Student Loan Consolidation Rules and Limitations

Student loan consolidation provides a way for many former students to improve their financial situations. Combining multiple federal loans into a single loan has several benefits. The most obvious is that it allows one to simplify her finances by making one payment instead of several. However, the most important benefit is that it often results in a lower monthly payment. Because these loans have options that allow repayment over a longer time frame, the reduction can be as much as 50 percent. This is often very beneficial to recent young graduates beginning their careers. This is when most people need lower payments. However, there are some rules and limitations to be considered. Here are some of the key rules to be aware of when applying for a student consolidation loan.


To qualify for federal loan consolidation, you must be current on your existing loans. You cannot be delinquent. For individuals who are delinquent, there may be ways to qualify at a later date. Contact your lender to find out what steps to take to become eligible. You will not qualify if you are in school as a full-time student for the loans being considered. However, you are permitted to be in school and qualify if your status is half time or less.

Private Loans Cannot Be Consolidated with Federal Loans

Private loans cannot be combined with federal loans under federal loan consolidation programs. Credit card balances and loans such as automobile loans and mortgages are not eligible for inclusion. Federal loans guarantee full payment to lenders. Therefore, if a student fails to repay the lender, the federal government pays the lender. Then the government pursues the student for payment. Private loans do not have the same government guarantee. Only the borrower backs these loans. For this reason, these two types of loans cannot be consolidated.

Student Loans Belonging to Married Couples Cannot Be Consolidated

Couples are not permitted to consolidate their student loans. Husbands and wives do not have the same flexibility they have with other debts. Generally, consolidating debt for couples is not an issue for private lenders. However, the Department of Education has policies that prohibit this practice in federal loan programs. Couples may apply to receive a joint bill, though. If approved, they will receive a consolidated bill for both loans each month. This will allow them to make one payment for both loans.

Once Done, Cannot Be Consolidated Again

In some cases, if you have consolidated in the past, you may not qualify to do it again. This is especially true if your prior consolidation was with someone other than the federal government. However, if you have a new student loan that was not included in the original consolidation, you may still qualify.

Payment Options

Your first payment will be due no more than 30 days from the disbursement date. The standard payment is monthly over a fixed period. For large loans, the repayment period can be extended to as long as 25 or 30 years. However, there is an option for variable payments based on income. Another variable payment option offered is a graduated payment schedule in which payments increase over time. Therefore, borrowers have a variety of budget-friendly choices.

Need a Student Loan? Click here!