Avoid other companies promising to reduce your interest rates or consolidate your federal loans.Private loans are another matter, which we’ll dive into next.
Here’s a beginner’s guide to student loan consolidation and refinancing.
Sometimes it makes sense to consolidate or refinance, but many times it doesn’t. Student loan consolidation is a program that repackages all of your federal student loans into a single loan with one fixed interest rate and one payment.
Find out the pros and cons to consolidation, if you’re eligible, and how to apply. But as if having a debt that may take 10 years or more to repay isn’t enough, most of us also graduate with several different student loans.
Each loan may have different servicing company, a different interest rate, repayment schedule, and due date.
Student loan consolidation gives you one fixed interest rate.
If you still have variable-rate student loans, this may save you money over time if interest rates get higher.
You are eligible for federal loan consolidation if you have two or more federal student loans and have graduated from school or dropped below half-time status.
You may be eligible even if you are in default on one or more of your student loans, provided that you have agreed to a modified repayment plan.
The interest rate on your consolidation loan is calculated by taking the weighted average of all of your current interest rates and rounded up to the nearest 1/8 percent.
There aren’t many drawbacks to federal student loan consolidation.
No, you can only consolidate your own federal student loans. You can also obtain more information about federal student loan consolidation through your loan servicer(s).