Undergraduate students, graduate students, and the parents of students can look to lenders, credit unions, and the federal government for help if they want to simplify their debt. A wealth of student loan consolidation experts are available to guide students and parents through the act of putting all of their student loans together into one lump sum with a reduced interest rate. This helps students and parents to significantly reduce the number of bills they have to pay each month. It is also a fantastic way to manage finances and begin the process of getting their monthly payments under control.

Federal student loan consolidation allows all active student loans to be compiled into one manageable monthly payment. If a student qualifies for federal student loans, then he or she also qualifies for federal student loan consolidation. This includes Stafford loans, Perkins loans, PLUS loans, Direct loans, HEAL, SLS, Health Professional student loans, NSL, and Guaranteed Student loans. Whether the recipient of a loan is the student or his or her parents, they can look into student loan consolidation. All loans must be consolidated separately, however. In July of 2006, a new provision maintains that married students are no longer allowed to lump their student loans together for the purpose of consolidation. An individual's loans must be consolidated separately.

Consolidation becomes a viable option only after the repayment period for a loan or loans has begun, or during the inherent grace period. Students are no longer able to begin consolidating their loans while they are still attending college. Parents however can begin to consolidate their PLUS loans at any time. As long as the repayment plan is satisfactory, loan recipients are also able to consolidate student loans if the loans are in default.

Both parents and students have to consolidate their student loans with a lender who is different from the one who loaned them the initial student loans. Doing so allows them to receive a lower interest rate and substantially more savings. Generally, lenders require a minimum balance for loan consolidation. Federal and private student loans have to be consolidated separately. This is because federal loan consolidation usually offers better advantages and lower interest rates. Interest rates are determined by averaging the current rates of the loans which will be consolidated and rounding the answer up to one-eighth of a percent. The interest rate can go up if a borrower extends the terms of the loan's repayment plan.

Federal loan consolidation requires no credit checks but the period of repayment is usually longer. In general, consolidating federal student loans results in lower monthly payments, because the loan period is extended from ten years to anywhere between twelve and thirty - it all depends on the amount of the loan.

Federal student loans and private student loans cannot be consolidated into one big loan. They are entirely separate loans and have to remain separated even in matters of consolidation. The primary benefit of consolidating private student loans is the borrower's ability to receive a single payment a month. It is entirely possible that the monthly amount will be lower, as the act of consolidating resets the entire student loan period. Any private student loan which has been consolidated will likely have a higher total interest rate, since it has to be paid out over a longer period of time. When deciding to consolidate student loans, the recipient of the loan should research which consolidation companies offer variable or fixed interest rates, what any penalties may be, and what kinds of fees are charged.

By Gary Marjani

Most new graduates usually do not earn much at their first jobs, making it difficult for them to meet their student loan payments. If you need to lower your monthly payments, and you anticipate that you'll be earning more in the future, then consolidating your loans may be the answer to your problems. When you consolidate your student loans, you'll be making smaller monthly payments since you'll be repaying the debt over a longer period. This is one of the major loan consolidation benefits. Other benefits include making only one monthly payment rather than multiple payments to several lenders, no penalties for early repayment or overpayment and the interest payments are income tax-deductible.

Student loan consolidation benefits also include interest rate reductions offered by lenders to those who sign up for automatic direct debit programs and make prompt repayments, in order to encourage borrowers to sign up with them. On the average, you will get a 0.25% discount if you direct-debit your payments and a 1% discount if you have paid promptly for 36 months. You should be aware, however, that you will lose the reduction permanently if you are late with just one monthly payment. Even if you're enrolled in direct-debit, you can still be late on a payment if you have an insufficient balance in your bank account.

Another thing to keep in mind is that, although you'll enjoy student loan consolidation benefits in the form of lower monthly payments, in the long run you'll end up paying more in interest rates. Since loan consolidation can increase the repayment term from the standard ten for student loans to as much as thirty years, you may end up paying as much as double or more of the interest you would have paid on your non-consolidated loans. However, you can reduce the amount of extra interest you'll end up paying by increasing your monthly payments once you can afford to do so.

Those pursuing careers in low-paying fields may also want to consider an income-based repayment (IBR) program rather than loan consolidation. Under an IBR plan, your monthly payments will be capped at an amount based on your income and family size, although you will be paying off your loan for 25 years rather than the standard ten years of student loans. However, if you qualify, any remaining balances after 25 years will be canceled. Still, if you believe that student loan consolidation benefits outweigh any potential drawbacks, then you should sign up for a loan consolidation program.