The procedure is very simple: you just have to call the Direct Loan Servicing Center (a division of the U.S. Department of Education) and in a very short period of time, you’ll have your new consolidation loan.
The new interest rate will be a weighted average of the interest rates of all your current federal student loans.
It is even possible to consolidate additional debt into this loan if this is considered to be a viable alternative.
The main reason that leads people to ask for debt consolidation is the huge sum of money spent on monthly payments. If you mix all the loans into a single one, your new monthly payment will become very affordable, not to mention that the loan can stretch for a few more years.
In order to do that, you can go to the bank and ask for a personal loan. It’s recommended that you use a separate loan for the student loans and another one for the rest of the debts.
Financial experts don’t encourage the combination of student loans using a privately funded debt consolidation loan because that will only create more financial problems.
In most cases of federal student loans, the interest is tax deductible. Why would anyone give up such a benefit? In this situation, having two loans is better than having a single one.
The only exception is when the consolidation loan is actually home equity loan. If you’re lucky you can obtain an interest rate lower that the one from your student loan.
Home equity loans are also tax deductible and you won’t loose the benefits. In time your income will rise and that affect the interest of writing off the student loan.
But, with home equity loan interest, you can continue writing off the amount without any problems.
To sum up all the above, sometimes including a student loan next to other loans into a single one can be viable but there are times when separate loans are simply the best option.