Simplifying your finances: For some people who may have 6 or 7 student loans

Simplifying your finances: For some people who may have 6 or 7 student loans, being able to make a single monthly payment (rather than 7) might be very desirable. Consolidating your student loans isn’t always the best financial decision, but it’s usually the simplest.

Repayment plan eligibility: If you have older FFEL loans (as well as certain other types of federal student loans), you may not be eligible for certain desirable repayment plans. Many times if you choose to consolidate those loans with a Direct Consolidation Loan, you are then eligible for those plans. (See the table above for a complete description of which plans you may be eligible for with a Direct Consolidation Loan.)

Longer repayment period: For federal student loans, your repayment period could go from 10 years to 30 years when consolidating your student loans. This makes your payments a whole lot more affordable every month, but it does mean you will pay a whole lot more interest in the long run. For private student loans, you may be able to get a longer term by consolidating several private student loans, but the same downside remains – a much higher overall cost due to more interest being paid over the longer term.

Securing a fixed rate: Whether you have private or federal student loans that have a variable interest rate, it might be worth it to consolidate those variable rate loans with a fixed rate loan. Typically, variable rate loans start off with an enticingly low interest rate, only to have your rate jump to a much higher interest rate later on. If that’s your situation, you may want to consider consolidating multiple variable rate loans with a single fixed rate consolidation loan.Big Boss vote

How it could hurt you

How it could hurt you

Consolidating doesn’t always make sense. In fact, there are certain situations in which you might lose a whole lot more than you gain by consolidating your student loans.

Eliminating possible repayment strategies: You could lose the ability to utilize several great repayment strategies if you choose to consolidate your student loans. For instance, the Debt Avalanche (paying off the loan with the highest interest rate first) and the Debt Snowball (paying off the loan with the smallest amount first) strategies both rely on your ability to pay extra on certain loans, while making the minimum payment on others. This obviously would not be possible if you consolidate all your student loans.

For federal student loans, your repayment period could go

Longer repayment period: For federal student loans, your repayment period could go from 10 years to 30 years when consolidating your student loans. This makes your payments a whole lot more affordable every month, but it does mean you will pay a whole lot more interest in the long run. For private student loans, you may be able to get a longer term by consolidating several private student loans, but the same downside remains – a much higher overall cost due to more interest being paid over the longer term.

Securing a fixed rate: Whether you have private or federal student loans that have a variable interest rate, it might be worth it to consolidate those variable rate loans with a fixed rate loan. Typically, variable rate loans start off with an enticingly low interest rate, only to have your rate jump to a much higher interest rate later on. If that’s your situation, you may want to consider consolidating multiple variable rate loans with a single fixed rate consolidation loan.

There are several scenarios in which consolidating your student loans makes a lot of sense and can be very beneficial for you.

There are several scenarios in which consolidating your student loans makes a lot of sense and can be very beneficial for you.

Simplifying your finances: For some people who may have 6 or 7 student loans, being able to make a single monthly payment (rather than 7) might be very desirable. Consolidating your student loans isn’t always the best financial decision, but it’s usually the simplest.

Repayment plan eligibility: If you have older FFEL loans (as well as certain other types of federal student loans), you may not be eligible for certain desirable repayment plans. Many times if you choose to consolidate those loans with a Direct Consolidation Loan, you are then eligible for those plans. (See the table above for a complete description of which plans you may be eligible for with a Direct Consolidation Loan.)

Longer repayment period: For federal student loans, your repayment period could go from 10 years to 30 years when consolidating your student loans. This makes your payments a whole lot more affordable every month, but it does mean you will pay a whole lot more interest in the long run. For private student loans, you may be able to get a longer term by consolidating several private student loans, but the same downside remains – a much higher overall cost due to more interest being paid over the longer term.

Consolidating Your Student Loans

Consolidating Your Student Loans
If you have multiple student loans, you can get one big loan that repays all of the other smaller loans. This process is referred to as “consolidating.” When you consolidate your student loans you are no longer bound by the terms of your previous loan, rather you are bound by the terms of your consolidation loan.

You can consolidate federal student loans with a Direct Consolidation Loan. You can also consolidate federal student loans or private student loans with a private consolidation loan. However, you cannot consolidate private student loans with a federal Direct Consolidation Loan.