Should you consolidate your student loans?

July 10, 2023 | Robbie Morris

Robbie Morris, CSLP®
Robbie Morris, CSLP®
Hey! I'm Robbie, the founder of Roots Financial Planning, a fee-only, fiduciary advisor located in San Antonio, TX working virtually with dentists across the United States. When I'm not helping dentists live their best life, you can find me making pizza, swimming, or skiing.

What is consolidation?

Consolidation is the act of combining multiple federal loans into one new loan that remains in the federal system. The new consolidation loan pays off your old separate loans (and any outstanding interest) and creates a new loan of equal value. The new interest rate is a weighted average of the old loans rounded up to the next 1/8 of 1%.

Which types of student loans can be consolidated?

Nearly every type of federal loan can be consolidated. Including the following:

  • Subsidized and Unsubsidized Federal Stafford Loans
  • Direct Subsidized and Unsubsidized Loans
  • Direct PLUS Loans
  • Health Professions Student Loans
  • Health Education Assistance Loans
  • PLUS loans from the Federal Family Education Loan (FFEL) Program
  • FFEL Consolidation Loans and Direct Consolidation Loans
  • Supplemental Loans for Students
  • Federal Perkins Loans
  • Nursing Student Loans
  • Nurse Faculty Loans
  • Loans for Disadvantaged Students
  • Federal Insured Student Loans
  • Guaranteed Student Loans
  • National Direct Student Loans
  • National Defense Student Loans
  • Parent Loans for Undergraduate Students
  • Auxiliary Loans to Assist Students

The most common loan types you will see as a dental school graduate are the first three loan types in bold.

If your parents assisted you with school and took out Parent PLUS loans, those are not eligible to be consolidated with loans issued to you as the student. They must remain separate as they were issued to a different person.

Additionally, any private student loans not held in the federal system cannot be consolidated with federal loans that are still in the federal system. Loans can leave the federal system to be privately refinanced but loans cannot come back into the federal system once they are private.

When can you consolidate your student loans?

You are eligible to consolidate when you graduate, leave school, or drop below half-time enrollment.

Upon graduation your loans go into a 6-month grace period in which you do not have to make payments. You can bypass this grace period by performing a consolidation and choosing one of the repayment options. If you know you want to pursue PSLF or taxable forgiveness this can give you a head start while your income is at its lowest.

Leaving the grace period is also beneficial if you will be attending residency and plan to pursue forgiveness. Your resident salary will make you eligible for very low payments which still count toward forgiveness.

What are the benefits of consolidation?

Consolidation can be used to simplify your repayment by giving you one payment at one servicer as opposed to many loans that could be at multiple loan servicers.

Consolidation can be used to exit the grace period and begin making payments towards forgiveness.

Consolidation can provide payment options for loans that were previously ineligible for Income Driven Repayment (IDR) plans.

Consolidation can be used to bring loans out of default and onto an IDR plan.

Consolidation will allow you to change student loan servicers if you desire.

What are the drawbacks of consolidation?

Consolidation generally makes the most sense right after graduation when you have no payment credit towards forgiveness yet. Previously, consolidation caused you to lose any credit you had towards forgiveness. After July 1, 2023, consolidation of loans with different numbers of payments will create a new loan with a weighted average number of payment credits. This could be a good thing for some loans and a bad thing for others.

The interest rate on your loans will increase by a small amount. Though if you are consolidating you are probably working towards some kind of forgiveness, so this is not a huge drawback.

Consolidation does not provide much benefit if you have a low student loan balance compared to your income and you know you will be paying your loans off in full.

How do you consolidate your student loans?

  1. Determine ahead of time which repayment plan and which servicer you will select. If you are married, know whether you will be filing taxes separately or jointly. Your most recently filed tax return can guide this selection.
  2. Head to the
  3. You will be asked to choose which loans you would like to consolidate.
  4. If you would like to exit the grace period as early as possible select the option to begin the process immediately without delay.
  5. You will be asked which servicer you would like to use.
  6. Next, you will be prompted to select your desired repayment plan.
  7. If you will be using your most recent tax return as proof of income you will be able to link to the IRS database to retrieve it.
  8. If you are married, your spouse might need to cosign on the consolidation loan. They will need to create a Student Aid account and complete this process on their end.
  9. Once you have signed the application (and spouse if applicable) you will wait for further instruction or for your loan to be consolidated.


If your loan balance is less than your income, consolidation can probably be avoided. Refinancing and aggressively repaying your loans is likely your most financially optimal solution (as long as you can refinance to a lower interest rate).

If your loan balance is much greater than your income, and you plan to pursue forgiveness in some form, consolidation can be used to enter into repayment right after graduation and pursue that goal. If you have any combination of undergrad, graduate, and FFEL loans, consolidation could have massive benefits towards potential forgiveness.