Consolidate Your Loans
If you have several federal education loans, you may want to consider combining them into one new loan with one monthly payment. This is called loan consolidation and can help keep you organized and on track with repayment.
Like many federal loan borrowers, you may have both FFEL and Direct Loans. The U.S. Department of Education (ED) encourages borrowers with both types of loans to consolidate them into the Direct Loan program. Once these loans are consolidated, you will have repayment options, some which lower your monthly payments, from which to choose.
Is consolidating your loans right for you? Consider the advantages and disadvantages carefully before you act. Once you consolidate, you are locked into a loan with a fixed interest rate. If you just want to reduce your monthly payment, discuss the federal loan repayment options available with your loan serviser.
Federal Loan Consolidation
Pro | Con |
---|---|
If consolidating variable interest rate loans, you save money if you consolidate while variable interest rates are low. |
Variable interest rates change annually. Therefore, if you consolidate your variable interest rate loans and the interest rates drop the following year, you have "locked" into the higher interest rate for the life of the loan. |
Repayment | |
Single Payment Lower Monthly Payment |
Loss of Deferment and Forgiveness Benefits More Interest Paid |
What Else? | |
Pro | Con |
Manage Monthly Budget Remove Loans From Default Status No Extra Costs |
Loss of Payment Incentives |
Visit the Federal Student Loan Consolidation Webpage for more information.
Private Loans
There are a growing number of companies offering student loan refinance and consolidation products. You should know the interest rate, fees and terms before you agree to consolidate or refinance your loans. While you are not allowed to consolidate private loans into a federal consolidation loan, avoid the temptation to consolidate your federal loans into a private consolidation loan; you may lose some valuable benefits available in federal student loan programs. Review information about private student loans.