Have Bad Credit? You Can Still Consolidate Some of Your Student Loans — Here’s How

sad millennial struggling with student loan debt
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If you have student loans with multiple loan servicers, consolidation is one option to simplify loan repayment while potentially lowering your monthly amount due. Student loan consolidation combines multiple student loans with different interest rates and term lengths into a single loan.

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Because the U.S. Department of Education doesn’t run a credit check as part of the application process, borrowers with bad credit can still consolidate their student loans, says Tate Law. However, private lenders have strict lending guidelines for private student loan consolidation and refinancing.

How to Consolidate Federal Student Loans

With federal student loans, the Department of Education reviews your account to make sure you have eligible loans and that you don’t have wage garnishment or a judgment for a defaulted federal student loan, Tate Law explains. 

Most federal student loans can be consolidated, with the exception of:

  • A single federal loan, unless it’s an FFEL Consolidation Loan.
  • A joint spousal consolidation loan.
  • A loan with an active wage garnishment or judgment.
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You can consolidate your federal student loans through studentaid.gov. Log into your account and select “Manage My Loans” and then “Consolidate My Loans.” You’ll be walked through the application process and you’ll be able to choose which loans you want to consolidate.

Choose a repayment plan and loan servicer for your consolidation loan. If you’re unsure of which repayment plan to choose, you can explore different plans through the department’s Loan Simulator.

Once you submit your application, the department says it takes about six weeks for applications to be processed. You can also reach out to your loan servicer to check on your application status. Two weeks before your new consolidation loan is disbursed, you will receive a Loan Summary Statement from your loan servicer.

How to Consolidate Private Student Loans

Private student loan lenders prefer borrowers with excellent credit, a long credit history, stable income and a low debt-to-income ratio. If your credit score is below 680, Tate Law says you may need to explore other options, such as:

  • Consolidate with a cosigner with excellent credit.
  • Find a credit union that offers members with poor credit personal loans to pay off debt.
  • Find a lender that will work with student loan borrowers with bad credit scores.
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While it is possible to consolidate private student loans with bad credit, you likely won’t qualify for a lower interest rate. Waiting to consolidate your private student loans until your credit score improves may be a better option.

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About the Author

Josephine Nesbit is a freelance writer specializing in real estate and personal finance. She grew up in New England but is now based out of Ohio where she attended The Ohio State University and lives with her two toddlers and fiancé. Her work has appeared in print and online publications such as Fox Business and Scotsman Guide.
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