How to consolidate your student loans

September 3, 2022

Editor’s Note: Since the writing of this article, the Biden administration has extended the pause on federal student loan repayment through Dec. 31, 2022.

How long it takes to consolidate student loans varies by lender. If you’re applying for federal loan consolidation, the process typically takes 30 to 45 days, though it can take even longer. On the other hand, you can often consolidate your student loans with a private lender in just a few weeks. Consolidation can simplify loan repayment by giving you a single loan with just one monthly bill. Consolidation can also lower your monthly payment by giving you a longer period of time (up to 30 years) to repay your loans. Or you can do it to achieve a lower interest payment for your single loan.

Understanding the timeline for student loan consolidation can help you manage your loans and avoid accidentally missing a payment.

What Is Student Loan Consolidation?

Student loan consolidation typically refers to combining multiple student loans into one to simplify repayment. When applying for federal loan consolidation, however, it is also possible to consolidate a single loan to make it eligible for certain federal repayment plans. In fact, there are two main ways to consolidate student loans. First, you can consolidate federal student loans into one with a Direct Consolidation Loan. Alternatively, you can consolidate federal student loans, private student loans, or both by refinancing with a private lender.

Federal loan consolidation

Federal loan consolidation involves replacing one or more of your federal loans with a Direct Consolidation Loan. It can be helpful for a few reasons. For one, it allows you to combine multiple loans into one so you only have a single bill to pay back. Second, it lets you choose a new repayment plan, sometimes even allowing you to access plans that your loans didn’t qualify for previously. Parent PLUS loans, for example, are only eligible for Income-Contingent Repayment (ICR) if you consolidate them first. This is an arrangement for the repayment of a loan where the regular amount to be paid by the borrower depends on his or her income.

Finally, federal loan consolidation is one way to get your student loans out of default and back into good standing. Note that private student loans are not eligible for federal loan consolidation.

Private loan consolidation

Private loan consolidation refers to refinancing one or more of your student loans with a private lender, such as a bank or credit union. If you refinance multiple loans, you can combine them into a single new loan. Depending on your credit, you could get a better interest rate than you have currently. Plus, you can choose new repayment terms. Both private and federal student loans are eligible for refinancing. However, refinancing federal loans turns them private, meaning they become ineligible for federal repayment plans and student loan forgiveness programs.

How to Consolidate Student Loans

You can apply for Direct Loan Consolidation at no cost on the Federal Student Aid website. According to Federal Student Aid, most applicants complete the process in 30 minutes or less. In your application, you’ll select which of your federal student loans you would like to consolidate. If any of your loans are in their grace period, you can request that Federal Student Aid delays processing your application until it ends. You’ll also choose a new student loan servicer and select a repayment plan.

The application offers a useful repayment estimator tool so you can see what paying off student loans would look like on each plan. Finally, you’ll review and accept the terms and conditions, provide your personal information, and sign your application. At this point, the Department of Education will verify your loans and loan amounts. If you have older loans, the Department may need to request Loan Verification Certificates (LVCs) from your lenders. Once it has verified your loans, it will pay them off and issue you a new Direct Consolidation Loan.

How Long Does Student Loan Consolidation Take?

Student loan consolidation often takes one to two months to complete. According to FedLoan Servicing, a student loan servicer that will be ending its contract with the Department of Education soon, it typically takes 30 business days (four to six weeks) to originate a Direct Consolidation Loan from the date it receives your application.

After you apply, it takes a couple weeks to receive confirmation of your loan amounts and interest rates. Once your loans are confirmed, you’ll receive a Loan Summary Statement. At this point, you have 10 business days to make changes or cancel your consolidation request. After these 10 days, it typically takes another three business days for your new consolidation loan to be disbursed. Note that this example comes from FedLoan Servicing, but the timeline may vary depending on the loan servicer you select and the amount of time it takes to verify your current loans.

How Long Does Refinancing Private Student Loans Take?

Student loan refinancing can be a faster process than federal consolidation. How long student loan refinance takes, though, will vary by lender. Some lenders can process your application and issue your new loan in just a few weeks.

SoFi, for example, reviews refinance applications within one or two business days. If you apply with a cosigner, it takes about 10 business days to process your application. Once you sign your final documents, SoFi sends funds to your previous lenders in just a few business days. The process of applying for student loan refinancing can also be completed pretty quickly.

To start, you can apply for prequalification online in a matter of minutes. If you see any offers you like, you can submit a full application with supporting documentation. Once the lender receives your application, it will typically take a few weeks to confirm your information and put together your new loan. Assuming you’re approved to refinance, the new lender will pay off your existing loan(s) and issue the new, refinanced one in its place.

The Takeaway

Neither federal student loan consolidation nor private student loan refinancing will happen overnight, but you won’t have to wait long. You can often finish the Direct Loan Consolidation process in 30 to 45 days. Alternatively, you can refinance your student loans in less than a month, depending on the lender you choose. Refinancing student loans has the potential to save you money, as creditworthy borrowers can qualify for better interest rates than they have now. Be cautious about refinancing federal student loans, though, as doing so means forfeiting access to federal benefits. Make sure to consider all the pros and cons of student loan refinancing before you apply.

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This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.

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