Should You Consolidate Your Student Loans?


Many college graduates carry significant student loan debt, often consisting of multiple loans. Loan consolidation can simplify your finances by allowing you to make one payment instead of many. Although loan consolidation isn’t always the best choice, it can benefit certain borrowers. Read on for more information on student loan consolidation, including the advantages and disadvantages of consolidating your loans.

What Loans Can and Cannot Be Consolidated?

Most federal loans can be consolidated into a Direct Consolidation Loan, according to the Federal Student Aid website. Loans that may be consolidated include Direct Subsidized and Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans, Direct PLUS Loans, Supplemental Loans for Students, Federal Nursing Loans and Federal Perkins Loans.

Private education loans cannot be consolidated into a Direct Consolidation Loan (for information on private loan consolidation, see below). PLUS Loans made to the parent(s) of dependent students cannot be included in the student’s consolidated loans. If you are in default, you must meet certain requirements in order to be eligible for consolidation.

 Advantages of Consolidation

– Simplification of payments

– Lowered monthly payments by increasing repayment time period

– Switching from variable to fixed interest rates

– Possible alternative repayment plans

– Lower interest rates

Disadvantages of Consolidation

– More interest paid overall if repayment period is extended

– Possible loss of borrower benefits that come with original loans, including loan cancellation benefits, interest rate discounts, or principal rebates

– Risk of higher interest rates (especially with private loan consolidation)

How to Apply for Consolidation (Federal Loans)

Borrowers are eligible for consolidation after graduation, leaving school, or dropping below half-time enrollment. In order to qualify for consolidation, you must have at least one Direct Loan or FFEL Program loan. You can apply for a Direct Consolidation Loan by visiting

Alternatives to Consolidation

You may not be sure if consolidation is the right option for you. Once you consolidate your loans into a Direct Consolidation Loan, the original loans no longer exist. Therefore, it may be better to consider short-term relief options such as forbearance or deferment.

Deferment means that you do not have to make payments on the principal or interest of your loans for a period of time. And depending on the type of loans, the federal government may make the interest payments for you. Contact your loan servicer to determine if you are eligible and to apply for deferment.

If you are not eligible for deferment, you may consider forbearance. Forbearance allows you to stop making payments for a period of up to 12 months. Interest on your loans will continue to accrue during this period. Contact your loan servicer to request a forbearance.

Private Loan Consolidation

Private loans generally can only be consolidated with other private loans. In addition, they usually have variable interest rates, so timing counts. According to Bankrate, consolidating loans when interest rates are low could save you thousands in interest payments. However, since the rate will be variable, interest rates could be higher in the future. Private lenders require credit checks for loan consolidation, so if you don’t have good credit it may not the best option.