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There are many types of federal and private student loans, and a variety of lenders who offer student loans. Not all students take the time to analyze each loan and the associated interest rates and charges. When it is time to repay the loan, that is when the reality of indebtedness begins. Many college graduates struggle to make the multiple monthly payments to each lender, and they can barely afford the minimum payment amount.

Consolidating your federal and private student loan debt can simplify the entire process. It eliminates multiple monthly payments, and in most cases, will reduce the amount you will be required to pay per month. Although consolidation is a great option for most people, it does have disadvantages that should be considered as well.

Federal Student Loans

Federal student loans can be direct or indirect, subsidized or unsubsidized, Stafford or Perkins loans. There are many more, but the point is that you should understand the loan amount, type and interest rate for each of your federal and private student loans. This is the only way you can determine if consolidating your student loans is the best option for your specific situation.  

The William D. Ford Program

The William D. Ford Program is funded by the U.S. Department of Education under the Federal Direct Loan Program. Loans that can be consolidated under this program include Direct Stafford, Direct Unsubsidized, Direct PLUS and Direct Consolidation loans. Direct consolidation loans may even be included for student who have defaulted on their loans but have made arrangements for payment, or who are willing to enroll in an income-contingent repayment plan.

Private Student Loans

The William D. Ford Program does not allow for consolidation of private student loans. If you have both federal and private student loans, you may consider choosing a lender who will allow you to consolidate both types of student loan debt. Keep in mind, though, that consolidating through the federal program will typically result in a lower interest rate, although not in all cases.

Because of the various consolidation options, it is important to compare different lenders and loan details so you can find the best offer for your specific situation. In addition to the federal consolidation program, there are multiple private lenders who will consolidate both your federal and private loan debt, so if you have both, you may want to combine them.