The process of student loan consolidation can take as little as a couple weeks to as long as several months.
The total amount of time and the exact number of steps that need to be taken depends upon a number of different factors. The biggest factor affecting the consolidation timeline is whether or not you are going through a federal direct consolidation or consolidating with a private company.
Federal Direct Consolidation
Consolidating your federal loans with the government is a pretty easy process. There is really only one form to complete, and then it is a waiting game.
All federal direct consolidation takes place at studentloans.gov (if somebody is trying to charge you to for federal direct consolidation, you are probably being ripped off). The application itself only takes about thirty minutes. After that, the waiting game begins.
Once your application is completed, the consolidation people will reach out to your existing federal loan holders to get final payoff numbers. Once they have final payoff numbers, you will receive a letter detailing your new consolidated loan, new interest rate (the weighted average of your existing loans), and new loan servicer. At that point you can either call to cancel the consolidation, or do nothing and the consolidation processes within a few weeks.
The work happening behind the scenes isn’t particularly complicated, but it does move at the speed of government, so it takes time. For borrowers, the important thing is to make sure that the proper loans are being included in the consolidated loan.
Private Student Loan Consolidation
If you are consolidating you private loans, or consolidating federal loans with a private company, the process is much different, and the total time for consolidation can vary greatly.
One important step that should not be skipped over is shopping around. With a number of different student loan consolidation companies in the market, research at the beginning of the process is essential.
Once you target the companies that you are interested in working with, applications begin. The initial application with each lender is not particularly time-consuming, and applying with several different lenders is a good idea because it will help you find the best rate. Initial approvals can be instant, or happen within a few days. Some may require more detailed income information, so it could take longer.
The next phase has a couple of steps happening at once. Your lender will be collecting information from you to verify your income and ability to pay. Your lender will also be reaching out to your exiting loan holders to get final payoff information with your existing loan companies. The amount of time that this takes varies greatly. Some companies will not reach out to lenders until all the borrower information reaches final approval, others will be working on both tasks at the same time. Getting final payoff information from your existing lenders is a huge variable, because some companies make the process very easy, while others put more steps in the way.
Once your old loans are paid off, you begin repayment with your new lender according to the terms of your new agreement.
The Bottom Line
Student loan consolidation is not a fast process, but both types of consolidation can have huge financial advantages, so it could be worth your time and effort.