April 2, 2022

What Is Student Loan Consolidation?


Are you thinking about consolidating your student loans but aren’t sure how to go about it? Here, we’ll help you understand your options and give you details on the best choices for you.

What is Student Loan Consolidation?

Student loan consolidation is a process that involves taking out a new loan that combines your existing loans to help pay off your existing student loans. Rather than having several loans and loan payment plans, student loan consolidation merges everything into one loan. Using this, you can combine all your private student loans and all your federal student loans, simplifying the payment process.

How much you’ll be allowed to borrow will depend on your college costs per year. For instance, if you take a four-year course, it’s likely that you will incur four loans — and this amount can increase if you choose to get a private loan for additional funding. Consolidating all your loans can simplify your life; however, you also need to be careful as there may be conditions that can cause you to lose some benefits from certain loans you currently have.

Am I Eligible for Student Loan Consolidation?

In most cases, a student is considered eligible for loan consolidation if they are:

  • Presently unenrolled or enrolled on a less than part-time basis
  • Good at making repayments (which means that there are no defaults on the loans)
  • Carrying between $5,000 to $7,500 in loans

While there’s no need for you to meet a minimum to combine your debts within the federal Direct Consolidation Loan program, some loan companies and private lenders may demand a minimum balance on your loans. Furthermore, you can’t consolidate federal student loans with private student loans. Lastly, you’re only allowed to consolidate loans under your name, which means that you can’t consolidate your loans with that of a spouse or loans under your parents’ names that they took to finance your education.

What Are the Advantages of Loan Consolidation?

Keep in mind that some advantages apply only to private loans or only to federal loans. Additionally, you can choose to keep a loan separate if it has great borrower benefits.

Advantages for Private Loans

  • Getting a fixed-rate loan: If you have student loans that have varying interest rates, you may be able to consolidate them and get one loan with a fixed rate. This is a smart move, especially if the rates have dropped significantly since you were last in school.
  • Getting a lower interest rate: If you have more than one student loan and have been able to improve your credit score since getting the loan, you might qualify for a consolidated loan with lower interest rates.

Advantages for Federal Loans

You can get an alternate repayment plan, which makes you eligible for a federal loan that will make it easier for you to repay your loans. There are two types of this plan, which are:

  • Income-sensitive repayments: These will calculate your monthly payment amount and convert it as a percentage of your pre-tax monthly income.
  • Graduated repayments: These allow you to start your payment at a lower amount every month, which will then gradually increase every two years.

What Are the Disadvantages of Loan Consolidation?

These are some cons that come with consolidating student loans, which apply to all kinds of loans:

  • Paying a bigger sum of interest: This happens as you will be restarting your loan repayment, which will probably lengthen your payment period. As such, even if your interest rate stays the same or decreases, you may still end up paying more in interest in total.
  • The loss of grace periods on your existing loans: If you have any grace periods on your current loans — student loans will usually have a post-graduation grace period — a consolidated loan most likely won’t have this.

Consolidating Student Loans With Loan Wage Garnishment

You may get out of wage garnishment through student loan consolidation. However, you can only do this before garnishment takes effect. Consolidating your student loan involves making a deal with the Department of Education to undergo income-driven repayment options.

Student loan consolidation combines your current student loan with another policy that has a potentially more affordable payment schedule to help you get out of default. Federal repayment policies include the following:

  • Revised Pay as You Earn (PAYE): Monthly payments equal 10% of your income
  • Income-Based Repayment (IBR): Monthly payments equal 10%-15% of your income
  • Income-Contingent Repayment (ICR): Fixed monthly payments less than 20% of your flexible income for 12 years

How Does Student Loan Wage Garnishment Work?

When you repeatedly fail to make payments on your student loans, you enter delinquency. Continuous delinquency leads to default status, where your student loan lenders can earn the right to seek repayment through your wages.

The federal government has the administrative right to conduct wage garnishment to pay off your federal student loans in default. This administrative right means they don’t need legal judgment to go after your wages in pursuit of repayment.

Meanwhile, private student loan lenders need to take you to court to assess whether they can seek wage garnishment as a form of repayment. They must win their case against you to begin the garnishment process, which you can still reverse through several options as we presented here.


Simply put, student loan consolidation is a great way to combine different loans into a single loan, which are all merged into one monthly bill. It may sound like a good idea off the bat, but it’s best to consider the conditions of your current loans and what consolidating them might mean for you. Because, while this process may have very attractive offerings, it also comes with a few but considerable disadvantages. Make sure to take into account all the details outlined above before deciding to consolidate your student loans.

Use Chipper for Lower Payments

Chipper can help you find a student loan repayment plan that actually fits into your budget. You simply fill out your information and link your student loan account for us to generate your options in seconds. We help the average student loan borrower save over $300 a month off their student loan monthly payment. Lowering your monthly payment plan can game changing for your personal finance and can be done in minutes! Sign up for Chipper today to get on track with your student loans.

Use Chipper for The Best Path to Forgiveness

Finding your path to student loan forgiveness is easier than ever before. Chipper helps members find better Income-Driven Repayment (IDR) plans every day. Once enrolled in an eligible repayment plan, we can help you explore your forgiveness options and understand your path towards forgiveness. Sign up with Chipper today and get on track with your student loans.

Use Chipper for Round-Ups

Paying off your student loans doesn’t have to be a long and painful journey. Round-Ups are a way to directly pay off your loans with your everyday spending! By tracking your linked spending account(s), we will calculate the rounded up amount from each transaction in a week (IE spending $4.28 would add $0.72 to the weekly amount). We then initiate a payment towards your student loan for the weekly amount. Get chipping away on your student loans with Chipper today.

Use Chipper for Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program was created to provide relief to borrowers aiding the public sector. Unfortunately, 30% of applicants are denied due to incorrect paperwork. We can help! Chipper was created to solve this issue by assisting borrowers in understanding their options as well as allowing forgiveness eligible users enroll into the best forgiveness program available. Sign up for Chipper today to see your student loan forgiveness options and get the forgiveness you deserve.

Use Chipper for Teacher Loan Forgiveness (TLF)

The Teacher Loan Forgiveness (TLF) program was created to enable teachers working in Title 1 schools to receive student loan forgiveness of up to $17,500 (depending on their teaching subject). Chipper has helped teachers from all over the country qualify for TLF program and can help you get the forgiveness you deserve today. Find out if you qualify for forgiveness in minutes with our employer search tool.

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