Pros And Cons Of Student Loan Consolidation Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: mapodile/Getty Images November 03, 2022 Hanneh Bareham specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand. Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. involves combining some or all of your federal loans into one Direct Consolidation Loan. By doing this, you’ll end up with one monthly payment instead of several with different interest rates. Consolidation is a great way to stay on top of your monthly payments, and in some cases it’s a necessary step to access federal student loan repayment and forgiveness plans. However, there are times when consolidating may not be the best idea. Pros of consolidating student loans
Consolidating student loans is a smart step for many federal borrowers; here are a few of the advantages: Potentially lower monthly payments: Direct Consolidation Loans have a repayment timeline of up to 30 years, as opposed to the standard repayment period of 10 years. This longer repayment term can make your loans more manageable by lowering your monthly payment. One payment per month: Instead of making multiple student loan payments on your federal loans, you’ll make one every month. If this move helps you avoid late payments, your could rise over time and it could reduce the possibility of extra interest accruing. Access repayment plans: Some older student loans, such as FFEL loans and Perkins Loans, are not eligible for certain or unless consolidated. Combining those loans into a Direct Consolidation Loan would open up access to those programs. Retain federal benefits: While some borrowers may consider refinancing their loans with a private lender as a way of combining several loans, choosing to instead consolidate ensures that you retain federal benefits like forbearance, income-driven repayment and hardship relief options. Cons of consolidating student loans
While consolidating can be a useful tool, there are still some drawbacks to be aware of before making the decision: Pay more interest over time: Choosing to pay off your loan over 30 years will lower your monthly payment but cost you more in interest over time. You’ll also be in debt for a longer period of time, which could . However, you can choose to pay off more than your set monthly amount if your budget allows. No lower interest rate: The primary draw of refinancing is that you can often find a lower interest rate than what you’re currently paying. With consolidation, your interest rate is calculated as the of the loans you’re consolidating, rounded up to the nearest one-eighth of a percent. Because of this, your interest rate could be slightly higher than what you’re currently paying, which will end up costing you more over the life of the loan. Lose progress toward federal forgiveness programs: Consolidating your loans could cause you to lose the progress you’ve made on federal programs like PSLF or an existing income-driven repayment plan. Make sure to check with your servicer prior to consolidating so you don’t erase years of progress toward forgiveness. Interest is added to your balance: If you have any unpaid interest on the loans that you’re consolidating, that interest will be added to your principal balance when you consolidate. Interest will then accrue on this higher balance. Should I consolidate my student loans
Consider loan consolidation carefully. Whether or not you should consolidate your student loans depends on the type of loans you have and your financial circumstances. You should consolidate if: You have old FFEL or Perkins Loans and want to pursue loan forgiveness. You’re having trouble keeping track of your monthly payments. You have a large amount of student loan debt. You should reconsider consolidating if: You don’t have many student loans. You’re close to meeting the requirements for a loan forgiveness program. You can pay off your loans quickly. You qualify for federal loan forgiveness. Can I consolidate my private student loans
You cannot consolidate private student loans, since consolidation is done through the U.S. Department of Education. However, you can , which is a similar process in theory — you’ll trade several private loans for one new private loan. This could help you manage multiple payments or get a lower monthly bill. Should I refinance or consolidate my federal loans
One of the biggest benefits of student loan consolidation is that it keeps your federal student loans with the Department of Education. While consolidation won’t necessarily save you money, it ensures that you retain access to benefits like and debt-relief programs. With that being said, some borrowers may choose to . When you refinance, your federal loans will turn into private loans, so you’ll lose federal benefits. However, refinancing could get you a much lower interest rate on your loans, which could help you pay them off faster and more cheaply. Before making the jump to refinance, take a look at the entire portfolio of options offered by the Department of Education. There may be forgiveness programs that you didn’t know existed that you could qualify for. If you just jump into refinancing your federal loans, you could be leaving thousands of dollars in forgiveness on the table. Next steps
Before applying for a Direct Consolidation Loan, consider what you stand to gain and lose. Once you’ve evaluated your financial situation and have decided that consolidating is the route you want to pursue, you’ll apply via an on the Federal Student Aid website. If you’re stuck on figuring out your next move, the Department of Education’s can help you decide whether you should consolidate or not. You can also run the numbers with a to better compare the impact to your loan cost. Learn more
SHARE: Hanneh Bareham specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand. Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Related Articles