Consolidating student loans is similar to refinancing, which allows a student to combine their federal loans (not private loans) into one big loan, usually extending the repayment period beyond the 10 year maximum. Depending on the loan amount, the new loan terms can go from 12-30 years. Although a student's minimum monthly payment can be significantly reduced, it is important to note that in most cases, this will result in additional interest being paid over the life of the loan.

Things to consider when deciding to consolidate:

Pros:

  • Can reduce monthly payment and extend repayment period for students with large loan balances
  • Consolidation loans come with a fixed rate of interest, while older loans may have a variable rate.
Cons:
  • You will lose interest rate subsidies for Perkins and Subsidized Stafford loans
  • You will lose your grace period on your loans because consolidation loans enter repayment immediately
  • You will lose any back-end benefits offered by your lender on your federal loans including interest rate reductions and rebates
For additional information on consolidation loans, we strongly urge you to visit http://www.finaid.org/loans/consolidation.phtml which is one of the most comprehensive sites on the web. To see if loan consolidation makes sense for you, please visit the finaid.org loan consolidation calculator at http://www.finaid.org/calculators/loanconsolidation.phtml. This useful tool provides a side by side comparison of standard repayment versus consolidated repayment in order to help you determine if loan consolidation is a better option for you. Loan consolidation applications are available through the Federal Direct Loan website at: https://loanconsolidation.ed.gov/AppEntry/apply-online/appindex.jsp.

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