Student loan consolidation is the process of combining multiple student loans into a single loan with one monthly payment. This option is primarily available for federal student loans, although some private lenders offer similar services for private loans. Consolidation can simplify repayment and sometimes result in more manageable monthly payments by extending the loan term. However, it’s important to note that while it may lower your monthly bill, it can also increase the total interest paid over time. It is different from refinancing, which involves taking out a new loan at a new interest rate, often based on your credit score. How Student Loan Consolidation Works When a borrower chooses to consolidate their loans, the U.S. Department of Education pays off the existing federal student loans and replaces them with a new Direct Consolidation Loan. This new loan may come with new repayment terms and a recalculated interest rate, which is typically a weighted average of the previous ...