Friday, October 22, 2010

Should I Consolidate My Student Loans?

Keeping up with all your different student loans can be a hassle. If you borrowed money from multiple lenders, you may have difficulty keeping up with all the due dates now that you have to start paying off your loans. One option that may help you is loan consolidation. Like many things in life, loan consolidation has its advantages and disadvantages.


  • One payment to one lender- With consolidation, you only make one monthly payment and you have one lender- the Department of Education.
  • Lower Monthly Payment- Your payments are lower because you have longer repayment period. Under the standard repayment plan, your payment period can be up to 30 years.
  • A fixed rate- Your consolidated loan will have a fixed interest rate during the life of the loan. Your rate is based on the weighted average of all your consolidated loans. Your interest rate will not exceed 8.5%.
  • No Minimum or Maximum Loan Amounts or Fees- Consolidation is free.
  •  No penalty for paying off your loan early

  • More interest- Since you have an extended repayment period, you will pay more in interest over the long term.
  • Loss of benefits. With consolidation you will longer be able to take advantage of certain incentives such as loan cancellations and interest rate reductions.
  • Higher interest rate- The interest rate on your consolidated loan may be higher than the interest rates on you individual loans.
Consolidating your loans can help you if your individual monthly loan payments are too high, but consider ALL your options before you consolidate. If your payments are too high, contact your lender and try to switch payment plans. Remember the IBR plan allows you to make monthly payments according your income. Consolidation is a good option, but consider what you give up before you consolidate your loans.

NOTE: DO NOT consolidate your federal student loans with your private student loans. When you mix the two types of loans, you loans are no longer backed by the government and you have a private lender. You lose all the benefits you have with your federal student loans when you consolidate with a private lender.

For more information about loan consolidation, visit

All information presented only relates to Federal student loans and is provided by the Department of Education. If you have private student loans, contact your lender(s).

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