Advantages of Consolidating Your Federal Loans

There are several advantages to consolidating your federal loans:

Affordability

By consolidating your education loan(s), you may be able to extend your repayment period, which will reduce your monthly payment. Consolidation loan repayment terms range from 10 to 30 years, depending on the amount borrowed. Remember that if you take longer to repay your loan, you will pay more interest over the life of the loan. Your monthly payments would be lower, however, making it easier to stay current on your payments. You can always make additional payments on the principal to reduce your loan term if you have the funds to do so.

Consolidation loans have a fixed interest rate. If you currently have a variable interest rate on one or more of your federal loans, refinancing when interest rates are low will enable you to save money over the length of the loan term by avoiding potential higher interest rates in the future.

Another benefit of consolidation is the elimination of the minimum payments. For example, if you have a $2,625 Stafford loan and a $3,500 Direct loan and you do not consolidate them, your payments will be $50 each, as this would be the minimum monthly payment per loan. If you consolidate these two loans into one consolidation loan, your monthly payments would be approximately $70 (based on 8.25 percent interest).

Efficiency

A consolidation loan allows you to consolidate one or more federal loans from different lenders. If you are a student borrower and have a Perkins loan, subsidized and/or unsubsidized Direct loans, and subsidized and/or unsubsidized Stafford loans, you can consolidate all of these into a single consolidation loan. You will receive only one monthly bill. There are no origination fees, and you may consolidate any number of loans, even just one loan.

Convenience

If you have a number of loans from different programs, managing them may be easier if you were to consolidate all of these into one loan. If you move, change your name, or phone number, or if you are requesting a postponement of payments, it would be more convenient to make these arrangements with just one loan servicer instead of multiple ones.