A number of lenders offer bill consolidation services which bunch together a number of parent or student loans into a single one. If a student opts for a school bill consolidation loan, he/she will have to take a bigger loan from the consolidation service which is used to pay of the other multiple loans. This kind of consolidation is akin to mortgage refinancing. Most lenders offer federal debt consolidation for loans like FFELP, Perkins, FISL, NSL, Health Professional Student Loans, Direct Loans as well as Guaranteed Student Loans. A few lenders also offer personal loans for debt consolidation. Because consolidation loans are not very profitable, a number of lenders do not offer them anymore. However, the United States Department of Education offers the Federal Direct Loan consolidation program, which can benefit students even if their college is not a participant in the Direct Loan Program.

The rates of interest carried by unsecured debt consolidation loans are the weighted average of the multiple interest rates on those loans that are being consolidated. This figure is capped at 8.25% and is rounded off to the closest 1/8 of a percent.

Consolidating a school loan is cost-effective because there are no extra costs or fees associated with it except the slight rise in the rate of interest. If the student pts for PLUS of Stafford loans, there may be some additional fees but these are always taken from the check of disbursement. If a lender demands an upfront fee it could be a scam.

Parent as well as student borrowers are eligible for consolidating school loans, but they aren‘t allowed to combine their loans unless they consolidate from the same borrower. Those students who are married cannot combine their consolidated loans. School loan consolidation can only take place once the repayment phase begins or within the period of grace. Students can consolidate loans even if they have defaulted, provided they have arranged for satisfactory repayments.

Both students as well as parents can sign up for loan consolidation with any lending institution even if they have hitherto borrowed from a single lender.

There are a number of online lenders who offer free debt consolidation tips, so do some basic research before committing for a debt consolidation program.

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