If you have a number of education loans with various repayment schedules, a Consolidation Loan can help you to simplify repayment by combining them all into one loan. The main advantages of this are that you will have only one monthly payment to make instead of several and because a Consolidation Loan usually has a lower rate of interest than your existing loans, your monthly payments will be lower.

There are various ways to obtain a Consolidation Loan. The U.S. Department of Education offers Direct Consolidation Loans while Federal Family Education Loans (FFELs) for Consolidation are available from participating lenders such as banks, credit unions, and savings and loan associations. It is also possible take out a Consolidation Loan from an independent financial organization.

The interest rate for FFEL Consolidation Loans (and for Direct Consolidation Loans applied for on or after February 1, 1999) is a fixed rate for the entire time you repay the loan; it is based on the weighted average of the interest rates on the loans at the time you consolidate, rounded up to the nearest one-eighth of a percent although it will not exceed 8.25 percent (The Student Guide, Financial Aid from the US Department of Education 2003-2004).

Before committing to consolidation bear in mind that even though your Consolidation Loan may have a lower interest rate than your original loans, if you take longer to pay it off you will be making more payments and could end up paying more interest overall. It is also important to consider whether you will lose any borrower benefits.