refinancing loan to pay back and will no longer have federal student loan benefits like student loan forgiveness or income-driven repayment. It’s important to consider these facts when evaluating if student loan refinancing is right for you.

4. Choose your consolidation method

After you’ve taken an inventory on your student loans and have determined which consolidation method you qualify for, it’s time to choose which method works best.

Look at the pros and cons of a Direct Consolidation Loan as well as working with a private lender and opting for student loan refinancing. You’ll probably want to compare multiple quotes from private lenders, which you can do easily online through a site like Credible.

You’ll want to know what your new monthly payment is, how long your repayment term is, as well as your prospective interest rate. Looking at these factors can give you insight into which option is best for you.

5. Apply for a Direct Consolidation Loan or refinancing loan

Once you’ve chosen the best student loan consolidation option for you, it’s time to apply. If you go the Direct Consolidation Loan route, you can apply at The process should take less than 30 minutes. You’ll want your FSA ID, personal, and financial information ready in order to fill out the application.

When you’ve applied, choose the loans you want to consolidate and sign up for a repayment plan.

If you choose student loan refinancing, apply directly with the student loan refinancing company. Your credit will be checked and you’ll likely be asked to provide financial information like a pay stub or tax return. Once you apply, choose the loans you’re refinancing and choose your repayment term and interest rate. You may have the option to choose between a variable or fixed interest rate.

6. Continue making payments

For both consolidation types, be sure to continue making payments on your current loans until the process is complete. Your first payment on your Direct Consolidation Loan will start 60 days after the loan is disbursed. Be sure to stay in touch with your loan servicer about your first due date. Once the process is complete, you can resume payments on a single loan and make student loan repayment more manageable.

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