Can Student Loans Be Consolidated?

If you are about to graduate or have recently graduated, you may be looking into the possibility of consolidating student loans. This can be an especially attractive option if you have multiple loans. While it is true that many types of student loans can be consolidated, it’s a good idea to explore your options before making this decision to ensure that it’s the right decision for you.

Some Benefits to Loan Consolidation

If you have multiple student loans, you may be worried about the hassle of making separate payments each month, as well as concerned about the large amount you might pay monthly if you continue to pay each loan separately. One of the main benefits of consolidation is that you will be able to roll your loans into one main loan and only have to make one payment each month. Typically, you can get a longer amount of time to pay this loan back, which also can reduce your monthly payments. Consolidating student loans can also often provide you with a fixed interest rate instead of a fluctuating one.

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While all of these are good short-term benefits, it’s important to consider the fact that a longer repayment period might also result in ultimately paying more interest. However, the possibility may exist that you will begin to earn more as your career advances, and in that case, you could pay your loan down more quickly than your repayment plan calls for. It may be important for you to carefully examine the existing terms on your loans prior to making a consolidation decision, because some loan terms offer certain benefits, like discounts on interest rates, which you might want to keep. Even if you decide not to consolidate all of your loans, there are short-term options you might want to explore, such as a deferment, if you find yourself in a relatively brief period of financial hardship.

Some Types of Loans That Qualify

The consolidation discussed here only applies to federal loans, not private ones. If you are going to consolidate multiple federal loans, you will want to make sure to go through a servicer with the U.S. Department of Education. If you end up working with an outside servicer, they will likely charge you a fee. Many types of federal loans can be consolidated, including but not limited to direct loans (subsidized and unsubsidized), Federal Stafford loans (subsidized and unsubsidized), Federal Perkins loans and Federal Nursing loans. Again, this is only a partial list. The full listing appears on the application for loan consolidation provided by the U.S. Department of Education. You can also ask questions about the process at the Loan Consolidation Information Center.

Making an informed decision about whether or not to consolidate your loans may take a little time, but doing your homework is worth it, especially if you end up saving money or providing yourself with some necessary extra time in which to repay your loans. So do your research on consolidating student loans and then make a decision which will be most helpful for you and your budget.