Lower Your Student Loan Interest Rate By Consolidating in 2023

Paying off student loans can be a huge financial burden for many people. With rising interest rates, monthly payments continue going up making it harder to pay off the principal balance. One way to potentially lower your interest rate and monthly payments is through student loan consolidation.

Consolidating multiple federal student loans into one new loan can provide certain benefits depending on your situation. While private student loan consolidation works differently, federal loan consolidation allows you to potentially lower your interest rate, lower monthly payments, or move from a variable rate to a fixed rate.

Outline of Article Contents


  • Overview of federal student loan consolidation
  • How interest rates are determined for consolidated loans
  • Pros and cons of consolidating federal student loans

Who Is Eligible To Consolidate Federal Student Loans?

  • Requirements for federal direct loan consolidation eligibility
  • Types of federal loans that can be consolidated
  • Loans that are not eligible for consolidation

The Student Loan Consolidation Process

  • How to apply for federal direct consolidation online or by mail
  • Processing time for consolidation applications
  • Repayment plan options for consolidated loans

Interest Rates On Consolidated Federal Loans

  • How consolidated loan interest rates are calculated
  • Scenarios when consolidation could lower your interest rate
  • Interest rate caps and floors for consolidated fixed rate loans

Monthly Payment Amounts After Consolidation

  • How payment amounts are determined for consolidated loans
  • Extended repayment term of consolidated loans
  • Income-driven and graduated repayment options

Pros Of Consolidating Federal Student Loans

  • Lower monthly payments and interest rate in certain cases
  • Switch variable interest rate loans to fixed rate
  • Access to additional repayment plans and forgiveness programs

Cons To Consider Before Consolidating Federal Loans

  • Higher total interest costs over loan term in some cases
  • Loss of grace period for recently graduated borrowers
  • No consolidation loan forgiveness apart from IDR plans

Consolidating Private Student Loans Works Differently

  • Overview of private student loan refinancing and consolidation
  • Private lenders have their own eligibility criteria and terms
  • Check for lower interest rates from different private lenders

Strategies To Get the Lowest Interest Rate

  • Compare consolidation quotes from multiple lenders
  • Consider refinancing private loans separately for lower rates
  • Check for interest rate discounts you may qualify for

Frequently Asked Questions

1. Does consolidating federal student loans hurt my credit score?

No, consolidating federal student loans has no impact on your credit score. The consolidation represents closing your old federal loans and opening one new direct consolidation loan. Your total loan balance remains the same so it does not lower or damage your credit.

2. Can I consolidate just some of my federal student loans?

No, federal direct loan consolidation requires you to combine all of your eligible federal student loans into one new consolidation loan. You cannot select specific loans to consolidate while keeping others separate. It’s an all-or-nothing proposition.

3. What types of federal repayment plans are available after consolidating?

All the same income-driven and fixed repayment plans you had access to before consolidating are still available with a federal direct consolidation loan. This includes IBR, PAYE, REPAYE, and standard 10-year fixed payments. You can change repayment plans annually if needed.

4. Are there consolidation loan forgiveness programs?

No, there are no special forgiveness programs just for federal consolidation loans. But by consolidating and entering an income-driven repayment plan you could qualify for loan forgiveness after 20-25 years of payments. Parent PLUS loans do not qualify for IDR forgiveness.

5. Will consolidating restart the clock on my Public Service Loan Forgiveness progress?

Unfortunately yes, consolidating federal loans will reset your payment count for PSLF back to zero. You would need to submit PSLF employer certification forms and make 120 more qualifying payments on the new consolidation loan to qualify for forgiveness.

6. Can I consolidate federal and private student loans together?

No, federal direct consolidation loans can only combine federal student loans. Private student loans from banks and other lenders must be consolidated or refinanced separately. You cannot consolidate federal and private loans together.


Student loan consolidation can potentially help you lower monthly payments or interest rates depending on your situation. Consolidating federal loans is straightforward but refinancing private loans takes more research to find the best lender and rates.

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Evaluate your options carefully and run the numbers to see if consolidation makes sense for your goals. With federal loans there are pros and cons to weigh regarding total interest costs. Consolidating private loans is primarily about seeking a lower rate.

Overall, consider student loan consolidation or refinancing if you want to simplify repayment or reduce interest rates. But make sure to compare multiple lender quotes and understand the tradeoffs before moving forward.

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