Loan Consolidation

One way to simplify repayment of your loans is consolidation. Instead of juggling multiple loans (and multiple monthly payments), you have the option to consolidate all of your federal loans into a Direct Consolidation Loan. This program has a few features that can improve your debt situation, including:

  • Change your variable interest rate loans to a fixed interest rate. The fixed rate is based on the average of the original loans' interest rates, rounded up to the nearest one-eighth of 1%.
  • Extend the repayment period of your loan up to 30 years. This could lower your  monthly payments; however, you'll also pay more interest over the life of the loan. You also might lose some of the benefits of the original loans, such as interest rate discounts or premium rebates.

For more information and to apply, visit the Federal Student Aid website(

Consolidating Federal and Private Loans

There are many loan consolidation programs that offer to consolidate private and federal debt together into one monthly payment. Although one monthly payment for all debt sounds tempting, the resulting interest costs might not be worth the convenience. The Direct Consolidation Loan is the most cost-effective way to manage your federal debt because the federal loans remain at a simple interest rate—meaning that you only pay interest on the principal balance you borrowed. By transitioning your federal debt into a private loan consolidation program, your federal debt could begin to compound interest and you will lose out on the low interest rates you received with federal loans. Private loans will most likely have higher interest rates than federal loans: therefore, one solution is to defer your federal loans until you can pay off your private loans. To pay less interest on your loans and pay them off faster, it might make sense to keep your federal loans within a federal consolidation program and manage your private loans separately.

The AAFP has partnered with SoFi to offer its members a rate discount when they refinance their student loans. Get more details about the program here. There are many lenders offering consolidation programs, all with unique borrower benefits. Be sure to check the eligibility requirements of any benefit that is being offered to make sure that you qualify.