Is Student Loan Consolidation Right for You?

A Direct Consolidation Loan allows you to combine multiple federal education loans into one loan. Before making the decision to consolidate your loans, you’ll want to carefully consider whether loan consolidation is the best option for you. Keep in mind, once your loans are combined into a Direct Consolidation Loan, they cannot be removed.

FACT: You never have to pay to consolidate your student loans. If you have questions about consolidation, contact your loan servicer.

FACT: You never have to pay to consolidate your student loans. If you have questions about consolidation, contact your loan servicer.

Advantages of consolidating your student loans:

  • It’s Free!
    It’s free to apply to consolidate your federal student loans. If you are contacted by someone offering to consolidate your loans for a fee, you are not dealing with the U.S. Department of Education.
  • Simplified Payments
    You’ll have a single monthly payment and a single lender (the U.S. Department of Education) instead of multiple payments and multiple lenders.
  • Lower Monthly Payments
    You may get a longer time to repay your loans, often resulting in lower monthly payments.
  • Qualify for Income-Driven Repayment or Loan Forgiveness
    Some benefits such as the Pay As You Earn Repayment Plan and Public Service Loan Forgiveness Program are only available for Direct Loans. If you choose to consolidate your Federal Family Education Loan Program loans into a Direct Consolidation Loan, you may be able to take advantage of these programs.
  • Fixed Interest Rate
    Direct Consolidation Loans have a fixed interest rate, meaning your interest rate won’t change year to year. The fixed interest rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%.

Disadvantages of consolidating your student loans:

  • More Interest Paid Over Time
    You will likely pay more money in interest over the life of the loan. The amount of time you have to repay your Direct Consolidation Loan can vary from 10-30 years depending on the amount of your Direct Consolidation Loan and the amount of your other student loan debt. The longer it takes to repay your loan, the more you will make in interest payments.
  • Loss of Borrower Benefits
    You may lose any borrower benefits, such as interest rate discounts, principal rebates, or some loan cancellation benefits, offered with the original loans.

In weighing your options, be sure to compare your current monthly payments to what your monthly payments would be if you consolidated your loans. If you’re just interested in temporarily lowering your monthly payment, consolidation might not be the answer.  Contact your loan servicer to consider alternative options such as switching repayment plans or requesting a deferment or forbearance.

To find out more information about loan consolidation, including eligibility requirements, visit https://studentaid.ed.gov/repay-loans/consolidation.

Tara Marini is a communication analyst at the Department of Education’s office of Federal Student Aid.

5 Comments

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  3. I have student loans of about 60,000 and I make zero income.
    My husband makes 50000 per year .
    we file jointly.
    can I get an IBR , if i consolidate in 2015, and file separately in 2015 in California community property state?
    I was told I cannot, only if I was in a non-community property state.??

    would you show my income zero, or half of my husband of $25000?
    please confirm, other blogs say I can still do it , please advise

  4. Currently I had spoken to someone from student loan services .
    a representive told me to go on line to your website. Unorder to get my student loans consuladated. I was wondering if you would be able to help.
    Thank You, Kindly Ms. Candie Jurca

    • Ms. Jurca, information about loan consolidation and how to apply can be found at http://www.studentaid.ed.gov. Also, ED operates a Loan Consolidation Information Center; you can call them at 1-800-557-7392 for help in applying for consolidation.

      If all else fails, please contact the FSA Ombudsman Group at 1-877-557-2575. Good luck!

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