Refinancing loans through consolidation establishes a new loan with new terms and conditions for the combined balance of your original loans.
Consolidation is usually synonymous with federal consolidation, although some private lenders offer consolidation loans as well. Federal consolidation combines multiple eligible federal student loans with various repayment schedules into a new federal loan with a single monthly payment. However, if you take longer to repay your loan, you’ll pay more interest over the life of the loan.
Check Federal Student Aid for the consolidation loan types and options available to you.
Some things to consider when consolidating
- Review your goal(s) for consolidation. Are you consolidating for affordability? Flexibility? Convenience? Are there other options you should consider that meet your goal(s)?
- Are you are struggling to make ends meet? If so will consolidation free up some money that can be put to better use, such as paying off higher-interest debt such as credit cards?
- Find out which loans are eligible and which you plan to consolidate. You may want to consolidate some loans but not others.
- Evaluate the impact of combining high-interest and low-interest loans in consolidation, as your consolidation interest rate will be the weighted average rate of the loans.
- Is there a minimum or maximum balance to the amount you can consolidate?
- What are the repayment options? Are there deferment, forbearance or prepayment options?
- What is the maximum payback period?
- Will the repayment option you chose under consolidation significantly increase the total cost of repaying your loans? If so, how much?
- Will you lose any borrower benefits by consolidating?