Understanding Student Loan Consolidation

If you have student loans, it might be a good idea to consolidate those loans after graduation. The biggest reason to consolidate your loans is to have one monthly payment if possible. However, there are some caveats to consolidation and some conditions to consolidate.

Federal Loans Only

Federal law states that only federal loans can be consolidated with federal loans. Some private loans can be consolidated, but that is up to the lender. This means that you might still have more than one payment each month for your student loans. Two examples of federal loans that are eligible for consolidation are the PLUS loan snd the Stafford loan.

May Not Lower Interest Rate

Prior to 2006, your federal student loans were a variable rate, and consolidating usually helped to lower that interest rate. After 2006, the student loans became a fixed rate, so you might not see any savings if you do decide to consolidate your federal student loans.

Timing Is Everything

You are only allowed one shot at consolidating your loans. You should also wait until after you graduate, otherwise you are going to have to start paying your loans immediately and there will be no grace period after college to start paying off your student loans.

Benefits To Consolidation

There are benefits to consolidation though. The first benefit is that you only have one, or two, payments to make each month. At the very least you are going to save the headache of scheduling a myriad of payments and it will help you keep your finances in order. Managing to have your finances in order will save on late fees and other penalties that can add up due to missed payments.

Student loan consolidation is a good idea even if it might not lower your interest rate. having only a couple payments to make each month makes it easier to keep track of your finances and you might still be able to consolidate private loans if your lender allows it. Just make sure that you time your loan for maximum benefit as you are only allowed to consolidate your loans once.