After graduating, having several different loans spread across multiple servicers can be difficult to manage, making it harder to keep up with your payments. One option that can help is student loan debt consolidation.

A consolidation loan helps you combine all of your student loans and combine them into one, single loan. You eliminate having to keep track of multiple student loan servicers and payment due dates. Instead, you make one monthly payment to one lender (or servicer – sometimes they’re one in the same).

While consolidating student loans can be a smart way to manage your repayment, it is frequently misunderstood. Here are five of the most common misconceptions about student loan consolidation.

Many people think consolidation and refinancing are interchangeable terms, but they’re two very distinct processes.

Student loan consolidation involves combining federal loans into a Direct Consolidation Loan, which is issued through the Department of Education. The interest rate on this new loan will be a weighted average of your previous rates, plus an extra percentage.

When it comes to student loan refinancing, you can choose to refinance federal or private loans. However, refinancing is available through private lenders only.

Like consolidation, refinancing allows you to take out a new loan with new terms that pays off your existing debt. You can refinance just one loan or multiple loans, in any combination you choose. Plus, you have the ability to change your interest rate, switch from a fixed rate to a variable rate (or vice versa), and/or change the length of repayment during the refinancing process.

Many borrowers choose to refinance so they can get a lower interest rate, which in turn can help reduce monthly payments and save money on interest over time.

There is no universal approach for consolidating student loans. The process you need to follow is dependent on whether you have private or federal loans.

As mentioned above, if you have federal student loans, you need to apply for a Direct Consolidation Loan via the Federal Student Aid website. While it can make managing your payment easier, a Direct Consolidation Loan usually does not lower your interest rate, so you likely won’t save money in interest charges. Rather, the goal is to simplify the repayment process. Plus, there are some federal repayment plans that require you to consolidate your loans before enrolling.

For private loans or a mix of both federal and private loans, you need to work with a private student loan company. Your credit history, income, and other personal financial information will impact your ability to refinance and at what interest rate and terms. Each refinancing company has varying requirements and will evaluate your situation differently.

For a long time, consolidating your federal loans was the only way to get a fixed interest rate for the length of your repayment. That could protect you from market fluctuations and help you save money.

However, that changed in 2006. The government passed a new bill that fixed interest rates for the life of federal loans. Even if interest rates skyrocketed after you graduated, you would continue to pay the same interest rate on your original debt. That means if you have federal loans, there’s no need to worry about consolidating to get a fixed rate; you already have one.

The exception is private loans with a variable rate. When you take out a loan, you can choose between variable and fixed rates. Variable interest rates tend to start off lower but can increase or decrease over time in response to market changes. If your interest rates have increased, or you’re concerned about rising rates, refinancing your debt to a fixed-rate loan can provide security.

There are many companies out there that will charge you a fee in return for consolidating your loans for you. However, there’s no need to pay anyone to do it; you can do it yourself for free. The application for Federal Direct Consolidation Loans can be completed online in about 30 minutes.

If you have private loans you would like to consolidate, you can do so by shopping for lenders on your own and comparing offers. Once you find terms that work for you, you can submit your application online. The best private lenders do not charge application, origination, or disbursement fees.

While student loan debt consolidation can be a wise move for some, it’s not for everyone. For federal loans, a Direct Consolidation Loan can help you if you plan to apply for an income-driven repayment plan. But it can also extend your repayment term, causing you to pay back more in interest fees.

Refinancing loans can help you save money over time and help you pay off your debt faster, but it’s not a decision you should make lightly. By consolidating federal and private loans together with a company or bank, you give up federal benefits such as access to income-driven repayment plans or forbearance and deferment programs.

Consolidating and refinancing can help you take control of your debt, but you should make sure you have the financial security to handle your payments going forward.

If you have done your homework and decided that student loan debt consolidation or refinancing is for you, we can help you through the process for free.