Make sure to carefully consider whether loan consolidation is the best choice for you. While loan consolidation can make loan repayment easy and lower your monthly payment, it also can significantly increase the total cost of repaying your private student loan. Consolidation offers lower monthly payments by giving you up to 30 years to repay your loans. But, if you increase the length of your repayment period, you'll also make more payments and pay more in interest than you would otherwise. In fact, in some situations, consolidation can double your total interest expense. If you don't need monthly payment relief, you should compare the cost of repaying your unconsolidated loans against the cost of repaying a consolidation loan.
You also should take into account the impact of losing any borrower benefits offered under repayment plans for the original loans. Borrower benefits from your original loan, which may include interest rate discounts, principal rebates, or some loan cancellation benefits, can significantly reduce the cost of repaying your loans. You may lose those benefits if you consolidate.
Once your loans are combined into a Direct Consolidation Loan, they cannot be removed. That's because the loans that were consolidated have been paid off and no longer exist. Take the time to study the pros and cons of consolidation before you submit your application.
Consolidating your student loans generally means one lender will group together multiple loans. The new lender will buy out the other loans and will be your primarily lender Instead of managing numerous simultaneous payments and interest rates, the consolidated loan will compile them into a single loan at a new, fixed rate. The main benefits of consolidation include one contact and payment point, a fixed interest rate and the potential to decrease your monthly payments. While consolidating your loans may be a good option, you should investigate your options, as consolidating student loans have regulations and implications that may not be beneficial to every situation.
There are pros and cons to consolidating depending on your particular situation. Before you rush to consolidate, consider the factors below.
Consolidating your loans at a fixed rate means that if rates go up, yours will stay put. Alternatively, if there is a sharp dip in interest rates, you will still be paying the same fixed rate. So if you think rates will plummet, it might be best to wait things Make sure your loans can be consolidated: consolidation loans are available for most federal loans, including FFELP loans , FISL, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. There are also private consolidation options available for private student loans.
You might pay more overall when you consolidate because you are extending the life of the loan (even if monthly payments are lower). Do note, however, that the interest you pay on your student loans is tax deductible. Evaluate the pros and cons of consolidation with your particular loans in mind to determine if it's worth consolidating. You'll also need to decide if consolidating all your loans is a good idea, or if you should just consolidate some of them. Because your rate is determined as an average of your current rates, you may want to keep a higher rate loan out of the equation
What kinds of loans can be consolidated?
Most federal student loans are eligible for consolidation, including subsidized and unsubsidized Direct and FFEL Stafford Loans, Direct and FFEL PLUS Loans, Supplemental Loans for Students (SLS), Federal Perkins Loans, Federal Nursing Loans, Health Education Assistance Loans, and some existing consolidation loans. Private education loans are not eligible for consolidation. If you are in default, you must meet certain requirements before you can consolidate your loans.
Note: A PLUS Loan made to the parent of a dependent student cannot be transferred to the student. Therefore, a student who is applying for loan consolidation cannot include his or her parent's PLUS Loan.