Student Loan Consolidation Program
Consolidating student loans can be a smart move, but it’s not the right choice for everyone. Here we’ll explore what consolidation is, who should consider it, how to compare different options and how to get started.
Your student loans aren’t kept in a single location; they’re serviced by different companies.
The federal government does not manage your student loans. Instead, they are serviced by private companies that handle the billing and repayment process. You can rest assured that the Department of Education will not consolidate your student loans for you—that’s a job left to these third-party companies.
Here’s what happens when you consolidate: Your current student loans are transferred from their current servicer (the company managing your loan) to Nelnet. Then Nelnet begins tracking all of them under one umbrella account. The main benefit here is that it allows you to have one easy-to-access location for all of them rather than having scattered accounts open at multiple places throughout the country or online with different companies offering each separate type of lending product available today (see why we’re so concerned about this?).
Consolidation is an attractive option if your loans are with many different servicers.
You can consolidate your federal student loans with a different lender, with the same lender, or even with a different servicer. However, it’s important to note that there are some restrictions based on your situation—for example, if you have Perkins or Parent PLUS loans and want to consolidate them with another type of federal loan. You can always check out our handy guide on how to consolidate your loans for more details.
- If your current servicer is Navient and they’re not providing good customer service (or any service at all), consolidating will give you the option of working with FedLoan Servicing (PHEAA) instead.
- If your current lender is Sallie Mae and they’re charging high interest rates on certain types of loans (such as private education loans), consolidating might make sense so that those higher-interest payments are no longer being added onto existing balances for no reason at all!
What is the difference between federal student loan consolidation and refinancing?
There are two ways to combine your student loans.
- Student loan consolidation is the process of combining multiple federal and private loans into one new loan. It’s ideal if you have several different balances with different interest rates and they’re all in default or close to it, making it difficult for you to pay them off separately. You can consolidate these loans by filling out a Free Application for Federal Student Aid (FAFSA) form, which will determine your eligibility based on need-based criteria such as cost of attendance and academic performance. Once you receive this information from the Department of Education (DOE), it will make arrangements with lenders who offer federal consolidation options based on your financial situation and credit history.
- Refinancing is the process of taking out a new loan with a new lender that replaces an existing one at a lower rate than what was originally offered by its original issuer—for example: refinancing from an unsubsidized Stafford Loan into an income-driven repayment plan like Pay As You Earn (PAYE). This option works best when borrowers have high amounts owed but good credit scores because most financial institutions require lenders who refinance federal student loans to use either FAFSA data or “soft” credit checks—meaning they look at factors like whether you have any late payments on record before deciding whether or not they’ll refinance those debts in exchange for lower monthly payments over time; remember though that soft credit checks don’t affect your actual credit score so if someone says otherwise they’re probably lying!
The benefit of refinancing is getting a lower rate not just on your original loan amount, but also on your accrued interest.
The benefit of refinancing is getting a lower rate not just on your original loan amount, but also on your accrued interest. This can save you money in the long run, as borrowers who refinance their loans reduce their monthly payment by several hundred dollars over time.
When considering refinancing, it’s important to consider whether this process will help meet your goals and objectives. If consolidating multiple student loans with varying interest rates into one loan will lower your payments and make them more manageable, this may be an effective tool for managing student debt. However, if you have high-interest private loans or a large federal loan balance that cannot be refinanced at a low rate because of its size and/or poor credit history—or if you don’t want to increase your monthly payments—consolidation may not be right for you at this time.
Refinancing can be done through banks, credit unions and online lenders.
You can consolidate your student loans through a bank or credit union.
You can also do so through an online lender.
You can consolidate your student loans through a servicer, who is the company that handles all of your loan payments for you.
You can consolidate multiple times.
You can consolidate multiple times. This means that, if you have federal loans through one lender and private loans through another, you can consolidate those two loans into one new loan with the Federal Direct Loan program.
You can also combine multiple federal or private student loans in order to get lower interest rates and reduce your monthly payment amount. When consolidating a loan, it’s important to know what type of repayment plan you’ll be agreeing to as well as any fees associated with that repayment plan.
Consolidation or refinancing can offer significant savings, but is not for everyone.
- Consolidation: Federal student loan consolidation is a program that allows you to combine multiple federal student loans into one new loan with a single monthly payment. This can make managing your debt easier, and in some cases, it can lower interest rates on all of your loans.
- Refinancing: Private student loan refinancing involves paying off one or more loans with a new private loan with better terms—usually lower rates and fees. Refinancing federal loans into private ones isn’t possible because the federal government doesn’t allow loans to be transferred from one lender to another (though there are exceptions for certain borrowers).
Consolidating or refinancing can help you organize your debt and save money but it’s important to do your research first.
Consolidating or refinancing your student loans can help you organize your debt and save money but it’s important to do your research first.
- Consolidation or refinancing can save you money. If you have more than one federal loan, consolidating them into a single loan could save you money in interest over time by reducing the number of payments and lowering the total amount owed on each month.
- Consolidation or refinancing can help you organize your debt. By combining all of your federal loans into one, it can be easier to track what’s due and when it’s due as well as keep track of any fees or penalties associated with late payments since they’ll all be listed on the same statement instead of spread out across several statements from different lenders. This will make paying off those debts much simpler and more organized so that they don’t fall into default status later down the line because someone forgot about something like a late fee charge that wasn’t paid regularly enough during repayment (which happens more often than people think).
If you’re looking to consolidate or refinance your loans, it’s vital that you do your research before making any decisions. This can help ensure that you get the best possible deal on your loan and avoid any hidden fees or pitfalls along the way. The first step is to read through our guide on student loan consolidation programs and learn more about what they entail so that you can make an informed decision when deciding whether or not this option is right for you!