There are two types of consolidation loans. The type of consolidation loans available to you depends on whether you have federal or private student loans. Show Federal Direct Consolidation LoanIf you have federal student loans, you have the option to combine all or some of your federal student loans into a federal Direct Loan Consolidation . This option is only available to consolidate federal student loans and not private student loans. Federal loan consolidation will not lower your interest rate. The fixed interest rate for a Direct Consolidation Loan is the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth of a percent. While consolidating your loans may slightly increase your interest rate, it will lock you into a fixed interest rate, so your new payment won’t change over time. If you have federal loans originated under the Federal Family Educational Loan (FFEL) program or the Perkins loan program, you may be able to consolidate those loans into a new Direct Loan to qualify for Public Service Loan Forgiveness (PSLF). Tip! On Oct. 6, 2021, the U.S. Department of Education (ED) announced a temporary period during which borrowers may receive credit for payments that previously did not qualify for PSLF or Temporary Expanded Public Service Loan Forgiveness (TEPSLF). Get current PSLF guidance and learn more about this limited time opportunity. Learn more about what type of loan you have and get information about your federal student loans . Private consolidation loanA private consolidation loan or refinancing a student loan allows you to combine all or some of your student loans, private and federal student loans, into one larger private consolidation loan through a private lender or bank. If you are approved to refinance or consolidate your existing private student loans into a new private loan, the terms of the consolidation loan may allow you to lower your interest rate, lower your monthly payment by extending the length of the repayment term, or release a co-signer from your student loan. It is possible to consolidate federal and/or private student loans into one private consolidation loan. Consolidating federal student loans into a private consolidation loan has risks. You should weigh the benefits and risks of refinancing your federal student loan into a private student loan, because changing from a federal to a private student loan eliminates some of these protections and benefits.
If you have a secure job, emergency savings, strong credit, and are unlikely to benefit from forgiveness options, then refinancing federal student loans into a private student loan may be a choice worth considering. Warning: Just remember that, under current law, once you refinance your federal loans into a private loan, you can’t turn your loans back into federal student loans or get any of the benefits of the federal student loan program. Can you consolidate student loans that have already been consolidated?In short, if you have previously consolidated your student loans—whether through the government or a private lender—you can still refinance your student loans if you are eligible.
Can my student loans be forgiven if I consolidate?If you consolidate loans other than Direct Loans, consolidation may give you access to forgiveness options, such as income-driven repayment or Public Service Loan Forgiveness (PSLF). If you consolidate, you'll be able to switch any variable-rate loans you have to a fixed interest rate.
Can you consolidate student loans multiple times?There's no limit on how many times you can refinance a student loan. And because many lenders do not charge prepayment penalties or origination fees, there is often no extra cost associated with student loan refinancing. Some borrowers might refinance more than once to take advantage of low interest rates.
What happens if I consolidate my student loans?When loans are consolidated, any unpaid interest capitalizes. This means your unpaid interest is added to your principal balance. The combined amount will be your new loan's principal balance. You'll then pay interest on the new, higher principal balance.
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