How it Works: College Consolidation Loan

Consolidation of college loans works by reducing the amount of your monthly installment while increasing the amount of time you have to pay. It also combines most, sometimes all, of your college loans into a single monthly payment. For the federal loan program you can typically combine all of your federal loans into a consolidation college loan along with some private loans.

The length of the consolidation college loan term depends on the amount due for all the loans consolidated. There is the standard 10 year term for $7,500 or less; 12 to 15 years for $10,000 to $20,000; 20 years for up to $40,000 and 30 years for above $60,000. The interest on the loan is also determined by the loan balance and term. Some higher value loans have lower interest rates because you wind up paying more interest overall on long term loans.