Student loan consolidation allows a graduate to bundle all of their educational loans together and simplify their repayment plan. In some cases, it’s possible to reduce monthly payments by as much as 50 percent. With consolidation, the borrower only makes one monthly payment instead of several payments – sometimes at varying interest rates.

Federal vs. Private Loan Consolidation

For federal loans, any graduate, who is not in default and is not currently attending college more than half-time under the loans they want to consolidate, is eligible for a consolidation program. Consolidating immediately after graduation typically allows you to lock in the best interest rate. No collateral or cosigner is needed, and the borrower doesn’t need to be employed. Consolidation is a relatively simple process that typically takes between 30 and 90 days to complete.

Consolidating non-federal loans is similar to acquiring any other type of private loan. Collateral, proof of employment or a cosigner may be required by the lending institution. Interest rates vary with the market and are typically higher than those available for federal loans.

Both private and federal student loans can rarely be consolidated but in most cases they can’t or shouldn’t be bundled together. Some private lenders will include some federal student loans in a consolidation program, but federal lenders cannot include private loans.

Federal loans are guaranteed by the government. Private loans are based on the borrower’s creditworthiness and are considered high-risk. Federal regulations don’t allow combining high-risk and low-risk loans. Conversely, private lenders are motivated to include guaranteed low-risk federal loans with risky personal loans. That’s why credit card debt and other personal loans may also be included in private loan consolidation, but not vice versa. Compare interest rates, repayment options and other loan specifications before deciding on a lender for private loans.

The best rates for federal loan consolidation are from federal lenders. Subsidized and unsubsidized Stafford loans, Perkins loans, HEAL and HPSL loans, Parent and Graduate PLUS loans and even pre-existing federal loans that have already been consolidated are all eligible for consolidation.

Tips for Consolidation

While there’s no deadline by which you must consolidate, the first six months after graduation is deemed a grace period for federal student loans; no payments will be required and no interest will accrue. Consolidating during this period will secure the lowest interest rate and lower monthly costs before the first payment comes due – making the transition from college to career more manageable.

With most consolidation programs several repayment options are available. Income-based payments allow you to pay on a sliding scale according to annual income. Graduated payments start low and increase over time. Standard payments are fixed; they remain the same over the life of the loan. Extended payments can lengthen the life of a loan for up to 30 years which allows for low monthly payments; however, the interest accrued over three decades can increase the overall cost of a loan by several thousands of dollars.

With federal consolidation you retain the right to defer and forbear your loan due to hardship or unemployment. Loan forgiveness in case of death continues.

There are several factors to consider before applying for consolidation, but the process itself is not complicated. One thing that’s for certain – your student loan will not magically disappear if you ignore it. If you’re struggling to repay your educational loans, consolidation may be the best way to aid your transition into the working world.oan consolidation refinancing comes in two types. The first is regulated by the federal government and is referred to as Federal Loan Consolidation. Several lenders listed in our directory offer this program. The second type of consolidating is  private student loan consolidation. Full details about private consolidation loans are on our private loan consolidation page seen on your left.

A brief overview of student loan consolidation rules.

You do not have to consolidate with the companies currently holding your loans. For instance, if you have a loan with company A and company B, you do not have to consolidate with the same company A and company B. Though companies A and B might be good companies, it is a common urban financial myth that you must consolidate with them..

Those who have loans from several lenders often consolidate their student loans with one of the student loan consolidation companies that specialize only in consolidating student loans. On this site we've complied a list of some trusted consolidation companies, lenders and resources that feature quality customer service with some of the lowest rates.