How to Consolidate Student Loans

Consolidating Student Loan Debt: A Comprehensive Guide

Student loans are a common form of debt, especially in countries like Canada where the cost of education is high. The average student loan debt upon graduation is around $13,000, a figure that is constantly increasing. This, paired with a tough job market, makes student loan repayment a significant challenge. If you’re among the many struggling to make your student loan repayments, you might be exploring the concept of student loan debt consolidation. In this guide, we’ll delve into the world of student loan consolidation and provide you with all the information you need.

Understanding Student Loan Debt

In 2019, nearly two million Canadian students collectively owed the government a staggering $20.5 billion. This does not include student debt from other sources, such as private student loans. The burden of student loans can be overwhelming, leading to questions like, when does student loan debt become too much? Or, what if I don’t qualify for a Repayment Assistance Plan? The answer to these questions lies in understanding the options available to manage your student loan debt, one of which is student loan consolidation.


“Student loans are a necessary evil for many, but understanding how to manage them can make a world of difference.”


What is Student Loan Debt Consolidation?

Debt consolidation is the process by which multiple debts are combined into a single debt. This process has a number of advantages. For one, it simplifies your debts into a single monthly payment. Additionally, it can often reduce your overall interest payments, thereby decreasing your monthly payments in some instances.

Debt Consolidation Process

Types of Student Loans

Before diving into how to consolidate student loans, it’s crucial to understand the types of student loans. These can be federal, provincial, or private. Each type has its own set of rules and regulations that can affect your consolidation options.

Debt Consolidation Loans

One way to consolidate your student loans is through a debt consolidation loan. This is a new loan that you borrow from a bank or another financial institution to pay off your student debts. However, before agreeing to any loan, ensure that it offers a lower interest rate than what you’re currently paying across all your debts.

Remember: To qualify for a debt consolidation loan, you need a good credit score and assets to use as collateral against your loan.

Debt Management Plans

An alternative to a debt consolidation loan is a debt management plan, typically acquired through credit counselling agencies. These agencies work on your behalf to collect from your financial institution. However, debt management plans do not work for all types of debts.

Consumer Proposal

A consumer proposal is a legal form of debt settlement that can reduce your debt by up to 80%. It involves proposing an affordable monthly repayment amount, which your Licensed Insolvency Trustee negotiates with your creditors.

When to Consider Student Loan Consolidation

Consolidating student loans is a good idea when you have multiple student loans from various lenders, you’re finding it difficult to manage multiple payments, or you want to lower your monthly payments.

Potential Drawbacks of Consolidation

While consolidation can be beneficial, it can also have downsides. For instance, you may lose certain borrower benefits (like interest rate discounts and loan cancellation benefits) that come with your original loans.

Tips on Choosing the Right Consolidation Option

Before choosing a consolidation option, consider your financial situation, your ability to make regular payments, and the types of loans you have. Always compare the terms of the new consolidation loan to your current loans.

Final Notes

Understanding how to consolidate student loans is the first step in managing your student loan debt. It’s essential to remember that every situation is different, and what works for others may not work for you. Always do your research and seek professional advice if necessary.

For more information on how to consolidate student loans, consider booking a free consultation with experienced Licensed Insolvency Trustees who specialize in student loan debts.

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