BBB Tips On Consolidating Student Loans

With existing student loan debt surging to well over a trillion dollars, many former students are looking for help managing their debt. One way people do that is by consolidating their existing loans into a Direct Consolidation Loan, which results in a single monthly payment instead of multiple payments to multiple servicers. Though there are definite advantages to this approach, it may not be for everyone. Better Business Bureau of Minnesota and North Dakota ® (BBB) reminds consumers that there are no application fees for those consolidating federal student loans through the US Department of Education.

“What we’re seeing more of are situations where people are led to believe they need assistance consolidating their student loans,” said Susan Adams Loyd, President and CEO of BBB of Minnesota and North Dakota. “Unfortunately, what many of these companies offering their help are actually doing is helping themselves to hefty fees for services people can perform themselves, for free, at”

A lot of companies claim to offer assistance to students as far as consolidating their loans and learning about relief programs they may qualify for – such as Public Service Loan Forgiveness or the Stafford Loan Forgiveness Program. However, many provide services of nebulous value. Some of these companies even ask students to provide their Federal Student Aid (FSA) ID, which puts them at risk of identity theft. FSA IDs should not be shared with anyone.

“Our office has seen an increase of student borrowers contacting us with concerns about the personal information shared with these companies,” said Betsy Talbot, Manager of Licensing and Registration for the Minnesota Office of Higher Education. “Students can contact our office if they have any questions about the company they are dealing with or the information they are asked to provide.”

The US Department of Education offers many tips to individuals with outstanding student loans to help them determine whether loan consolidation is right for them. From there, BBB offers some additional tips to consumers before seeking student loan consolidation assistance:

  • Be proactive. If you’re interested in consolidating your existing student loans, contact the Loan Consolidation Information Call Center at 1-800-557-7392 or login with your FSA ID at Remember, you don’t need the assistance of any company to consolidate your loans, but you do need to know if you’re eligible to proceed with consolidation.
  • Research companies and their complaint histories for free at org. Carefully review complaint details and also customer reviews people have submitted through BBB and on other websites.
  • Make sure you understand the offer and be wary of verbal promises. Never agree to anything over the phone. Ask the company to send you their offer in writing. From there, contact your loan servicing company, your school’s financial aid office, the Department of Education, or the Minnesota Office of Higher Education to make sure the offer is legitimate.
  • Ask what service the company is providing. Some companies say they can offer “relief” for student loan holders. However, all they do – for a fee – is work with your loan servicer to secure a temporary deferment or forbearance. These options are something borrowers can seek for free and, if granted, only delay loan repayment for a specified time.
  • Also, watch out for:
  • Outlandish claims, such as companies that say they can easily get your loans forgiven or reduced by as much as 90%. Claims like these are easy to make, but hard to make good on.
  • Companies that have you make monthly payments to them instead of a federal loan servicer.
  • Companies that ask for your FSA IDs, answers to security questions, Social Security Number, or bank account information over the phone.

According to the US Department of Education, it is important that people seeking to consolidate their loans continue to make payments, if required, to the holders or servicers of the loans they want to consolidate until their consolidation servicer informs them that the underlying loans have been paid off. Once loans are combined into a Direct Consolidation Loan, they cannot be removed. The previous loans are paid off and no longer exist.

If borrowers feel they have been misled by a company offering assistance consolidating their student loans, they should file complaints at, their state Attorney General’s office and the Consumer Financial Protection Bureau (