Loans are seen as a large source of financial aid by many college students. These loans have to be paid back after a certain period of time. The most common student loans fall under three categories. This includes Stafford and Perkins loans, private loans, and parent loans. Student loan consolidation is often done when people have a hard time being able to pay back these loans. Loan consolidation applies to private and federal loans. The way that loan consolidation works is that a lender pays off your debt from other loans and generates a new loan and interest rate that you have to pay off. Loan consolidation has a variety of advantages. Your new loan typically has a lower monthly payment and longer repayment period than your old loans. There are various types of student loan consolidation programs that students have the option of using.

Stafford loans serve as one off the most popular student loans used by graduate and undergraduate students. The Federal Family Education Loan Program is a Stafford loan program that allows students to combine all of their federal loans so that they pay one set monthly payment. Federal loans that you are interested in consolidating have a list of rules set up by the federal government. One of the rules states that you can no longer consolidate a federal loan while you are still in school. The Direct Consolidation Loan Program is another program designed to consolidate federal loans. This type of loan consolidation requires individuals to at least have a direct federal loan in order to qualify.

Private loans generally cannot be consolidated with federal loans. Banks and other financial institutions are able to consolidate private student loans. Types of private student loan consolidations include interest rates associated with these types of student loan consolidations are determined by the lender and not the federal government like in federal student loans. These private consolidation loans may also come along with fees and either a fixed or variable interest rate.