• You can combine multiple student loans into one with loan consolidation.
  • You’ll apply for loan consolidation through the federal government online or via the mail.
  • When you consolidate, you’ll get a fixed interest rate that is an average of your old loans’ rates.
  • Read more of Insider’s student loan coverage here.

Keeping track of multiple monthly federal student loan payments can be a headache. Student loan consolidation can help streamline the process and make it easier for you to manage your financial obligations. 

What is loan consolidation?

Consolidating a loan means you are combining multiple federal student loans into one. You’ll get a fixed interest rate that is a weighted average of your old loans’ rates, rounded up to the nearest eighth of a percent. 

Loan consolidation can make it easier to manage your financial obligations, as you’ll be making a singular monthly payment as opposed to multiple. You may also get a lower monthly payment by extending your loan term, though you’ll pay more in overall interest by doing so. 

However, when you consolidate your loans, any outstanding interest becomes part of the principal balance on your new loan. This means that interest may accrue on a larger principal balance than if you hadn’t consolidated. You won’t get a lower rate by consolidating your student loans. 

Applying for a Direct Consolidation Loan is free. Private companies may offer to help you complete your application for a fee, but they aren’t affiliated with the Department of Education in any way. 

You can only consolidate federal loans — private loans are just eligible for refinancing (which is sometimes confusingly called private consolidation). Additionally, you may only consolidate a loan that’s in repayment or a grace period, so you won’t be able to do so while you’re still in school. 

What do I need to consolidate student loans?

You’ll have to fill out the government’s Direct Consolidation Loan application to consolidate your student loans. You can either apply online or via a mailed print application. You’ll need to provide the following: 

  • Verified Federal Student Aid ID
  • Contact information including address, email, and phone number
  • Which loans you want to consolidate
  • Social Security number
  • Employer’s name and address (or an indication that you aren’t employed)
  • Driver’s license state and number
  • Reference information
  • Information about your income (if you’re looking to consolidate under an Income-Driven Repayment plan)

Five steps to consolidating a loan

  1. Review your current loan terms. Log onto your servicers’ portals and look over the interest rate you’re paying on your loans and their repayment term lengths. Download any relevant files and keep them in your records in case of any errors when you consolidate.  
  2. Apply for a Direct Consolidation Loan with the federal government. You have to complete the application in one sitting and it will take roughly 30 minutes or less. You’ll see your new loan terms when you apply. 
  3. Choose a repayment plan. You can choose a standard repayment plan, the default option which sets your monthly payment at a fixed amount over a ten-year term. Graduated repayment plans are also an option in which your payments will start out low and increase every two years over a ten-year repayment period. You can also pick an Income-Driven Repayment plan, which take your particular income and family size into account when calculating monthly payments.
  4. Sign a Master Promissory Note. You’ll need to sign a Master Promissory Note if you choose to take out a new loan. An MPN is a legal document you sign to promise to pay back your loan along with interest and fees. You’ll confirm the loans you want to consolidate when you sign this document. 
  5. Continue making payments. Keeping paying your current loans until your consolidation servicer informs you that they’ve been paid off by your new Direct Consolidation Loan. Once your consolidation process is finished, you’ll begin making one monthly payment instead of the multiple you were making before.  Your loan servicer will let you know when your first payment is due, which will be within 60 days after your loan is disbursed. 

Consolidating your student loans is a relatively painless process and can help you organize your student loan payments — all you need to do is to fill out a federal application and input personal and financial information.