Loan Consolidation

Loan consolidation combines multiple federal loans into one single direct loan. The main reason to consolidate one’s loans is to simplify repayment. This service is free through the Dept of Education and there is no need to pay private companies.  You can begin consolidation after graduation, if you leave school or drop below half time. Your consolidated interest rate is your weighted average of all the rates rounded up to nearest 1/8 of 1 percent.

Pros

  • Simplifies your repayment
  • May give you access to Income Driven Repayment Plan and Public Service Loan Forgiveness
  • Allows you to switch from variable rate loans to a fixed interest rate

Cons

  • Likely to pay longer and more than original loan
  • Outstanding interest becomes a part of the principal, therefore interest accrues on a higher principal balance
  • If you are currently under an income driven plan and are making qualifying payment towards PSLF you will lose those credits and start over