Student loan consolidation results in lowered debt and payments if the average interest after consolidation is lower than it is before. This is really just refinancing one or a group of federal student loans, at a lower interest rate - just as refinancing a mortgage loan at a lower interest rate would reduce monthly payments and the total amount paid.

There are two basic kinds of student loan refinancing - private school loan consolidation and federal student loan consolidation. Federal school loans almost always have a lower student loan consolidation rate than you could get for an unsecured private loan consolidation. Federal student loans include Perkins loans, Stafford loans both federal family education loans and William D. Ford direct loans, and parent plus loans.

Perkins loans are a low interest 5 percent loan for both undergraduate and graduate students with financial need. With Perkins loans your school is your lender and made with government funds with a share contributed by the educational institution. You must either repay this loan to the school or consolidate it through a student loan consolidation. Also, there are student loan forgiveness programs for teachers, health care professionals, and military personal.

Stafford loans are offer by the U.S. Department of Education administers the Federal Family Education Loan or (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both the FFEL and Direct Loan programs consist of what are generally known as Stafford Loans these loans are for students. Schools generally participate in either the FFEL or Direct Loan program but sometimes participate in both. Under the Direct Loan Program, the funds for your loan come directly from the federal government. Funds for your FFEL will come from a bank, credit union, or other lenders that participates in the program. Eligibility rules and loan amounts are identical under both programs, but repayment plans are different.

Parents can borrow a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Your parents can get either loan, but not both, for you during the same enrollment period. They also must have an acceptable credit history.

If you're attending school at least half time, you have nine months after you graduate, leave school, or drop below half time status before you must begin repayment (you may have longer than nine months if you are on active duty with the military). This is called a grace period. If you're attending less than half time, check with your financial aid administrator to determine your grace period. At the end of your grace period, you must begin repaying your loan. You may be allowed up to 10 years to repay. Once you consolidate college loans from school you may, depending on the total amount of all your loans included in the college loan consolidation or college loan refinance plan, be entitled to up to 30 years to repay.

Because of the nature of the federal loans, you should never consolidate both private and federal loans into a single private loan. Only federal loans carry government backing, they can be refinanced at a much lower interest rate than can privately financed school loans. So when it is time for a school loan consolidation, do the federal loans together then look at consolidating your private student loans. Also make sure you consolidate your federal student loans first because federal student loan consolidation has a positive effect on your credit and you will most likely get a better interest rate and lower payments on the private loan consolidation.