One of the biggest myths when it comes to student loans is whether you can combine your Federal and private student loans.

Think about it: you just graduated from college and you have a combination of about five different student loans. Three of them are Federal student loans and two of them are private. What do you do? Should you combine them? Should you leave everything alone?

Well, since the middle of 2014, you can actually refinance and consolidate both your Federal and private student loans into a single loan with many private lenders. However, there are times when combining all of your loans (both Federal and private) makes sense, and there are times when it may not.

Here is what you need to know about consolidating and refinancing your Federal and private student loans together.

Why Consolidate Your Loans?

Consolidating multiple loans into one single loan can really help borrowers who prefer to have a simple, single payment for their student loans. Having multiple loans can be tough to manage – different amounts due, different payment due dates, and a lot more statements to keep track of.

By combining your loans into a single loan, you can have one single bill, and you may even be able to lower your payments.

Consolidating Your Federal Student Loans

When you consolidate your Federal student loans, you go through the Direct Consolidation Loan program. This program is designed specifically for Federal student loans and is administered by the Department of Education.

According to, the following types of student loans are eligible for consolidation:
• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Subsidized Federal Stafford Loans
• Unsubsidized Federal Stafford Loans
Direct PLUS Loans
• PLUS Loans from the FFEL Program
• Supplemental Loans for Students (SLS)
• Federal Perkins Loans
• Federal Nursing Loans
• Health Education Assistance Loans
• Some previous consolidation loans

When you consolidate your Federal student loans, you will get a new loan through the Department of Education, which you can then setup a repayment plan that works for you. The interest rate will also be fixed at the current Federal Direct loan rate.

You are eligible for any “Direct” repayment plan – and you can setup a timeline from 10 to 30 years to pay back the loan.

This is one of the best ways to lower your current payment on your Federal student loans.

Refinancing Your Private Student Loans

If you want to combine your private student loans together into one payment, you have to refinance your student loans. The process is very similar to Federal loan consolidation, but it is done through a bank rather than the Department of Education.

The benefits of refinancing your private student loans are typically two-fold. First, you get a single monthly payment for all of your previous private student loans. This makes repayment and financial management easier.

Second, you may be able to get a lower interest rate, which will save you money over the life of the loan. Many borrowers, when they start college, don’t have great credit, simply because they haven’t built it up enough yet. However, after graduation, many borrowers have much better credit histories, which could qualify you for a lower interest rate on your loan.

Combining Your Private And Federal Loans Together

If you want to combine your Federal and private student loans together, you have to do it through a private lender. The Federal Direct Consolidation Loan program does not consolidate private loans into Federal loans. However, several banks and services do allow you to combine your private and Federal loans into one payment.

When It Makes Sense To Combine

Depending on your post-graduation experience, it may make a lot more sense to combine your loans together. One situation that is very common is the graduate who has Federal student loans but is just on the standard repayment plan. If your Federal loans are at 6.8%, and you aren’t taking advantage of any of the special repayment plans, you may benefit by consolidating to a private student loan with a lower interest rate.

For example, a $20,000 Federal student loan at 6.8% will cost a borrower $27,619 to repay – $7,619 in interest. By contrast, if that student refinanced into a private student loan, they could significantly lower their interest rate and monthly payments. That would also reduce the total repayment over the lifetime of the loan – saving the borrower thousands in interest over the same 10 years.

The key here is to look at your own repayment situation and see if a lower interest rate is worthwhile.

When It Makes Sense To Keep Your Loans Separate

On the other hand, if you are taking advantage of benefits of your Federal student loan, such as income-based repayment plans or forgiveness plans, you should not consolidate your Federal student loans into your private student loans. Your Federal benefits will disappear if you do this, and you’ll end up owing the full balance of your loan over time.

Going back to our original situation, you could still combine your private student loans by refinancing, and you could consolidate your Federal student loans through the Direct Consolidation program. That way, you could take advantage of the lower rates potentially offered through a private student loan refinance, while still maintaining your benefits on your Federal student loans.

Simple tips to remember:

  • If you take advantage of Federal benefits (such as income-based repayment or student loan forgiveness): Don’t consolidate your Federal loans into private student loans
  • If you have a standard repayment on your Federal loans and want to save money and have a single payment: Consider consolidating all your Federal and private student loans into one single private loan