If you have more than one student loan, you may have heard about or considered consolidating your loans.Consolidating student loans is a process where you take out a new loan, which is then used to pay off your other existing student loans.If you are successful in getting the new loan, you're then responsible for repaying the one, larger loan.
However, before you rush to apply, it's important to know the potential benefits and downfalls of consolidating student loans.
(For background reading, see You cannot consolidate private student loans with federal student loans, and you can only consolidate the loans you hold in your name; this means that you cannot consolidate your own loans with your spouse's or with loans your parents may have taken out to finance your college education.
(Some savings vehicles may be better than college saving funds, check out .) Each lender has its own minimum loan balance necessary for loan consolidation; however, you do not need to meet any minimum loan balance for loans consolidated under the Federal Direct Consolidation Loan program.
Advantages of Consolidating There are several potential advantages to consolidating your student loans including: 1.
Consolidation offers a way to select among other repayment plans such as the following federal consolidation loan repayment options: .
Lenders will often offer loan holders certain benefits for being a good borrower.If your lender does not provide any benefits, you may want to consider consolidating your loans with a lender who does.With more than one student loan, you probably have to remember multiple due dates for your monthly repayments.With just one loan, you have only one repayment due date to remember and one check to write. If you are having difficulty repaying your loans or you anticipate a change in your income or expenses, you may want to consolidate so that you can lengthen the amount of time you have to repay your loans.However, extending the repayment term, or life of the loan, comes at a cost since you will be paying interest on the new loan for a longer period of time.(Follow these five steps to manage debt without cutting up your credit cards in Your life circumstances may have changed since you first took on your student loan and the repayment plan you have - for example, the typical 10-year standard repayment plan for most federal loans - may not best fit your current financial situation.