Why Consolidate?
Student Loan Consolidation offers students the flexibility of one lower payment each month. Your student loans will be refinanced and combined into one new loan. Even if you can make the monthly payments from your original school loans, you may still want to consider consolidating to lower your payments and free up money for bills with higher interest rates. These include credit cards and personal loans, neither of which have tax-deductible interest.
Both federal student loan consolidation and private student loan consolidation offer the benefit of a significantly lower monthly payment and simplified finances. If you want to consolidate student loans, begin with your federal Stafford, Parent PLUS, Perkins, and all Federal FFELP and Federal Direct Loans that were taken out for your education. Private student loan consolidation is a separate program that allows you to refinance all non-federal, education related debt. Check out the links below for additional information on how to consolidate student loans, specifically federal loans, private loans, and frequently asked questions.
Before consolidating, always evaluate the benefits provided by the current holder of your loans. The loan discounts offered by originating lenders tend to be superior to those offered by consolidating lenders, since consolidation loans have tighter margins. Also, if you received a fee waiver or rebate from the originating lender, you may have to repay that discount if you consolidate with another lender. It may be possible to get some of the benefits of alternate repayment plans without consolidating, such as extended/graduated repayment with a loan term of up to 25 years and a single monthly payment, if you have more than $30,000 in federal education loan debt accumulated since October 7, 1998 with the lender. (This is due to a little known provision of the Higher Education Act, in section 428(b)(9)(A)(iv), and the regulations at 34 CFR 682.209(a)(6)(ix).)
Aside from a slight increase in the interest
rate on the consolidation loan, there is no
cost to consolidate your loans. There are no
fees to consolidate. |
Both student and parent borrowers can consolidate their education loans. (Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.) |
The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%. |