Consolidate Student Loan

Student loan consolidation can have several benefits, such as lowering your interest rate on your loan, lowering your loan payments, or extending the timeline to repay the loan. Whether or not student loan consolidation will benefit you depends on your current loan rates and terms and the current market interest rates. If you are looking to consolidate student loan debt, there are two types namely federal student loan consolidation and private student loan consolidation.

Federal Student Loan Consolidation

Federal student loan consolidation is only for consolidating federal student loans (Federal Stafford Loans, PLUS Loans, Federal Direct Loans, Perkins Loans, and HEAL Loans). Consolidation of federal student loans cannot include private student loans.

The main benefits of federal student loan consolidation is that you can consolidate your loans to be at a fixed interest rate set by the federal government. You get a interest rate reduction of 0.6% if you consolidate student loans in your loan grace period, so if the current fixed interest rate is lower than your interest rate on your current student loans, it can be the perfect time to consolidate and refinance your loans. In addition to locking in a fixed interest rate, consolidating federal student loans gives you the added benefit of spreading your payment plan over 30 years instead of the standard 10 year repayment plan with most federal student loans. There are also no fees and no credit checks when you consolidate federal student loans, so the process is quite easy.

Private Student Loan Consolidation

You can consolidate private student loans as well as federal student loans with a private student loan consolidation. However, it usually doesn't make sense to include federal student loans in a private student loan consolidation because you will lose the federal loan benefits. However, since you can't consolidate private student loans with a federal student loan consolidation, a private student loan consolidation may still make sense.

One key benefit of a private student loan consolidation is the ability to consolidate the loans and thus only have one payment to make instead of several payments to several lenders. In addition, consolidaitng private student loans allows you to repay the loans over a longer period of time (25 years for undergraduate loans and 30 years for graduate loans). Another potential benefit is consolidating with a lower overall interest rate, however that will only be possible if your credit score has improved somewhat since you took out the loans or if you have a co-signer to help boost the credit worthiness of the loan.