Consolidating Student Loans: Pros And Cons
Consolidating your student loans may make it easier for you to live with them. At best, it could reduce your monthly loan payments, cut your interest rate, and ease the burdens of recordkeeping. At worst, it won't help with any of these concerns -- and it could cost you important benefits associated with your federal student loans.
If you're considering student loan consolidation, it's essential that you know the terms of your existing loans and understand how consolidation works before you proceed.
What Is Student Loan Consolidation?
Loan consolidation is a process that lets you replace multiple student loans with a new loan from a single lender. The interest rate on the consolidation loan will be based on the average interest rates of all the loans that you consolidate.
EXAMPLE: If you consolidate a $5,000 loan at 6.8% interest and a $10,000 loan at 6.0% interest, your new interest rate will be $6.375%. (To figure out the consolidation interest rate for your loans, you can use the FinAid Loan Consolidation Calculator.)