Those seeking consolidation should also review their repayment options at Student gov, so they’re prepared to pick the proper repayment plan.
Almost all types of federal loans can be consolidated.
Borrowers should have loan account numbers, estimated payoff dates and contact information for each of their loans’ holders ready.
Here’s what you need to know before deciding to consolidate student loans.
Loan consolidation is when a borrower takes out a new loan to pay off several smaller student loans.
When it comes to consolidation, the types of loans you have matters, but most federal loans, including Stafford, Perkins, Direct Plus and Supplemental loans, can be consolidated with other federal student loans.
“The interest rate on (federal) consolidation loans is an average of the interest rates on the (federal) loans you’re consolidating,” says Ken O’Connor, director of student advocacy for Fynanz, a New York City firm providing technology for the private student loan market.While loan consolidation can sometimes dramatically lower a borrower’s monthly payments, Kevin Walker, co-founder of the college finance site Simple Tuition.com, says it can also cost you.“The downside of getting a lower monthly payment is that you’re going to subject yourself to substantially more interest charges over the life of the loan,” he says.“If the terms you’re going to get are the not as generous as the terms you already have, consolidation is probably not a good idea,” she says.Regardless of whether consolidating federal or private loans, there is a catch.But borrower protections and repayment options on private consolidation loans can vary wildly from lender to lender.