Student Loan Consolidation Programs for Federal and Private Loans

Leaving college burdened by multiple loans and large debt is daunting. The substantial debt burden for recent graduates, makes student loan consolidation a smart choice for any graduate in need of debt help. Consolidation of federal loans is easy, and might save you hundreds of dollars by lowering your interest rate.

What is student loan consolidation?

Federal student loans are consolidated somewhat differently than private student loans, as federal student loans are guaranteed by the U.S. government. In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year's student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year.

The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated together.

Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private sector debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.

Student loan consolidation can be beneficial to students' credit rating, but it's important to note that not all federal student loan consolidation companies report their loans to all credit bureaus.

Private Student Loan Consolidation

Private student loan consolidation is very easy. Below you will find a list of lenders that can help with your current financial situation, and help you to consolidate your debt into one loan payment. Usually it is simple to combine private loans into one consolidation loan with a lower interest rate (depending on your credit profile).