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Student Loans : Student Loan Consolidation Guide

Federal Student Loan Consolidation

Student Loan Consolidation Guide Step 2: The Facts of Federal Student Loan Consolidation

    When you consolidate your student loans, you have two options. You can either consolidate with a private company or choose federal student loan consolidation. The type of consolidation program you choose will greatly depend on your situation. Federal student loan consolidation can be a good choice for those who have student loans from the government; however, not all students with government student loans will benefit from federal student loan consolidation.

What is Federal Student Loan Consolidation?

    Federal student loan consolidation is a program managed by the US Department of Education that pays off recent graduate's education loans with one consolidation loan, essentially combining many loans into one larger loan ("About Consolidation"). You still have to pay off all your debt, but instead of having to manage and keep track of multiple loans, you only have one consolidation loan. For example, if you had three separate student loans, each for $1,000, you could get on consolidation loan for $3,000 to pay off those three loans. Then, all you would be left with is the one $3,000 consolidation loan.

Who Should Do Federal Student Loan Consolidation?

    Before you apply for federal student loan consolidation, make sure that you are eligible and that consolidating your loans will be beneficial. Almost all student loans from the federal government can be consolidated through federal student loan consolidation ("What Loans Can I Consolidate?"). However, loans from private and state agencies are not eligible for federal student loan consolidation, although they may be eligible for private consolidation. Remember, just because your loans are eligible for consolidation, doesn't mean you have to do it. In fact, you should only do federal student loan consolidation or any other type of consolidation if you are sure it will help your financial situation. If you aren't careful, you could lose government forbearances or deferments, become ineligible for loan cancellation, increase your overall number of payments, lose prior incentives or lock in high interest rates ("Loan Consolidation," FinAid). In light of those risks, you should only do federal student loan consolidation or any other type of loan consolidation if it won't make it harder for you to pay back your debt.
    If you are safe from the risks, then you should consider the many possible benefits of federal student loan consolidation. You can lock in a low interest rate, eliminate having multiple lenders and reduce your monthly payments ("Loan Consolidation"). So, if you are having trouble making your monthly payments and you aren't close to paying off your debt, you should seriously consider consolidating ("Should I Consolidate?").

How to do Federal Student Loan Consolidation?

    If you are eligible and sure federal student loan consolidation will help you, then you are ready to apply. The application process is very easy and can be done online, over the phone or with a paper application ("How Do I Apply?"). Just visit to find an application. Once you apply it may take several months before your old loans are paid off. So make sure you keep making payments on them until they are paid off in full by the consolidation loan. If you don't, you may default on your loans, making it much harder to be approved for federal student loan consolidation.

    If you have student loans from the federal government, you should look into federal student loan consolidation. It may make becoming debt free that much easier. Just make sure you won't be adversely affected.

The Rest of Our Student Loan Consolidation Guide:


FinAid. "Frequently Asked Questions about Consolidation." (accessed August 7, 2006).

US Department of Education. "About Consolidation." (accessed September 14, 2006).

US Department of Education. "How Do I Apply?" (accessed September 14, 2006).

US Department of Education. "Loan Consolidation."
consolidation.jsp?tab=repaying (accessed August 7, 2006).

US Department of Education. "Should I Consolidate?" (accessed September 14, 2006).

US Department of Education. "What Loans Can I Consolidate?" (accessed September 14, 2006).